-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UYeIm53CRqhXxPoeA9Fy4dffk8Xv21//S3nLPjLVCEixp/CJRL3V8RPjdqlUVI4Z al/JMyGb+lvmMXUqznseRg== 0000889812-97-001581.txt : 19970728 0000889812-97-001581.hdr.sgml : 19970728 ACCESSION NUMBER: 0000889812-97-001581 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 40 FILED AS OF DATE: 19970725 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRECISE TECHNOLOGY INC CENTRAL INDEX KEY: 0001042317 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 251205268 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-32041 FILM NUMBER: 97645096 BUSINESS ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 BUSINESS PHONE: 4128232100 MAIL ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRECISE TECHNOLOGY OF DELAWARE INC CENTRAL INDEX KEY: 0001042318 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 510351451 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-32041-01 FILM NUMBER: 97645097 BUSINESS ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 BUSINESS PHONE: 4128232100 MAIL ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRECISE TECHNOLOGY OF ILLINOIS INC CENTRAL INDEX KEY: 0001042319 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 364069525 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-32041-02 FILM NUMBER: 97645098 BUSINESS ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 BUSINESS PHONE: 4128232100 MAIL ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRECISE TMP INC CENTRAL INDEX KEY: 0001042320 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 541253743 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-32041-03 FILM NUMBER: 97645099 BUSINESS ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 BUSINESS PHONE: 4128232100 MAIL ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRECISE POLESTAR INC CENTRAL INDEX KEY: 0001042321 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 541675114 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-32041-04 FILM NUMBER: 97645100 BUSINESS ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 BUSINESS PHONE: 4128232100 MAIL ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MASSIC TOOL MOLD & DIE INC CENTRAL INDEX KEY: 0001042322 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 541683716 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-32041-05 FILM NUMBER: 97645101 BUSINESS ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 BUSINESS PHONE: 4128232100 MAIL ADDRESS: STREET 1: 501 MOSSIDE BLVD CITY: NORTH VERSAILLES STATE: PA ZIP: 15137 S-4 1 REGISTRATION STATMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 1997 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ PRECISE TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) DELAWARE 25-1205268 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number)
and subsidiary guarantors PRECISE TECHNOLOGY OF DELAWARE, INC. PRECISE TECHNOLOGY OF ILLINOIS, INC. PRECISE TMP, INC. PRECISE POLESTAR, INC. MASSIE TOOL, MOLD & DIE, INC. (Exact name of registrants as specified in their respective charters) DELAWARE 51-0351451 DELAWARE 36-4068725 VIRGINIA 54-1253743 VIRGINIA 54-1675114 FLORIDA 54-1683716 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number)
3089 (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER) ------------------------ JOHN R. WEEKS PRESIDENT AND CHIEF EXECUTIVE OFFICER PRECISE TECHNOLOGY, INC. 501 MOSSIDE BLVD. 501 MOSSIDE BLVD. NORTH VERSAILLES, PENNSYLVANIA 15137-2553 NORTH VERSAILLES, PENNSYLVANIA 15137-2553 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (412) 823-2100 INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE EXECUTIVE OFFICE) NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO: ROBERT W. ERICSON WINSTON & STRAWN 200 PARK AVENUE NEW YORK, NEW YORK 10166 (212) 294-6741 ------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the Securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE Series B 11 1/8% Senior Subordinated Notes due 2007............................................. $75,000,000 100% $75,000,000 $22,728 Guarantees of Series B 11 1/8% Senior Subordinated Notes due 2007................................... $75,000,000 (2) (2) (2) Total.............................................. $75,000,000 100% $75,000,000 $22,728
(1) In accordance with Rule 457(f)(2), the registration fee is calculated based on the book value, which has been computed as of June 30, 1997, of the outstanding 11 1/8% Senior Subordinated Notes due 2007 of Precise Technology, Inc. (2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is payable for the Guarantees. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRECISE TECHNOLOGY, INC. CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
ITEM NUMBER ITEM LOCATION IN PROSPECTUS - ------ ---- ---------------------- 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus.............................. Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus..................... Inside Front Cover Page; Outside Back Cover Page 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information............................. Summary; Risk Factors; Selected Financial Data; Pro Forma Financial Data 4. Terms of the Transaction.................. Outside Front Cover Page; Summary; Description of Notes; The Exchange Offer; Certain U.S. Federal Income Tax Considerations 5. Pro Forma Financial Information........... Pro Forma Financial Data 6. Material Contracts with the Company Being Acquired................................ Inapplicable 7. Additional Information Required........... Inapplicable 8. Interests of Named Experts and Counsel................................. Legal Matters; Experts 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities............................. Inapplicable 10. Information with Respect to S-3 Registrants............................. Inapplicable 11. Incorporation of Certain Information by Reference............................... Inapplicable 12. Information with Respect to S-3 or S-2 Registrants............................. Inapplicable 13. Incorporation of Certain Information by Reference............................... Inapplicable 14. Information with Respect to Registrants other than S-3 or S-2 Registrants....... Outside Front Cover Page; Summary; Risk Factors; Capitalization; Pro Forma Financial Data; Selected Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Certain Transactions; Principal Stockholders; Description of Certain Indebtedness; Description of Notes 15. Information with Respect to S-3 Companies............................... Inapplicable 16. Information with Respect to S-3 or S-2 Companies............................... Inapplicable 17. Information with Respect to Companies Other than S-3 or S-2 Companies......... Inapplicable 18. Information if Proxies, Consents or Authorizations are to be Solicited...... Inapplicable 19. Information if Proxies, Consents or Authorizations are not to be Solicited or in an Exchange Offer................. Management; Principal Stockholders; Certain Transactions
Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED JULY 25, 1997 PROSPECTUS PRECISE TECHNOLOGY, INC. OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS SERIES B 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007, OF WHICH $75,000,000 PRINCIPAL AMOUNT IS OUTSTANDING THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. ------------------------ Precise Technology, Inc., a Delaware corporation ('Precise,' and together with its direct and indirect subsidiaries, the 'Company,' unless the context otherwise requires), hereby offers (the 'Exchange Offer'), upon the terms and conditions set forth in this Prospectus (the 'Prospectus') and the accompanying Letter of Transmittal (the 'Letter of Transmittal'), to exchange $1,000 principal amount of its Series B 11 1/8% Senior Subordinated Notes due 2007 (the 'New Notes'), registered under the Securities Act of 1933, as amended (the 'Securities Act'), pursuant to a Registration Statement of which this Prospectus is a part, for each $1,000 principal amount of its outstanding 11 1/8% Senior Subordinated Notes due 2007 (the 'Old Notes'), of which $75,000,000 principal amount is outstanding. The form and terms of the New Notes are the same as the form and terms of the Old Notes (which they replace), except that the New Notes will bear a Series B designation and will have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and will not contain certain provisions relating to the payment of Liquidated Damages (as defined herein) which were included in the terms of the Old Notes in certain circumstances relating to the timing of the Exchange Offer. The New Notes will evidence the same debt as the Old Notes (which they replace) and will be issued under and be entitled to the benefits of the Indenture, dated as of June 13, 1997 (the 'Indenture'), among Precise, the Guarantors (as defined herein) and Marine Midland Bank, as trustee (the 'Trustee'). The Old Notes and the New Notes are sometimes referred to herein collectively as the 'Notes.' See 'The Exchange Offer' and 'Description of Notes.' (Continued on Next Page) ------------------------ SEE 'RISK FACTORS' BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THE DATE OF THIS PROSPECTUS IS , 1997. (Continued from Cover Page) Interest on the Notes will be paid in cash semi-annually on June 15 and December 15 of each year, commencing on December 15, 1997. The Notes will mature on June 15, 2007 and are not subject to any sinking fund requirement. The Notes are redeemable at the option of Precise, in whole or in part, at any time on or after June 15, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption. Notwithstanding the foregoing, Precise, at its option, may redeem in the aggregate up to 33 1/3% of the original principal amount of the Notes at any time and from time to time prior to June 15, 2000 at 111.125% of the aggregate principal amount so redeemed, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the redemption date, with the Net Proceeds (as defined herein) of one or more Public Equity Offerings (as defined herein), provided that at least 66 2/3% of the aggregate principal amount of the Notes originally issued remain outstanding immediately after the occurrence of any such redemption and that any such redemption occurs within 90 days following the closing of any such Public Equity Offering. In addition, at any time prior to June 15, 2002, Precise may, at its option, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium (as defined herein). See 'Description of Notes--Optional Redemption.' Upon a Change of Control (as defined herein), each holder of the Notes will be entitled to require Precise to repurchase such holder's Notes at 101% of the principal amount thereof plus accrued and unpaid interest to the repurchase date. See 'Description of Notes--Repurchase at the Option of Holders--Change of Control.' In addition, Precise is obligated in certain instances to make an offer to repurchase the Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase with the net cash proceeds of certain asset sales. See 'Description of Notes--Certain Covenants--Merger, Consolidation or Sale of Assets.' The New Notes will be general unsecured obligations of Precise, subordinated in right of payment to all existing and future Senior Debt (as defined herein) of the Company, including all obligations of the Company under the New Credit Agreement (as defined herein), and senior to or pari passu with all existing and future subordinated indebtedness of the Company. Precise's payment obligations under the New Notes will be jointly and severally guaranteed, on a senior subordinated basis, by all of Precise's existing Subsidiaries (as defined herein) and certain future Restricted Subsidiaries (as defined herein) of the Company (the 'Guarantors'). As of March 31, 1997, after giving pro forma effect to the Refinancing Transactions (as defined herein), Precise and the Guarantors would have had outstanding approximately $16.4 million of consolidated Senior Debt. See 'Description of Notes--Subordination' and 'Capitalization.' The Indenture (as defined herein) pursuant to which the New Notes will be issued permits Precise and the Guarantors to incur additional indebtedness, including Senior Debt, subject to certain limitations. See 'Description of Notes--Certain Covenants.' Precise will accept for exchange any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time on , 1997, unless extended by Precise in its sole discretion (the 'Expiration Date'). Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain customary conditions. The Old Notes were sold in an aggregate principal amount of $75.0 million by Precise on June 13, 1997 to Bear, Stearns & Co. Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the 'Initial Purchasers') in a transaction not registered under the Securities Act in reliance upon an exemption under the Securities Act (the 'Initial Offering'). The Initial Purchasers subsequently placed the Old Notes with qualified institutional buyers in reliance upon Rule 144A under the Securities Act. Accordingly, the Old Notes may not be reoffered, resold or otherwise transferred in the United States unless registered under the Securities Act or unless an applicable exemption from the registration requirements of the Securities Act is available. The New Notes are being offered hereunder in order to satisfy the obligations of Precise and the Guarantors under the Registration Rights Agreement (as defined herein) entered into by Precise and the Guarantors in connection with the Initial Offering. See 'The Exchange Offer.' Based on no-action letters issued by the staff of the Securities and Exchange Commission (the 'Commission') to third parties, Precise believes the New Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an 'affiliate' of Precise within the meaning of Rule 405 under the Securities Act) without compliance with the 2 registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such New Notes. See 'The Exchange Offer--Resale of the New Notes.' Each broker-dealer (a 'Participating Broker-Dealer') that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer as a result of marketmaking activities or other trading activities. The Company has agreed that, for a period of one year after the Exchange Offer Effectiveness Date (as defined), it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See 'Plan of Distribution.' Holders of Old Notes not tendered and accepted in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and benefits and will be subject to the limitations applicable thereto under the Indenture and with respect to transfer under the Securities Act. Precise will pay all the expenses incurred by it incident to the Exchange Offer. See 'The Exchange Offer.' There has not previously been any public market for the Old Notes or the New Notes. Precise does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system. There can be no assurance that an active market for the New Notes will develop. See 'Risk Factors--Absence of a Public Market.' Moreover, to the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes could be adversely affected. The New Notes will be available initially only in book-entry form and Precise expects that the New Notes issued pursuant to the Exchange Offer will be issued in the form of a Global Note (as defined herein), which will be deposited with, or on behalf of, The Depository Trust Company ('DTC') and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the Global Note representing the New Notes will be shown on, and transfers thereof will be effected through, records maintained by DTC and its participants. After the initial issuance of the Global Note, New Notes in certificated form will be issued in exchange for the Global Note only under the limited circumstances set forth in the Indenture. See 'Description of Notes--Book-Entry, Delivery and Form.' 3 AVAILABLE INFORMATION Precise and the Guarantors have filed with the Commission a Registration Statement on Form S-4 (the 'Exchange Offer Registration Statement,' which term shall encompass all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the New Notes being offered hereby. This Prospectus does not contain all the information set forth in the Exchange Offer Registration Statement. For further information with respect to the Company and the Exchange Offer, reference is made to the Exchange Offer Registration Statement. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Exchange Offer Registration Statement, reference is made to the exhibit for a more complete description of the document or matter involved, and each such statement shall be deemed qualified in its entirety by such reference. The Exchange Offer Registration Statement, including the exhibits thereto, can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the Regional Offices of the Commission at 7 World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a World Wide Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such site is http://www.sec.gov. As a result of the filing of the Exchange Offer Registration Statement with the Commission, Precise and the Guarantors will become subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance therewith will be required to file periodic reports and other information with the Commission. The obligation of Precise and the Guarantors to file periodic reports and other information with the Commission will be suspended if the Notes are held of record by fewer than 300 holders as of the beginning of any fiscal year of Precise and the Guarantors other than the fiscal year in which the Exchange Offer Registration Statement is declared effective. Precise has agreed that, whether or not it is required to do so by the rules and regulations of the Commission, for so long as any of the Notes remain outstanding, it will furnish to the holders of the Notes and file with the Commission (unless the Commission will not accept such a filing) (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if Precise were required to file such forms, including a 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and, with respect to the annual information only, a report thereon by Precise's independent auditors and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if Precise were required to file such reports. FORWARD LOOKING STATEMENTS THIS PROSPECTUS CONTAINS CERTAIN 'FORWARD-LOOKING STATEMENTS' CONCERNING THE COMPANY'S OPERATIONS, OPERATING PERFORMANCE AND FINANCIAL CONDITION, WHICH ARE SUBJECT TO INHERENT UNCERTAINTIES AND RISKS, INCLUDING THIS IDENTIFIED UNDER 'RISK FACTORS.' ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THIS PROSPECTUS. WHEN USED IN THIS PROSPECTUS, THE WORDS 'ESTIMATE,' 'PROJECT,' 'ANTICIPATE,' 'EXPECT,' 'INTEND,' 'BELIEVE' AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, 'Precise' refers to Precise Technology, Inc. and the 'Company' refers to Precise and its direct and indirect subsidiaries, unless the context otherwise requires. The Company acquired Unity Mold Corporation (the 'Unity Acquisition') and Tredegar Molded Products Company (the 'Tredegar Acquisition') in January and March of 1996, respectively. All references to 'Tredegar' in this Prospectus are to Tredegar Molded Products Company. Unless otherwise specified, pro forma information contained in this Prospectus gives effect to (i) the Unity Acquisition and the Tredegar Acquisition as if such acquisitions (the 'Acquisitions') had occurred on January 1, 1996, (ii) the Initial Offering and the application of the net proceeds therefrom and (iii) the consummation of the New Credit Agreement and the incurrence of $9.5 million of indebtedness thereunder to partially fund the transactions described under 'Use of Proceeds.' The Initial Offering, the application of the net proceeds therefrom, the consummation of the New Credit Agreement and the incurrence of $9.5 million of indebtedness thereunder upon the closing of the Initial Offering are referred to collectively herein as the 'Refinancing Transactions.' Combined financial data for 1995 included in this Prospectus reflects the combined operations of the Company, Unity Mold Corporation and Tredegar Molded Products Company for the entire period, without giving effect to pro forma acquisition adjustments. THE COMPANY The Company is a leading full-service, custom injection molder of precision plastic products, focusing on three broad markets: healthcare, packaging and consumer/industrial products. These markets are characterized by high volume requirements, long product life cycles, limited vulnerability to recessionary trends and relatively low susceptibility to off-shore competition. The Company differentiates itself by providing total project management, including value-added services, for the manufacture of highly engineered, close tolerance products, such as disposable medical devices, thin-wall consumer product containers and electrical connectors. The Company currently serves a diverse base of original equipment manufacturers ('OEMs'), including Fortune 500 companies such as Abbott Laboratories ('Abbott Labs'), The Gillette Company ('Gillette') and The Procter & Gamble Company ('Procter & Gamble'). The Company is the sole or primary source supplier of the products that it manufactures for many of its customers. On a pro forma basis, after giving effect to the Acquisitions, the Company generated net sales and EBITDA (as defined) of $110.5 million and $17.3 million, respectively, in the twelve months ended March 31, 1997. The Company operates approximately 185 molding machines in nine strategically located facilities throughout the eastern and midwestern United States, three of which have advanced mold making capabilities. The Company is capable of providing its customers with comprehensive custom manufacturing services, including extensive product design and prototype development, mold design and manufacturing, close tolerance injection molding and value-added finishing services such as packaging, assembly and decoration. The Company's technologically advanced, computer-aided manufacturing facilities and equipment enable it to engineer custom solutions to technically demanding customer requirements, which are generally characterized by close tolerances and high speed, volume and durability parameters. The high level of automation in many of the Company's manufacturing facilities minimizes both direct labor input and scrap loss. The Company believes that its leading technical capabilities and reputation for high quality products, on-time deliveries and reliability have enabled it to both obtain new customers and further penetrate existing customers. Precise was acquired in 1990 by an entity managed by Mentmore Holdings Corporation ('Mentmore'), a privately-held investment and management company. Mentmore recruited an experienced management team beginning in 1990 to implement several key strategic initiatives aimed at improving the Company's competitive standing and profitability, as well as promoting internal and external growth. As a result of these initiatives, the Company's net sales and EBITDA increased from $22.8 million and $(129,000), respectively, in 1991 to $33.5 million and $4.5 million, respectively, in 1995 (prior to the Acquisitions). In addition, during the same period, the Company's EBITDA margin improved from (0.6)% to 13.3%. In 1996, the Company acquired Tredegar Molded Products Company ('Tredegar'), a full-service plastics injection molder supplying OEMs primarily in the healthcare, packaging and consumer/industrial markets, and Unity Mold Corporation ('Unity'), a plastics injection molder specializing in medical diagnostic products and precision valves. The Acquisitions more than tripled the Company's net sales on a pro forma basis, making it one 5 of the larger custom injection molders in the United States. Management believes that the Acquisitions also significantly enhanced the Company's prospects for future growth by expanding its manufacturing and technological capabilities, enlarging its customer base, strengthening its relationships with certain existing customers and broadening its geographic presence. In addition, the Acquisitions provided the Company with significant opportunities for economies of scale in raw material purchasing and reductions in manufacturing and administrative costs. As a result of operating improvements implemented by the Company since the Acquisitions were completed, the Company's EBITDA and EBITDA margin increased from $12.7 million and 9.8%, respectively, on a combined basis in 1995 to $17.3 million and 15.6%, respectively, on a pro forma basis in the twelve months ended March 31, 1997. Injection molding is one of the most widely used plastic processing methods in the world. According to The Freedonia Group, Inc. ('The Freedonia Group'), an independent market research firm, annual shipments of injection molded plastic products have increased from approximately 7 billion pounds in 1985 to over 11 billion pounds in 1996, and are expected to exceed 13 billion pounds by the year 2000. This growth is driven by the relative design and production versatility offered by injection molding versus other manufacturing processes and the continued substitution of plastic for materials such as metal, glass and paper. The Company believes that this substitution is primarily the result of plastic's unique physical product attributes such as recyclability, durability, cosmetic appeal, flexibility of form and cost and weight advantages. The United States plastics injection molding industry is comprised of over 7,000 molders, the substantial majority of which are small operators or captive divisions of larger companies. Management believes that larger injection molders such as the Company will benefit from continued industry consolidation and the trend by OEMs to outsource their injection molding needs to larger, full-service independent molders that are able to provide total project management. High volume OEMs are increasingly implementing rigorous programs for evaluating and rating suppliers, which encompass quality, cost control, reliability, new technology implementation and overall management. Management believes that a limited number of injection molders are capable of providing the breadth of services increasingly being demanded by high volume OEMs. As a result, management believes that full-service, multiple plant suppliers, such as the Company, are becoming increasingly important to large OEMs who are looking to form long-term alliances with key suppliers. COMPETITIVE STRENGTHS Management believes that the Company is well positioned to capitalize on the favorable trends in the plastics injection molding industry and to enhance its position in its target markets. The following are, in management's view, the Company's principal competitive strengths: FULL-SERVICE CAPABILITIES. The Company offers comprehensive services ranging from product design, product development and mold making through molding, decorating and assembly. As one of a limited number of injection molders in the United States capable of offering such comprehensive services, management believes that the Company is well positioned to benefit from the consolidation currently taking place in the injection molding industry and the trend among high volume OEMs to increasingly rely upon custom injection molders for total project management. ADVANCED MANUFACTURING CAPABILITIES. The Company uses state-of-the-art computer-aided design/computer-aided manufacturing ('CAD/CAM') technology in the design and manufacture of its molds and subjects each mold to extensive testing to ensure that it meets high quality standards. The Company has also made substantial investments in advanced high speed molding machines and significantly expanded its use of automation and robotics in its manufacturing and assembly operations. As a result of its efforts, the Company has received numerous quality awards, including Gillette's OmniMark Award, the Lexmark International Prestige Supplier Award and the bioMerieux Vitek World Class Supplier Award. In addition, the Company has achieved 'ship-to-stock' status with many of its customers. Management believes that the Company's mold making capabilities and the high quality of its molding have been integral in the Company's strategy of focusing on highly engineered products. LOW COST PRODUCTION. The Company has been successful in reducing costs by improving manufacturing efficiency, introducing advanced molding technology and realigning facilities and production to increase facility utilization. In addition, as one of the largest manufacturers in the plastics injection molding industry, the Company is able to realize significant economies of scale in raw material purchasing. Management believes that 6 by being one of the industry's low cost producers, the Company enjoys a significant advantage over many of its competitors in obtaining new business. MULTIPLE PLANT LOCATIONS. Management believes that the Company's nine plants, located throughout the eastern and midwestern United States, provide it with the opportunity to effectively compete for new product contracts that require large volume runs and multiple distribution points. The Company's multiple plant locations enable it to allocate production to the facility best suited for a job in view of its relative capabilities and proximity to the customer. As a result, the Company provides its customers with a broad range of injection molding capabilities and better service through improved responsiveness, timely delivery and reduced freight costs. In addition, by operating numerous plants, the Company can mitigate customer sourcing risks associated with single facility production. EXPERIENCED MANAGEMENT. The six members of the Company's senior management team have, on average, approximately 19 years of experience in the plastics injection molding industry. The members of the management team, most of whom were recruited by Mentmore in 1990 and 1991 from other leading plastics companies, are largely responsible for the substantial growth and improved operating performance that the Company has experienced over the past five years. BUSINESS STRATEGY The Company's objective is to become the leading supplier of plastic molded products to leading OEMs in the healthcare, packaging and consumer/industrial markets. The key elements of the Company's business strategy to achieve this objective are as follows: FOCUS ON TARGET MARKETS. The Company focuses its marketing efforts on high margin accounts in the healthcare, packaging and consumer/industrial markets. These markets are characterized by high volume requirements, long product life cycles, limited vulnerability to recessionary trends and relatively low susceptibility to off-shore competition. By focusing on high volume, long run manufacturing for products in these markets, management believes that the Company will be able to maximize its profitability and best utilize its resources. FURTHER PENETRATE EXISTING CUSTOMER BASE. As OEMs continue to reduce their supplier base and outsource their injection molding needs, the Company has the opportunity to increase sales to its existing customers and participate in their domestic and international growth. The Company seeks to capitalize on these favorable industry trends and growth opportunities by expanding its sales force, emphasizing its full-service capabilities and developing close working relationships with its customers. INVEST IN TECHNOLOGY AND QUALITY IMPROVEMENTS. The Company continues to improve productivity through an on-going program of upgrading equipment and facilities and investing in automation, robotics and other technological improvements. Management believes that these initiatives, as well as a focus on quality in all aspects of manufacturing and customer service, will further enable the Company to increase sales to its existing customers, develop new customer relationships and improve its profit margins through increased efficiencies. REDUCE COSTS AND INCREASE PRODUCTIVITY. The Company focuses on simultaneously reducing costs while meeting the high quality standards of its customers. Through aggressive asset management, the use of total quality management techniques and extensive employee training and incentive programs, the Company strives to reduce costs and increase productivity. As a result, the Company's net sales per employee increased from $87,000 in 1991 to $127,000, on a pro forma basis, in 1996, and the Company's EBITDA margin improved from (0.6)% to 15.8% during the same period. The Company intends to continue to implement measures that minimize costs, increase margins and result in competitive prices for its customers. DEVELOP PARTNERSHIPS WITH KEY CUSTOMERS. In response to customers' increasing focus on outsourcing non-core activities such as injection molding, management continues to pursue customer partnerships that involve sole or primary source production and total project management under long-term contracts. For example, the Company's 51,000 square foot, state-of-the-art Customer-Aligned-Production ('CAP') facility in Newark, Delaware (the 'Delaware CAP Facility') is specifically designed to serve the needs of Procter & Gamble and other customers in the thin-wall packaging market segment. Through this facility, the Company currently is the sole source manufacturer of polypropylene containers for Baby Fresh(Trademark) baby wipes for Procter & Gamble and Softkins(Trademark) moist tissues for Kimberly-Clark Corporation ('Kimberly-Clark'), producing approximately 18 million units in 1996. Because of its highly automated manufacturing process, the Delaware CAP Facility's 7 direct labor costs as a percentage of net sales in 1996 were 1.9%, compared to what management believes to be an industry average of approximately 10.0%. The Company intends to continue to pursue CAP facilities and similar partnerships with other customers. SELECTIVELY PURSUE ACQUISITION OPPORTUNITIES. Strategic acquisitions have been, and management believes will continue to be, an important element in the Company's growth and in its efforts to capitalize on favorable industry trends. The Company's recent acquisitions have expanded its customer base, complemented its existing technological and manufacturing capabilities, presented substantial cost savings opportunities and provided significant growth opportunities. The Company will consider future acquisition opportunities that are attractively priced and that it believes will strengthen its customer base, broaden its geographic presence, enhance its production capabilities and/or provide significant operating synergies. ------------------------ The Company's principal executive offices are located at 501 Mosside Boulevard, North Versailles, Pennsylvania 15137. Its telephone number at that location is (412) 823-2100. Precise was incorporated in Delaware on August 14, 1969. THE INITIAL OFFERING Notes Pursuant to a Purchase Agreement dated as of June 10, 1997 (the 'Purchase Agreement'), Precise sold Old Notes in an aggregate principal amount of $75.0 million to the Initial Purchasers on June 13, 1997. The Initial Purchasers subsequently resold the Old Notes purchased from Precise to qualified institutional buyers pursuant to Rule 144A under the Securities Act. A substantial portion of the net proceeds from the Initial Offering, estimated to have been approximately $70.3 million after deducting discounts and commissions to the Initial Purchasers and estimated expenses relating to the consummation of the Refinancing Transactions, together with initial borrowings under the New Credit Agreement, were used to refinance indebtedness and redeem preferred stock issued in connection with the Tredegar Acquisition. Specifically, the Company used the net proceeds from the Initial Offering to (i) repay indebtedness under the Existing Credit Agreement (as defined), (ii) redeem the Existing Notes (as defined), (iii) redeem the Redeemable Preferred Stock (as defined), (iv) repurchase certain shares of common stock of Precise from Parent, the proceeds of which were used by Parent to redeem the Parent Preferred Stock (as defined) and (v) make a distribution to Parent on or after the consummation of the Initial Offering. See 'Capitalization.' Registration Rights Agreement Pursuant to the Purchase Agreement, Precise, the Guarantors and the Initial Purchasers entered into a Registration Rights Agreement, dated as of June 13, 1997 (the 'Registration Rights Agreement'), which grants the holders of the Old Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such exchange rights which terminate upon the consummation of the Exchange Offer. THE EXCHANGE OFFER Securities Offered........................ $75,000,000 aggregate principal amount of 11 1/8% Senior Subordinated Notes due 2007 of Precise. The Exchange Offer........................ $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, $75,000,000 aggregate principal amount of Old Notes are outstanding. Precise will issue the New Notes to holders on or promptly after the Expiration Date. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, Precise believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder which is an 'affiliate' of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has
8 no arrangement or understanding with any person to participate in the distribution of such New Notes. Each holder accepting the Exchange Offer is required to represent to Precise in the Letter of Transmittal that, among other things, the New Notes will be acquired by the holder in the ordinary course of business and the holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such New Notes. Any Participating Broker-Dealer that acquired Old Notes for its own account as a result of market-making activities or other trading activities may be a statutory underwriter. Each Participating Broker- Dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resale of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of one year after the Exchange Offer Effectiveness Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See 'Plan of Distribution.' Any holder who tenders in the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the New Notes will not be able to rely on the position of the staff of the Commission enunciated in no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Failure to comply with such requirements in such instance may result in such holder incurring liability under the Securities Act for which the holder is not indemnified by the Company. Minimum Condition......................... The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered or accepted for exchange. Expiration Date........................... 5:00 p.m., New York City time, on , 1997 unless the Exchange Offer is extended, in which case the term 'Expiration Date' means the latest date and time to which the Exchange Offer is extended. Accrued Interest on the New Notes and the Old Notes............................... Each New Note will bear interest from its issuance date. Holders of Old Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the issuance date of the New Notes. Such interest will be paid with the first interest payment on the New Notes. Interest on the Old Notes accepted for exchange will cease to accrue upon issuance of the New Notes. Conditions to the Exchange Offer.......... The Exchange Offer is subject to certain customary conditions, which may be waived by Precise. See 'The Exchange Offer--
9 Conditions.' Precise reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. Procedures for Tendering Old Notes........ Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, or an Agent's Message (as defined) in connection with a book-entry transfer, together with the Old Notes and other required documentation to the Exchange Agent (as defined) at the address set forth herein. By executing the Letter of Transmittal, each holder will represent to Precise that, among other things, the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder, that neither the holder nor any such other person (i) has any arrangement or understanding with any person to participate in the distribution of such New Notes, (ii) is engaging or intends to engage in the distribution of such New Notes, or (iii) is an 'affiliate,' as defined under Rule 405 of the Securities Act, of Precise. See 'The Exchange Offer--Purpose and Effect of the Exchange Offer' and 'The Exchange Offer--Procedures for Tendering.' Untendered Old Notes...................... Following the consummation of the Exchange Offer, holders of Old Notes eligible to participate but who do not tender their Old Notes will not have any further exchange rights and such Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Old Notes could be adversely affected. Consequences of Failure to Exchange....... The Old Notes that are not exchanged pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Old Notes may be resold only (i) to Precise, (ii) pursuant to Rule 144A or Rule 144 under the Securities Act or pursuant to some other exemption under the Securities Act, (iii) outside the United States to a non-U.S. person pursuant to the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities Act. See 'The Exchange Offer-- Consequences of Failure to Exchange.' Shelf Registration Statement.............. If (i) Precise and the Guarantors are not required to file the Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy or (ii) any Holder of Transfer Restricted Securities (as defined) notifies Precise prior to the 20th day following consummation of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer or (B) that it may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and owns Notes acquired directly from Precise or an affilaite of Precise, Precise and the Guarantors will file with the Commission a Shelf Registration Statement (the 'Shelf Registration Statement') to cover resales of
10 the Notes by the Holders thereof who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement. Precise and the Guarantors will use their best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. A holder of the Old Notes that sells such Old Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a holder (including certain indemnification obligations). Special Procedures for Beneficial Owners.................................. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Precise will keep the Exchange Offer open for not less than twenty business days in order to provide for the transfer of registered ownership. Guaranteed Delivery Procedures............ Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who cannot deliver their Old Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent (or comply with the procedures for book-entry transfer) prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth in 'The Exchange Offer-- Guaranteed Delivery Procedures.' Withdrawal Rights......................... Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Acceptance of Old Notes and Delivery of New Notes............................... Precise will accept for exchange any and all Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See 'The Exchange Offer--Terms of the Exchange Offer.' Federal Income Tax Consequences........... The exchange of Old Notes for New Notes by tendering holders will not be a taxable exchange for federal income tax purposes, and such holders should not recognize any taxable gain or loss or any interest income as a result of such exchange. Use of Proceeds........................... There will be no cash proceeds to Precise from the exchange pursuant to the Exchange Offer. Exchange Agent............................ Marine Midland Bank.
11 THE NEW NOTES GENERAL............................... The form and terms of the New Notes are the same as the form and terms of the Old Notes (which they replace) except that (i) the New Notes bear a Series B designation, (ii) the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (iii) the holders of New Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for the payment of Liquidated Damages in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. See 'The Exchange Offer--Purpose and Effect of the Exchange Offer.' The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See 'Description of the Notes.' The Old Notes and the New Notes are referred to collectively herein as the 'Notes.' ISSUER................................ Precise Technology, Inc. SECURITIES OFFERED.................... $75.0 million in aggregate principal amount of Series B 11 1/8% Senior Subordinated Notes due 2007. MATURITY.............................. June 15, 2007. INTEREST.............................. Interest on the New Notes will accrue at the rate of 11 1/8% per annum from the date of issuance (the 'Issue Date') and will be payable semi- annually in arrears on June 15 and December 15 of each year, commencing December 15, 1997. GUARANTEES............................ Precise's payment obligations under the New Notes will be jointly and severally guaranteed (the 'Subsidiary Guarantees'), on a senior subordinated basis, by the Guarantors. The Subsidiary Guarantee of each Guarantor will be subordinated to the prior payment in full of all Senior Debt of such Guarantor. See 'Description of Notes--Subsidiary Guarantees.' RANKING............................... The New Notes will be general unsecured obligations of Precise, subordinated in right of payment to all existing and future Senior Debt of the Company, including all obligations of the Company under the New Credit Agreement, and senior to or pari passu with all existing and future subordinated indebtedness of the Company. As of March 31, 1997, after giving pro forma effect to the Refinancing Transactions, Precise and the Guarantors would have had outstanding approximately $16.4 million of consolidated Senior Debt. See 'Capitalization' and 'Description of Notes--Subordination.' OPTIONAL REDEMPTION................... The Notes will be redeemable at the option of Precise, in whole or in part, at any time on or after June 15, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption. Notwithstanding the foregoing, on or prior to June 15, 2000, Precise may redeem at any time or from time to time up to 33 1/3% of the aggregate principal amount of the Notes issued at a redemption price of 111.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption, with the net cash proceeds of one of more Public Equity Offerings; provided, however, that at least 66 2/3% of the aggregate principal amount of the Notes originally issued remain outstanding immediately after
12 the occurrence of such redemption and that any such redemption occurs within 90 days following the closing of any such Public Equity Offering. In addition, at any time prior to June 15, 2002, Precise may, at its option, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium. See 'Description of Notes--Optional Redemption.' CHANGE OF CONTROL..................... Upon the occurrence of a Change of Control, Precise will be required to make an offer to repurchase all or any part of the Notes at a price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of repurchase. See 'Description of Notes--Repurchase at the Option of Holders--Change of Control.' CERTAIN COVENANTS..................... The Indenture contains covenants, including covenants with respect to the following matters: (i) limitations on the incurrence of indebtedness and the issuance of preferred stock; (ii) limitations on certain payments, including dividends, repurchases of Precise's capital stock, repurchases of subordinated obligations, and the making of certain investments; (iii) limitations on liens; (iv) limitations on dividend and other payment restrictions affecting Restricted Subsidiaries; (v) limitations on mergers, consolidations, or the sale of substantially all assets; (vi) limitations on transactions with affiliates; (vii) limitations on issuances and sales of capital stock of wholly owned Restricted Subsidiaries; (viii) limitations on layering debt; and (ix) limitations on asset sales. See 'Description of Notes--Certain Covenants.' REGISTRATION RIGHTS................... Pursuant to a registration rights agreement (the 'Registration Rights Agreement') between Precise, the Guarantors and the Initial Purchasers, Precise and the Guarantors agreed to file a registration statement (the 'Exchange Offer Registration Statement') with respect to an offer to exchange the Old Notes for New Notes of Precise having substantially identical terms. If (i) the Exchange Offer is not permitted by applicable law or (ii) any holder of Transfer Restricted Securities notifies Precise that (a) it is prohibited by law or Commission policy from participating in the Exchange Offer, (b) it may not resell a New Note acquired by it in an Exchange Offer to the public without delivering a prospectus and that the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resale or (c) it is a broker-dealer and holds Notes acquired directly from Precise or an affiliate of Precise, Precise and the Guarantors will be required to file a shelf registration statement (the 'Shelf Registration Statement') to cover resales of the Notes by the holders thereof. If Precise and the Guarantors fail to satisfy these or certain other registration obligations, Precise and the Guarantors will be required to pay Liquidated Damages to the holders of the Notes under certain circumstances. See 'The Exchange Offer.'
RISK FACTORS Before tendering their Old Notes for the New Notes offered hereby, holders of the Old Notes should consider carefully the information set forth under the caption 'Risk Factors,' and all other information set forth in this Prospectus. 13 SUMMARY FINANCIAL DATA The following table sets forth (i) summary historical consolidated financial data of the Company for the five-year period ended December 31, 1996 and for the three months ended March 31, 1996 and 1997, (ii) pro forma consolidated statement of income and other financial data of the Company for the year ended December 31, 1996 and the three and twelve months ended March 31, 1997 which give effect to the Acquisitions and the Refinancing Transactions, as if such events had occurred on January 1, 1996 and (iii) summary historical balance sheet data of the Company as adjusted to give effect to the Refinancing Transactions as if such events had occurred on March 31, 1997. The summary historical consolidated financial data for the five-year period ended December 31, 1996 were derived from audited consolidated financial statements of the Company. The audited consolidated financial statements of the Company for each of the years in the three-year period ended December 31, 1996 are included elsewhere in this Prospectus together with the reports of Ernst & Young, LLP, independent accountants, for the years ended December 31, 1996 and 1995, and Grant Thornton, LLP, independent accountants, for the year ended December 31, 1994. The summary historical consolidated financial data for the years ended December 31, 1993 and 1992 were derived from audited consolidated financial statements of the Company that are not included herein. The summary historical consolidated financial data for the three months ended March 31, 1996 and 1997 and the pro forma twelve months ended March 31, 1997 were derived from unaudited financial statements of the Company, which, in the opinion of management, include all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the information set forth therein. The results of operations for the three months ended March 31, 1997 are not necessarily indicative of the results that may be expected for the full year. The pro forma financial data and the adjusted balance sheet data are provided for informational purposes only, are unaudited and are not necessarily indicative of future results or what the operating results or financial condition of the Company would have been had the Refinancing Transactions and the Acquisitions actually been consummated on the dates assumed. The following table should be read in conjunction with 'Capitalization,' 'Selected Financial Data,' 'Pro Forma Financial Data,' 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and the historical financial statements of the Company and Tredegar, and the accompanying notes thereto, included elsewhere in this Prospectus.
UNAUDITED PRO FORMA(2) UNAUDITED ------------------------ THREE MONTHS ENDED THREE MONTHS YEAR ENDED DECEMBER 31, MARCH 31, YEAR ENDED ENDED ---------------------------------------------------- ------------------- DECEMBER 31, MARCH 31, 1992 1993 1994 1995 1996(1) 1996 1997 1996 1997 -------- -------- -------- -------- -------- -------- -------- ------------ --------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Net sales.................... $ 27,673 $ 24,161 $ 33,157 $ 33,542 $ 93,289 $ 9,089 $ 26,325 $114,658 $ 26,325 Cost of sales................ 22,908 19,536 26,807 25,877 76,477 7,156 21,613 94,199 21,613 -------- -------- -------- -------- -------- -------- -------- ------------ --------- Gross profit................. 4,765 4,625 6,350 7,665 16,812 1,933 4,712 20,459 4,712 Selling, general and administrative............. 3,390 3,373 3,916 4,454 7,262 1,100 2,139 8,003 2,139 Plant closure costs.......... -- -- -- -- 671 -- -- 671 -- Amortization of intangible assets..................... 219 -- 26 37 1,614 42 433 1,758 402 -------- -------- -------- -------- -------- -------- -------- ------------ --------- Operating income............. 1,156 1,252 2,408 3,174 7,265 791 2,140 10,027 2,171 Interest expense............. 703 706 956 810 5,559 261 1,690 9,897 2,463 Other (income) expense....... 44 59 (72) 148 (25) (2) (4) (25)(3) (4) -------- -------- -------- -------- -------- -------- -------- ---------- -------- Income (loss) before income taxes...................... 409 487 1,524 2,216 1,731 532 454 155 (288) Provision (benefit) for income taxes (4)........... -- 66 574 941 1,265 245 304 578 4 -------- -------- -------- -------- -------- -------- -------- ---------- -------- Net income (loss)............ $ 409 $ 421 $ 950 $ 1,275 $ 466 $ 287 $ 150 $ (423)(5) $ (292) -------- -------- -------- -------- -------- -------- -------- ---------- --------- -------- -------- -------- -------- -------- -------- -------- ---------- --------- CASH FLOW DATA: Net cash provided by operating activities....... $ 1,167 $ 1,463 $ 1,327 $ 3,170 $ 9,602 $ 908 $ 703 -- -- Net cash used in investing activities (excluding Acquisitions) (6).......... (383) (309) (1,968) (998) (1,829) (302) (805) -- -- Net cash provided by (used in) financing activities... (893) (1,161) 650 (2,202) 57,313 63,826 (684) -- -- TWELVE MONTHS ENDED MARCH 31, 1997 --------- STATEMENT OF INCOME DATA: Net sales.................... $110,525 Cost of sales................ 90,847 --------- Gross profit................. 19,678 Selling, general and administrative............. 8,301 Plant closure costs.......... 671 Amortization of intangible assets..................... 1,783 -------- Operating income............. 8,923 Interest expense............. 9,886 Other (income) expense....... (27) -------- Income (loss) before income taxes...................... (936) Provision (benefit) for income taxes (4)........... 109 -------- Net income (loss)............ $ (1,045) -------- -------- CASH FLOW DATA: Net cash provided by operating activities....... -- Net cash used in investing activities (excluding Acquisitions) (6).......... -- Net cash provided by (used in) financing activities... --
14
UNAUDITED PRO FORMA(2) UNAUDITED ------------------------ THREE MONTHS ENDED THREE ENDED MONTHS YEAR ENDED DECEMBER 31, MARCH 31, YEAR ENDED ENDED ---------------------------------------------------- ------------------- DECEMBER 31, MARCH 31, 1992 1993 1994 1995 1996(1) 1996 1997 1996 1997 -------- -------- -------- -------- -------- -------- -------- ------------ --------- (DOLLARS IN THOUSANDS) OTHER FINANCIAL DATA: EBITDA (7)................... $ 2,043 $ 1,837 $ 3,542 $ 4,472 $ 14,518 $ 1,254 $ 3,906 $ 18,165 $ 3,906 EBITDA margin (7)............ 7.4% 7.6% 10.7% 13.3% 15.6% 13.8% 14.8% 15.8% 14.8% Depreciation and amortization............... $ 931 $ 644 $ 1,062 $ 1,446 $ 5,925 $ 461 $ 1,762 $ 6,740 $ 1,731 Capital expenditures (8)..... 412 2,445 4,403 1,582 6,376 2,089 1,330 7,604 1,330 Ratio of earnings to fixed charges (9)................ 1.5x 1.6x 2.4x 3.4x 1.3x 2.6x 1.3x 1.0x -- Pro forma ratio of EBITDA to interest expense........... -- -- -- -- -- -- -- 1.8x 1.6x Pro forma ratio of total debt to EBITDA.................. -- -- -- -- -- -- -- 5.0x -- TWELVE MONTHS ENDED MARCH 31, 1997 --------- OTHER FINANCIAL DATA: EBITDA (7)................... $ 17,257 EBITDA margin (7)............ 15.6% Depreciation and amortization............... $ 7,004 Capital expenditures (8)..... 5,617 Ratio of earnings to fixed charges (9)................ -- Pro forma ratio of EBITDA to interest expense........... 1.7x Pro forma ratio of total debt to EBITDA.................. 5.3x
UNAUDITED AS OF MARCH 31, 1997 ------------------------------ ACTUAL AS ADJUSTED(10) ----------- --------------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Total assets.................................................................................... $ 97,215 $ 97,435 Long-term debt, including current maturities.................................................... 64,577 91,391 Redeemable preferred stock...................................................................... 8,250 -- Total stockholder's equity (deficit)............................................................ 6,898 (7,681)
- ------------------------------ (1) The statement of income data, cash flow data and other financial data for 1996 reflect the results of operations of Unity and Tredegar since they were acquired by the Company on January 25, 1996 and March 29, 1996, respectively. (2) The unaudited pro forma statement of income data and other financial data of the Company give effect to the Acquisitions and the Refinancing Transactions as if they had occurred on January 1, 1996. (3) Excludes a non-recurring charge of $500,000 representing financial advisory fees paid to Mentmore in connection with the Refinancing Transactions. (4) The provision for income taxes for the unaudited pro forma statement of income data for 1996, for the three months ended March 31, 1997 and for the twelve months ended March 31, 1997, is computed by applying the statutory rate of 43%, excluding the impact of non-deductible goodwill amortization. (5) Excludes an extraordinary loss on the early extinguishment of indebtedness, net of tax effect, of $4,538,000. (6) Net cash used in the Unity Acquisition was $3,308,000 and net cash used in the Tredegar Acquisition was $60,493,000. (7) 'EBITDA' represents net income plus income taxes, interest expense, depreciation and amortization and certain non-recurring charges and non-cash charges. Non-recurring charges and non-cash charges for the year ended December 31, 1996 and for the pro forma twelve months ended March 31, 1997 include operating losses (excluding depreciation expense) related to the Company's Graham, North Carolina facility which was closed in September 1996 ($510,000), plant closure costs ($671,000) and the elimination of pension costs associated with a terminated defined benefit plan ($122,000). Non-recurring charges and non-cash charges for the pro forma year ended December 31, 1996 include operating losses (excluding depreciation expense) related to the Company's Graham, North Carolina facility which was closed in September 1996 ($580,000), plant closure costs ($671,000) and the elimination of pension costs associated with a terminated defined benefit plan ($122,000). 'EBITDA margin' is defined as EBITDA divided by net sales. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service indebtedness. However, EBITDA should not be considered an alternative to operating income or cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. (8) Includes capital expenditures financed through capital leases of $0 in 1992, $1,896,000 in 1993, $2,328,000 in 1994, $536,000 in 1995 and $4,201,000 in 1996 and $1,732,000 and $506,000 in the three months ended March 31, 1996 and 1997, respectively. Also includes capital expenditures financed through capital leases of $4,201,000, $506,000, and $2,975,000 for the pro forma year ended December 31, 1996, the pro forma three months ended March 31, 1997 and the pro forma twelve months ended March 31, 1997, respectively. (9) In calculating the ratio of earnings to fixed charges, earnings consist of income before taxes plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing costs, whether expensed or capitalized, plus the portion of operating lease expense attributable to interest. For the three months and twelve months ended March 31, 1997, the Company's pro forma earnings were inadequate to cover fixed charges by $288,000 and $936,000, respectively. Adjusted to eliminate non-cash charges of depreciation and amortization of $1,731,000 and $7,004,000 for the pro forma three months and twelve months ended March 31, 1997, respectively, such earnings would have exceeded fixed charges by $1,443,000 and $6,068,000, respectively. (10) The as adjusted balance sheet data give effect to the Refinancing Transactions as if such transactions had occurred on March 31, 1997. 15 RISK FACTORS In addition to the other information contained in this Prospectus, before tendering their Old Notes for the New Notes offered hereby, holders of the Old Notes should consider carefully the following factors, which may be generally applicable to the Old Notes as well as the New Notes. SUBSTANTIAL LEVERAGE The Company is highly leveraged. At March 31, 1997, after giving pro forma effect to the Refinancing Transactions, the Company's total consolidated indebtedness would have been $91.4 million, and the Company would have had an additional $20.5 million of undrawn commitments under the New Credit Agreement. The Company would have had a stockholder's deficit on such date of $7.7 million. In addition, subject to certain restrictions set forth in the New Credit Agreement and the Indenture, the Company may incur additional indebtedness, including Senior Debt, in the future for acquisitions, capital expenditures, working capital and other corporate purposes. For the three months and twelve months ended March 31, 1997, the Company's pro forma earnings were inadequate to cover fixed charges by $288,000 and $936,000, respectively. The Company's ability to make scheduled payments of the principal of, or interest on, or to refinance its indebtedness (including the Notes) depends on its future operating performance, which to a certain extent is subject to economic, financial, competitive and other factors beyond its control. The Company believes that, based on its current level of operations and anticipated growth, its cash flow from operations, together with borrowings under the New Credit Agreement, will be adequate to meet its anticipated requirements for working capital, capital expenditures, interest payments and scheduled principal payments over the next several years. The Company's anticipated cash flow from operations in 1997 is expected to be insufficient to cover the Company's cash requirements during such period. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources.' The Company, however, intends to continue to enter into capital leases to fund a portion of its capital expenditures. There can be no assurance that any such lease financings will be available on commercially reasonable terms or at all. In addition, there can be no assurance that the Company's business will generate cash flow at or above expected levels. If the Company is unable to generate sufficient cash flow from operations in the future to service its indebtedness and make necessary capital expenditures, or if its future earnings are insufficient to make all required principal payments out of internally generated funds, the Company may be required to refinance all or a portion of its existing indebtedness, sell assets or obtain additional financing. There can be no assurance that any such refinancing or asset sales would be possible or that any additional financing could be obtained on terms acceptable to the Company or at all, particularly in view of the Company's high level of indebtedness. The Company's high level of indebtedness will have several important effects on its future operations, including the following: (a) the Company will have significant cash requirements to service indebtedness, reducing funds available for working capital, acquisitions, capital expenditures and other corporate purposes and increasing the Company's vulnerability to adverse general economic and industry conditions and (b) the financial covenants and other restrictions contained in the New Credit Agreement, the Indenture and other agreements relating to the Company's indebtedness require the Company to meet certain financial tests, restrict its ability to borrow additional funds and impose limitations on the disposition of assets. In addition, although management believes that capital expenditures above maintenance levels can be deferred to address cash flow or other constraints, such initiatives cannot be deferred for extended periods without adverse effects on the Company's business, results of operations and financial position. The Company's continued growth depends, in part, on its ability to maintain its facilities, and, therefore, to the extent it is unable to do so with internally generated cash, its inability to finance capital expenditures through borrowed funds could have a material adverse effect on the Company's future operations. SUBORDINATION OF THE NOTES AND SUBSIDIARY GUARANTEES; UNSECURED STATUS OF THE NOTES Subordination The payment of principal of, premium and interest on, and any other amounts owing in respect of, the Notes is subordinated to the prior payment in full of all existing and future Senior Debt of Precise, including indebtedness under the New Credit Agreement. Similarly, the Subsidiary Guarantees of the Guarantors will be 16 subordinated in right of payment to all Senior Debt of the respective Guarantors. At March 31, 1997, after giving pro forma effect to the Refinancing Transactions, Precise and the Guarantors would have had an aggregate of approximately $16.4 million of consolidated Senior Debt outstanding and $20.5 million of undrawn commitments under the New Credit Agreement. The Indenture limits, but does not prohibit, the incurrence by the Company of additional indebtedness which may constitute Senior Debt. In the event of the bankruptcy, liquidation, dissolution, reorganization or other winding up of Precise, the assets of Precise and the Guarantors will be available to pay obligations on the Notes only after all Senior Debt has been paid in full in cash, and there may not be sufficient assets remaining to pay amounts due on any or all of the Notes. In addition, under certain circumstances, the Company may not pay principal of, premium or interest on, or any other amounts owing in respect of, the Notes, or purchase, redeem or otherwise retire the Notes, if a payment default or a non-payment default exists with respect to certain Senior Debt, and, in the case of a non-payment default, a payment blockage notice has been received by the Trustee (as defined). See 'Description of Notes--Subordination.' Unsecured Status of the Notes and Subsidiary Guarantees The Notes and Subsidiary Guarantees are unsecured obligations of Precise and the Guarantors, respectively. The Indenture permits the Company to incur certain secured indebtedness, including indebtedness under the New Credit Agreement, which is secured by a lien on substantially all of the assets of Precise and the Guarantors. The holders of any secured indebtedness will have a claim prior to the holders of the Notes with respect to any assets pledged by the Company as security for such indebtedness. Upon an event of default under the New Credit Agreement, the lenders thereunder would be entitled to foreclose on the assets of Precise and the Guarantors. In such event, the assets of Precise and the Guarantors remaining after repayment of such secured indebtedness may be insufficient to satisfy the obligations of Precise and the Guarantors with respect to the Notes. See 'Description of Certain Indebtedness--New Credit Agreement.' RESTRICTIONS UNDER DEBT AGREEMENTS The Indenture contains covenants that, among other things, limit the ability of Precise and its Restricted Subsidiaries to incur additional indebtedness, incur liens, pay dividends and make certain other restricted payments, make investments, consummate certain asset sales, enter into certain transactions with affiliates, issue subsidiary stock, consolidate or merge with any other person or transfer all or substantially all of the assets of the Company. In addition, the New Credit Agreement contains restrictive covenants which, generally, are more restrictive than those contained in the Indenture, and limit, among other things, the Company's ability to prepay its subordinated indebtedness (including the Notes) and capital expenditures. The New Credit Agreement also requires the Company to maintain specified consolidated financial ratios, such as senior and total funded indebtedness to consolidated EBITDA ratios, a fixed charge coverage ratio and an interest coverage ratio, and satisfy certain consolidated financial tests. The Company's ability to meet those financial ratios and financial tests can be affected by events beyond its control, and there can be no assurance that the Company will meet those ratios and tests. A breach of any of the covenants under the New Credit Agreement or the Indenture could result in a default under the New Credit Agreement and/or the Indenture. If an event of default occurs under the New Credit Agreement, the lenders could elect to declare all amounts outstanding thereunder, together with accrued and unpaid interest, to be immediately due and payable. If the Company is unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness. See 'Description of Notes' and 'Description of Certain Indebtedness--New Credit Agreement.' HOLDING COMPANY STRUCTURE; EFFECTS OF ASSET ENCUMBRANCES A substantial portion of Precise's consolidated operating income will be generated by its subsidiaries. As a result, Precise will depend significantly on the earnings and cash flow of, and dividends and distributions or advances from, its subsidiaries to provide the funds necessary to meet its debt service obligations, including the payment of principal of and interest on the Notes. There can be no assurance that Precise's subsidiaries will generate sufficient cash flow to dividend, distribute or advance funds to Precise. Should Precise fail to satisfy any payment obligation under the Notes, the holders thereof would have a direct claim therefor against the Guarantors pursuant to the Subsidiary Guarantees. However, substantially all of the assets of the Guarantors are pledged to secure the obligations of Precise and such subsidiaries under the New Credit Agreement and other secured obligations. The Indenture limits, but does not prohibit, the ability of Precise and its Restricted Subsidiaries to 17 incur additional secured indebtedness. In the event of a default under the New Credit Agreement (or any other secured indebtedness), the lenders thereunder would be entitled to a claim on the assets securing such indebtedness which is prior to any claim of the holders of the Notes. Accordingly, there may be insufficient assets remaining after payment of prior secured claims (including claims of lenders under the New Credit Agreement) to pay amounts due on the Notes. See '--Substantial Leverage' and '--Subordination of the Notes and Subsidiary Guarantees; Unsecured Status of the Notes.' RELIANCE ON KEY CUSTOMERS AND SUPPLY AGREEMENTS The Company's business is substantially dependent on a limited number of customers. In 1996, the Company's ten largest customers accounted for approximately 57.3% of its pro forma net sales. The Company's largest customers are Procter & Gamble, Gillette, AMP Incorporated ('AMP') and Lexmark International Group, Inc. ('Lexmark'), which represented approximately 12.3%, 10.7%, 5.2% and 5.1%, respectively, of the Company's pro forma net sales in 1996. The loss of a substantial customer, or a significant reduction in sales generated from a substantial customer, could have a material adverse effect on the Company's business, financial condition and results of operations. Sales to each of the Company's customers are dependent on the Company's ability to manufacture products of acceptable quality, at acceptable prices, that meet the customer's specifications and to deliver such products on a timely basis. Approximately 25% of the Company's pro forma net sales in 1996 were made pursuant to multiple year supply agreements. Generally, these agreements are terminable by the customer at any time upon notice. While the Company has no reason to believe that any of its existing supply agreements will be cancelled by a customer and anticipates that, upon expiration, it will be able to extend or renew its existing supply agreements with its customers on terms no less favorable to the Company, no assurance can be given in this regard. See 'Business--Customers.' VOLATILITY OF CUSTOMER DEMAND The demand for the Company's services and products is subject to substantial volatility and other factors beyond its control. Several of the Company's largest customers, including Gillette and AMP, have significant plastics injection molding capabilities and may periodically insource a portion of production being manufactured by the Company as a result of underutilization of their own facilities. Such insourcing could result in a material loss of sales to the Company during particular fiscal periods. In December 1996, for example, AMP began to insource a portion of its electrical connector production that was formerly manufactured by the Company. As a result, the Company has experienced a significant loss of sales to AMP, and management believes the Company may suffer further losses of sales to AMP in the future. Demand for the Company's products is also dependent upon the demand for its customers' products. Disappointing market acceptance or obsolescence of a customer's product can have a material adverse effect on the Company's sales to such customer. Additionally, a customer may move the location at which a product is being manufactured, which may cause the Company to no longer be able to supply such customer efficiently and result in a loss of sales. Finally, the making of particular molds is non-recurring in nature, and, therefore, the Company's mold making sales are volatile. Although management does not expect the Company to lose or suffer a significant reduction in business in the foreseeable future, there can be no assurance that the factors described above, or other competitive factors affecting the Company's business, will not result in a significant loss or reduction of sales in future periods. EXPOSURE TO FLUCTUATIONS IN RESIN COST AND SUPPLY The Company uses various plastic resins in the manufacture of its products. In 1996, on a pro forma basis, the aggregate cost for plastic resins was $34.2 million, or 36.3% of the Company's total cost of goods sold. Pursuant to the terms of multiple-year supply agreements and purchase orders, the Company historically has had the ability to pass on a significant portion of increases in resin prices (as well as decreases in resin prices) to its customers through price adjustments. Because plastic resins are the principal components in the Company's products, the Company's financial performance is materially dependent on its ability to pass resin price increases on to its customers through contractual arrangements or otherwise. Plastic resin prices are subject to fluctuations due, in part, to industry capacity, consumption levels, supply shortages and changes in the prices of natural gas, crude oil and other petrochemical intermediates from which plastic resins are produced. For example, during the past four years, the resin market has been volatile due to increased demand and irregular producer capacity. Although the Company will continue to have the benefit of resin price pass-through provisions under its existing 18 customer agreements for so long as such agreements remain in effect, there can be no assurance that it will continue to be able to effect such a pass-through under contractual agreements or otherwise in the future. In addition, there can be no assurance that a significant increase in resin prices would not negatively impact the Company's existing business or future business opportunities, including those relating to the potential conversion from glass, metal and composite containers to rigid plastic, and thereby have a material adverse effect on the Company's business, financial condition and results of operations. See 'Business--Raw Materials and Suppliers.' During 1996, the Company purchased, on a pro forma basis, approximately 26.2% and 17.3% of its total plastic resin requirements (in dollars) from Huntsman Chemical Corporation ('Huntsman') and the General Polymers Division of Ashland Chemical Company ('General Polymers'), respectively, pursuant to purchase orders delivered from time to time by the Company. The Company has long-standing relationships with Huntsman and General Polymers, and has worked closely with them to develop plastic resins which yield maximum performance from the Company's equipment. Although the Company believes its relationships with Huntsman and General Polymers are mutually beneficial, no assurance can be given that Huntsman and General Polymers will continue to be suppliers to the Company in the future. The Company believes that alternative sources are available for its plastic resin requirements. However, should any of the Company's resin suppliers fail to deliver under their arrangements, the Company would be forced to purchase resins in the open market, and no assurance can be given that it would be able to make such purchases at prices which would allow it to remain competitive. COMPANY GROWTH AND RISKS RELATED TO FUTURE ACQUISITIONS The Company's ability to increase net sales and operating cash flow over time depends, in part, on its success in consummating future acquisitions upon satisfactory terms and successfully integrating the acquired companies or assets into the Company's operations. There can be no assurance that acquisition opportunities will continue to be available or that if available, such acquisitions could be consummated on terms acceptable to the Company, or that the Company would be able to obtain financing on terms that it deems acceptable to consummate any potential acquisition. In addition, future acquisitions would place increasing demands on the Company's management and operational resources. The Company's future performance will depend, in part, on its ability to manage expanding operations and to adapt its operational systems to such expansions. The failure of the Company to effectively manage its growth or successfully integrate acquired companies or assets into the Company's operations could have a material adverse effect on the Company's business, financial condition and results of operations. COMPETITION Most of the Company's products are sold in highly competitive markets in the United States. In addition, the markets for certain of the Company's products are characterized by low costs of entry and competition based primarily on price. The Company competes with a significant number of companies of varying sizes, including divisions or subsidiaries of larger companies, on the basis of price, service, quality and the ability to supply products to customers in a timely manner. A number of the Company's competitors have financial and other resources that are substantially greater than those of the Company. Competitive pressures or other factors could cause the Company to lose existing business or opportunities to generate new business or could result in significant price erosion, all of which would have a material adverse effect on the Company's business, financial condition and results of operations. See 'Business--Competition.' CONTROLLING STOCKHOLDER Precise is a wholly-owned subsidiary of Precise Holding Corporation ('Parent'). Sunderland Industrial Holdings Corporation ('Sunderland') held approximately 80.4% of the outstanding shares of Common Stock of Parent ('Parent Common Stock'), on a fully-diluted basis, as of March 31, 1997. The outstanding capital stock of Sunderland is owned by trusts established for the benefit of certain relatives of Richard L. Kramer and William L. Remley. Messrs. Kramer and Remley are executive officers and directors of Sunderland, Mentmore, Parent and Precise. The interests of Sunderland, Mentmore and their affiliates may differ from the interests of holders of the Notes. 19 DEPENDENCE ON KEY PERSONNEL The continued success of the Company is largely dependent on the personal efforts and abilities of senior management. The loss of services of key personnel could have a material adverse effect on the Company. The Company has no long-term employment agreements with, or key-man life insurance for, any of its executive officers or key employees. ENVIRONMENTAL MATTERS Federal, state and local governments or regulatory agencies could enact laws or regulations concerning environmental matters that increase the cost of producing, or otherwise adversely affect the demand for, plastic products. The Company is aware that certain local governments have adopted ordinances prohibiting or restricting the use or disposal of certain plastic products that are among the types of products manufactured by the Company. If widely adopted, such regulatory and environmental measures or a decline in consumer preference for plastic products due to environmental considerations could have a material adverse effect upon the Company's business, financial condition and results of operations. In addition, the past and present operations of the Company and the past and present ownership and operations of real property by the Company are subject to extensive and changing federal, state and local environmental laws and regulations pertaining to the discharge of materials into the environment, the treatment, storage and disposal of solid and hazardous wastes or otherwise relating to the protection of the environment. While the Company has not been required historically to make significant capital expenditures in order to comply with applicable environmental laws and regulations, in the future the Company may have to make capital expenditures in excess of current estimates because of continually changing compliance standards and environmental technology. Furthermore, unknown contamination of sites currently or formerly owned or operated by the Company (including contamination caused by prior owners and operators of such sites) and off-site disposal of hazardous substances may give rise to unanticipated remediation and compliance costs. The Company does not currently have specific insurance coverage for environmental liabilities and does not anticipate obtaining such coverage in the future. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations--Environmental Matters' and 'Business--Regulation and Legislation.' CHANGE OF CONTROL OFFER Upon a Change of Control, Precise will be required to offer to repurchase all of the outstanding Notes at 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of repurchase. There can be no assurance that Precise will have sufficient funds available or will be permitted by its other debt agreements to repurchase the Notes upon the occurrence of a Change of Control. The New Credit Agreement currently prohibits the Company from repurchasing any Notes and also provides that certain change of control events with respect to the Company would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Debt to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when the Company is prohibited from repurchasing Notes, the Company could seek the consent of its lenders to the repurchase of Notes or could attempt to refinance or repay the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from repurchasing Notes. In such case, the Company's failure to make a Change of Control Offer (as defined) or repurchase tendered Notes would constitute an Event of Default (as defined) under the Indenture which would, in turn, constitute a default under the New Credit Agreement. In such circumstances, the subordination provisions in the Indenture would likely restrict payments to the holders of the Notes. See 'Description of Notes--Subordination' and 'Description of Notes--Repurchase at the Option of Holders--Change of Control.' FRAUDULENT CONVEYANCE The incurrence by Precise of indebtedness such as the Notes may be subject to review under relevant state and federal fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors of Precise. Under these laws, if a court were to find that, after giving effect to the sale of the Notes and the application of the net proceeds therefrom, either (a) Precise incurred such indebtedness with the intent of hindering, delaying or defrauding creditors or contemplated insolvency with a design to prefer one or more creditors to the exclusion in whole or in part of others or (b) Precise received less than reasonably equivalent 20 value or consideration for incurring such indebtedness and (i) was insolvent or rendered insolvent by reason of such transaction, (ii) was engaged in a business or transaction for which the assets remaining with Precise constituted unreasonably small capital or (iii) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, such court may subordinate such indebtedness to presently existing and future indebtedness of Precise, avoid the issuance of such indebtedness and direct the repayment of any amounts paid thereunder to Precise's creditors or take other action detrimental to the holders of such indebtedness. Precise's obligations under the Notes are guaranteed by the Guarantors. The incurrence by a Guarantor of a Subsidiary Guarantee may be subject to review under relevant state and federal fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors of such Guarantor. Under these laws, if a court were to find that either (a) a Subsidiary Guarantee was incurred by a Guarantor with the intent of hindering, delaying or defrauding creditors or such Guarantor contemplated insolvency with a design to prefer one or more creditors to the exclusion in whole or in part of others or (b) such Guarantor received less than reasonably equivalent value or consideration for incurring such Subsidiary Guarantee and (i) was insolvent or rendered insolvent by reason of such transaction, (ii) was engaged in a business or transaction for which the assets remaining with such Guarantor constituted unreasonably small capital or (iii) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, such court may subordinate such Subsidiary Guarantee to presently existing and future indebtedness of such Guarantor, avoid the issuance of such Subsidiary Guarantee and direct the repayment of any amounts paid thereunder to such Guarantor's creditors or take other action detrimental to the holders of such Subsidiary Guarantee. A legal challenge of a Subsidiary Guarantee on fraudulent conveyance grounds, may, among other things, focus on the benefits, if any, realized by the Guarantor as a result of the issuance by Precise of the Notes. To the extent any Subsidiary Guarantee was avoided as a fraudulent conveyance or held unenforceable for any other reason, holders of the Notes would cease to have any claim in respect of such Guarantor and would be creditors solely of Precise and any Guarantor whose Subsidiary Guarantee was not avoided or held unenforceable. In such event, the claims of the holders of the applicable Notes against the issuer of an invalid Subsidiary Guarantee would be subject to the prior payment of all liabilities and preferred stock claims of such Guarantor. There can be no assurance that, after providing for all prior claims and preferred stock interests, if any, there would be sufficient assets to satisfy the claims of the holders of the applicable Notes relating to any voided portions of any of the Subsidiary Guarantees. The measure of insolvency for purposes of determining whether a transfer is avoidable as a fraudulent transfer varies depending upon the law of the jurisdiction which is being applied. Generally, however, a debtor would be considered insolvent if the sum of all its liabilities, including contingent liabilities, were greater than the value of all its property at a fair valuation, or if the present fair saleable value of the debtor's assets were less than the amount required to repay its probable liabilities on its debts, including contingent liabilities, as they become absolute and matured. Based upon financial and other information currently available to it, management believes that the indebtedness retired with the proceeds of the Initial Offering and the indebtedness evidenced by the Notes and the Subsidiary Guarantees was incurred for proper purposes and in good faith and that at the time the Company incurred the indebtedness retired with the proceeds of the Initial Offering and Precise and the Guarantors incurred the indebtedness evidenced by the Notes and the Subsidiary Guarantees, Precise and each Guarantor, as the case may be, was, (i) neither insolvent nor rendered insolvent thereby, (ii) in possession of sufficient capital to run its business effectively and (iii) incurring debts within its ability to pay as the same mature or become due. See 'Management's Discussions and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources.' In reaching these conclusions, the Company has relied upon various valuations and estimates of future cash flow that necessarily involve a number of assumptions and choices of methodology. No assurance can be given, however, that the assumptions and methodologies chosen by the Company would be adopted by a court or that a court would concur with the Company's conclusions. ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER The Old Notes were issued to, and the Company believes are currently owned by, a relatively small number of beneficial owners. Prior to the Exchange Offer, there has not been any public market for the Old Notes. The Old Notes have not been registered under the Securities Act and will be subject to restrictions on transferability to the extent that they are not exchanged for New Notes by holders who are entitled to participate in the 21 Exchange Offer. The holders of Old Notes (other than any such holder that is an 'affiliate' of the Company within the meaning of Rule 405 under the Securities Act) who are not eligible to participate in the Exchange Offer are entitled to certain registration rights, and the Company and the Guarantors are required to file a Shelf Registration Statement with respect to such Old Notes. The New Notes will constitute a new issue of securities with no established trading market. The Company does not intend to list the New Notes on any national securities exchange or seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Initial Purchasers have advised the Company that they currently intend to make a market in the New Notes, but they are not obligated to do so and may discontinue such market making at any time. In addition, such market making activity will be subject to the limits imposed by the Securities Act and the Exchange Act and may be limited during the Exchange Offer and the pendency of the Shelf Registration Statement. Accordingly, no assurance can be given that an active public or other market will develop for the New Notes or as to the liquidity of the trading market for the New Notes. If a trading market does not develop or is not maintained, holders of the New Notes may experience difficulty in reselling the New Notes or may be unable to sell them at all. If a market for the New Notes develops, any such market may be discontinued at any time. If a public trading market develops for the New Notes, future trading prices of such securities will depend on many factors including, among other things, prevailing interest rates, the Company's results of operations and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and other factors, including the financial condition of the Company, the New Notes may trade at a discount from their principal amount. CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES Holders of the Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes, as set forth in the legend thereon, as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act and applicable state securities laws, or pursuant to an exemption therefrom. Except under certain limited circumstances, the Company does not intend to register the Old Notes under the Securities Act. In addition, any holder of Old Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. To the extent Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See 'The Exchange Offer.' 22 CAPITALIZATION The following table sets forth the cash and cash equivalents and the capitalization of the Company at March 31, 1997, and as adjusted to give effect to the Refinancing Transactions. The historical and as adjusted data should be read in conjunction with 'Selected Financial Data,' 'Pro Forma Financial Data,' 'Management's Discussion and Analysis of Financial Condition and Results of Operations,' and the Company's consolidated financial statements and the accompanying notes thereto, which information is included elsewhere in this Prospectus.
UNAUDITED AS OF MARCH 31, 1997 -------------------------- HISTORICAL AS ADJUSTED ----------- ----------- (DOLLARS IN THOUSANDS) Cash and cash equivalents.............................................................. $ 525 $ 525 ----------- ----------- ----------- ----------- Long-term debt, including current maturities (1): Existing Credit Agreement............................................................ $39,450 $ --(2) New Credit Agreement (3)............................................................. -- 9,500 Existing Notes....................................................................... 18,236 --(4) 11 1/8% Senior Subordinated Notes due 2007........................................... -- 75,000 Other debt........................................................................... 498 498 Capital lease obligations............................................................ 6,393 6,393 ----------- ----------- Total long-term debt, including current maturities.............................. 64,577 91,391 Redeemable Preferred Stock: Series A Cumulative Exchangeable Preferred Stock..................................... 5,750 --(5) Series B Cumulative Redeemable Preferred Stock....................................... 2,500 --(6) ----------- ----------- Total Redeemable Preferred Stock................................................ 8,250 -- Stockholder's equity: Common Stock, no par value, 1,000 shares authorized and 125 shares and 1 share issued and outstanding as of March 31, 1997 and as adjusted, respectively................. 3,316 1(7) Additional paid-in capital........................................................... 3,555 3,555 Retained earnings (deficit).......................................................... 27 (11,237)(8) ----------- ----------- Total stockholder's equity (deficit)............................................ 6,898 (7,681) ----------- ----------- Total capitalization........................................................ $79,725 $83,710 ----------- ----------- ----------- -----------
- ------------------------------ (1) For a description of the Company's long-term debt, see Note 7 to the audited consolidated financial statements of the Company included elsewhere in this Prospectus. (2) Reflects the repayment of $39,450,000 of principal and $166,000 of accrued interest outstanding as of March 31, 1997 under that certain Credit Agreement dated as of March 28, 1996 (the 'Existing Credit Agreement') among Parent, Precise and the lenders named therein. Substantially all of these borrowings were incurred to finance the Tredegar Acquisition. Borrowings under the Existing Credit Agreement bore interest at an average rate of 8.56% per annum as of March 31, 1997. (3) In connection with the consummation of the Initial Offering, Precise entered into the New Credit Agreement, which provides for borrowings in an outstanding principal amount of up to $30,000,000. (4) Reflects the repayment of $20,000,000 of principal (including $1,764,000 of unamortized original issue discount) and a $2,178,000 prepayment premium as of March 31, 1997 under the Company's 12.25% Senior Subordinated Notes due 2006 (the 'Existing Notes'), which were issued in connection with the Tredegar Acquisition. See 'Certain Transactions--Tredegar Financing Transactions.' Indebtedness under the Existing Notes bore interest at a rate of 12.25% per annum on the aggregate principal thereof. (5) Reflects the redemption of 575 shares of Exchangeable Preferred Stock (as defined) with a liquidation preference of $10,000 per share that were issued by Precise in connection with the Tredegar Acquisition. See 'Certain Transactions--Tredegar Financing Transactions' and Note 2 to the audited consolidated financial statements of the Company included elsewhere in this Prospectus. (6) Reflects the redemption of 250 shares of Seller Preferred Stock (as defined) with a stated value of $10,000 per share that were issued by Precise in connection with the Tredegar Acquisition. See 'Certain Transactions--Tredegar Financing Transactions' and Note 2 to the audited consolidated financial statements of the Company included elsewhere in this Prospectus. (7) Reflects the repurchase of 124 shares of Common Stock of Precise ('Common Stock') from Parent for $3,315,000, the proceeds of which were used to redeem 331.46 shares of Parent's 9.5% Preferred Stock (the 'Parent Preferred Stock') held by Hamilton Holdings Ltd. Corporation, an entity whose principal officers are Richard L. Kramer and William L. Remley, executive officers and directors of Precise. See 'Certain Transactions--Tredegar Financing Transactions.' The Common Stock which was redeemed was issued to Parent at the time the Parent Preferred Stock was issued in exchange for certain preferred stock of Precise. See Note 13 to the audited consolidated financial statements of the Company included elsewhere in this Prospectus. (8) As adjusted retained earnings (deficit) reflects a non-recurring charge incurred in connection with the Refinancing Transactions, net of tax effect, of $285,000 for advisory fees paid to Mentmore, an extraordinary loss on the early extinguishment of indebtedness, net of tax effect, of $4,538,000, as well as a distribution of $6,441,000 to Parent. 23 SELECTED FINANCIAL DATA The following table sets forth (i) selected historical consolidated financial data of the Company for the five-year period ended December 31, 1996 and for the three months ended March 31, 1996 and 1997 and (ii) selected historical balance sheet data of the Company as adjusted to give effect to the Refinancing Transactions as if such events had occurred on March 31, 1997. The selected historical consolidated financial data for the five-year period ended December 31, 1996 were derived from audited consolidated financial statements of the Company. The audited consolidated financial statements of the Company for each of the years in the three-year period ended December 31, 1996 are included elsewhere in this Prospectus together with the reports of Ernst & Young, LLP, independent accountants, for the years ended December 31, 1996 and 1995, and Grant Thornton, LLP, independent accountants, for the year ended December 31, 1994. The selected historical consolidated financial data for the years ended December 31, 1993 and 1992 were derived from audited consolidated financial statements of the Company that are not included herein. The selected historical consolidated financial data for the three months ended March 31, 1996 and 1997 were derived from unaudited financial statements of the Company, which, in the opinion of management, include all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the information set forth therein. The results of operations for the three months ended March 31, 1997 are not necessarily indicative of the results that may be expected for the full year. The adjusted balance sheet data are provided for informational purposes only, are unaudited and are not necessarily indicative of future results or what the operating results or financial condition of the Company would have been had the Refinancing Transactions and the Acquisitions actually been consummated on the dates assumed. The following table should be read in conjunction with 'Capitalization,' 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and the historical financial statements of the Company and Tredegar, and the accompanying notes thereto, included elsewhere in this Prospectus.
UNAUDITED THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, --------------------------------------------------- ------------------ 1992 1993 1994 1995 1996(1) 1996 1997 ------- ------- ------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Net sales....................................... $27,673 $24,161 $33,157 $33,542 $93,289 $ 9,089 $26,325 Cost of sales................................... 22,908 19,536 26,807 25,877 76,477 7,156 21,613 ------- ------- ------- ------- ------- ------- ------- Gross profit.................................... 4,765 4,625 6,350 7,665 16,812 1,933 4,712 Selling, general and administrative............. 3,390 3,373 3,916 4,454 7,262 1,100 2,139 Plant closure costs............................. -- -- -- -- 671 -- -- Amortization of intangible assets............... 219 -- 26 37 1,614 42 433 ------- ------- ------- ------- ------- ------- ------- Operating income................................ 1,156 1,252 2,408 3,174 7,265 791 2,140 Interest expense................................ 703 706 956 810 5,559 261 1,690 Other (income) expense.......................... 44 59 (72) 148 (25) (2) (4) ------- ------- ------- ------- ------- ------- ------- Income (loss) before income taxes............... 409 487 1,524 2,216 1,731 532 454 Provision (benefit) for income taxes............ -- 66 574 941 1,265 245 304 ------- ------- ------- ------- ------- ------- ------- Net income (loss)............................... $ 409 $ 421 $ 950 $ 1,275 $ 466 $ 287 $ 150 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- CASH FLOW DATA: Net cash provided by operating activities....... $ 1,167 $ 1,463 $ 1,327 $ 3,170 $ 9,602 $ 908 $ 703 Net cash used in investing activities (excluding Acquisitions) (2)............................. (383) (309) (1,968) (998) (1,829) (302) (805) Net cash provided by (used in) financing activities.................................... (893) (1,161) 650 (2,202) 57,313 63,826 (684) OTHER FINANCIAL DATA: EBITDA (3)...................................... $ 2,043 $ 1,837 $ 3,542 $ 4,472 $14,518 $ 1,254 $ 3,906 EBITDA margin (3)............................... 7.4% 7.6% 10.7% 13.3% 15.6% 13.8% 14.8% Depreciation and amortization................... $ 931 $ 644 $ 1,062 $ 1,446 $ 5,925 $ 461 $ 1,762 Capital expenditures (4)........................ 412 2,445 4,403 1,582 6,376 2,089 1,330 Ratio of earnings to fixed charges (5).......... 1.5x 1.6x 2.4x 3.4x 1.3x 2.6x 1.3x
24
UNAUDITED AS OF DECEMBER 31, AS OF MARCH 31, 1997 --------------------------------------------------- -------------------------- 1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(6) ------- ------- ------- ------- ------- ------- --------------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Total assets.................................. $13,283 $15,412 $20,358 $18,863 $99,059 $97,215 $97,435 Long-term debt, including current maturities.................................. 8,245 9,277 9,164 7,538 64,512 64,577 91,391 Redeemable preferred stock.................... -- -- -- -- 8,250 8,250 -- Total stockholder's equity (deficit).......... 70 295 4,395 5,400 6,953 6,898 (7,681)
- ------------------------------ (1) The statement of income data, cash flow data and other financial data for 1996 reflect the results of operations of Unity and Tredegar since they were acquired by the Company on January 25, 1996 and March 29, 1996, respectively. (2) Net cash used in the Unity Acquisition was $3,308,000 and net cash used in the Tredegar Acquisition was $60,493,000. (3) 'EBITDA' represents net income plus income taxes, interest expense, depreciation and amortization and certain non-recurring charges and non-cash charges. Non-recurring charges and non-cash charges for the year ended December 31, 1996 include operating losses (excluding depreciation expense) related to the Company's Graham, North Carolina facility which was closed in September 1996 ($510,000), plant closure costs ($671,000) and the elimination of pension costs associated with a terminated defined benefit plan ($122,000). 'EBITDA margin' is defined as EBITDA divided by net sales. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service indebtedness. However, EBITDA should not be considered an alternative to operating income or cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. (4) Includes capital expenditures financed through capital leases of $0 in 1992, $1,896,000 in 1993, $2,328,000 in 1994, $536,000 in 1995 and $4,201,000 in 1996 and $1,732,000 and $506,000 in the three months ended March 31, 1996 and 1997, respectively. (5) In calculating the ratio of earnings to fixed charges, earnings consist of income before taxes plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing costs, whether expensed or capitalized, plus the portion of operating lease expense attributable to interest. (6) The as adjusted balance sheet data give effect to the Refinancing Transactions as if such transactions had occurred on March 31, 1997. 25 PRO FORMA FINANCIAL DATA The following pro forma financial data have been derived by the application of pro forma adjustments to the historical consolidated financial statements of the Company for its fiscal year ended December 31, 1996 and for the three and twelve months ended March 31, 1997 and those of Tredegar for the period from January 1, 1996 to March 28, 1996 and Unity for the period from January 1, 1996 to January 24, 1996. The pro forma financial data presented below give effect to the Acquisitions and the Refinancing Transactions as if such events had occurred on January 1, 1996. The adjustments relating to the Acquisitions and the Refinancing Transactions are described in the accompanying notes. The pro forma financial data presented below should not be considered indicative of actual results that would have been achieved had the Acquisitions and the Refinancing Transactions been consummated on the date assumed and do not purport to indicate results of operations as of any future date or for any future period. The pro forma financial data presented below should be read in conjunction with the Company's consolidated financial statements and the accompanying notes thereto, 'Summary Financial Data,' 'Capitalization,' 'Selected Financial Data' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations,' which information is included elsewhere in this Prospectus. 26 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME AND OPERATING DATA FOR THE YEAR ENDED DECEMBER 31, 1996
TREDEGAR UNITY REFINANCING PRECISE HISTORICAL HISTORICAL ACQUISITIONS PRO FORMA TRANSACTIONS HISTORICAL 1/1/96-3/28/96 1/1/96-1/24/96 ADJUSTMENTS FOR ACQUISITIONS ADJUSTMENTS ---------- -------------- -------------- ----------- ---------------- ------------ (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Net sales......................... $ 93,289 $ 20,921 $448 $ -- $114,658 $ -- Cost of sales..................... 76,477 18,221 391 (890)(1) 94,199 -- ---------- ------- ----- ----------- -------- ------------ Gross profit...................... 16,812 2,700 57 890 20,459 -- Selling, general and administrative.................. 7,262 993 17 (269)(2) 8,003 -- Plant closure costs............... 671 -- -- -- 671 -- Amortization of intangible assets.......................... 1,614 59 -- 335(3) 2,008 (250)(6) ---------- ------- ----- ----------- -------- ------------ Operating income.................. 7,265 1,648 40 824 9,777 250 Interest expense.................. 5,559 -- 5 1,432(4) 6,996 2,901(7) Other (income) expense............ (25) -- -- -- (25) -- ---------- ------- ----- ----------- -------- ------------ Income loss before income taxes... 1,731 1,648 35 (608) 2,806 (2,651) Provision (benefit) for income taxes........................... 1,265 649 4 (200)(5) 1,718 (1,140)(5) ---------- ------- ----- ----------- -------- ------------ Net income (loss)................. $ 466 $ 999 $ 31 $ (408) $ 1,088 $ (1,511) ---------- ------- ----- ----------- -------- ------------ ---------- ------- ----- ----------- -------- ------------ OTHER FINANCIAL DATA: EBITDA (10)....................... Depreciation and amortization..... Ratio of earnings to fixed charges (11)............................ Ratio of EBITDA to interest expense......................... Ratio of total debt to EBITDA..... COMPANY PRO FORMA --------- STATEMENT OF INCOME DATA: Net sales......................... $114,658 Cost of sales..................... 94,199 --------- Gross profit...................... 20,459 Selling, general and administrative.................. 8,003 Plant closure costs............... 671 Amortization of intangible assets.......................... 1,758 --------- Operating income.................. 10,027 Interest expense.................. 9,897 Other (income) expense............ (25 )(8) --------- Income loss before income taxes... 155 Provision (benefit) for income taxes........................... 578 --------- Net income (loss)................. $ (423 )(9) --------- --------- OTHER FINANCIAL DATA: EBITDA (10)....................... $ 18,165 Depreciation and amortization..... 6,740 Ratio of earnings to fixed charges (11)............................ 1.0x Ratio of EBITDA to interest expense......................... 1.8x Ratio of total debt to EBITDA..... 5.0x
FOR THE THREE MONTHS ENDED MARCH 31, 1997
REFINANCING PRECISE TRANSACTIONS COMPANY HISTORICAL ADJUSTMENTS PRO FORMA ---------- ------------ --------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Net sales............................................................................... $ 26,325 $ -- $26,325 Cost of sales........................................................................... 21,613 -- 21,613 ---------- ----- --------- Gross profit............................................................................ 4,712 4,712 Selling, general and administrative..................................................... 2,139 -- 2,139 Amortization of intangible assets....................................................... 433 (31)(6) 402 ---------- ----- --------- Operating income........................................................................ 2,140 31 2,171 Interest expense........................................................................ 1,690 773(7) 2,463 Other (income) expense.................................................................. (4) -- (4) ---------- ----- --------- Income before income taxes.............................................................. 454 (742) (288) Provision (benefit) for income taxes.................................................... 304 (300)(5) 4 ---------- ----- --------- Net income (loss)....................................................................... $ 150 $ (442) $ (292) ---------- ----- --------- ---------- ----- --------- OTHER FINANCIAL DATA: EBITDA (10)............................................................................. $ 3,906 Depreciation and amortization........................................................... 1,731 Ratio of earnings to fixed charges (11)................................................. -- Ratio of EBITDA to interest expense..................................................... 1.6x
See accompanying notes to Unaudited Pro Forma Consolidated Statement of Income and Operating Data. 27 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME AND OPERATING DATA FOR THE TWELVE MONTHS ENDED MARCH 31, 1997
REFINANCING TWELVE MONTHS ENDED ACQUISITIONS PRO FORMA TRANSACTIONS COMPANY MARCH 31, 1997 ADJUSTMENTS FOR ACQUISITIONS ADJUSTMENTS PRO FORMA ------------------- ----------- ---------------- ------------ --------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Net sales......................... $ 110,525 $ -- $110,525 $ -- $110,525 Cost of sales..................... 90,934 (87)(1) 90,847 -- 90,847 -------- ----- -------- ------------ --------- Gross profit...................... 19,591 87 19,678 -- 19,678 Selling, general and administrative.................. 8,301 -- 8,301 -- 8,301 Plant closure costs............... 671 -- 671 -- 671 Amortization of intangible assets.......................... 2,005 -- 2,005 (222)(6) 1,783 -------- ----- -------- ------------ --------- Operating income.................. 8,614 87 8,701 222 8,923 Interest expense.................. 6,988 -- 6,988 2,898(7) 9,886 Other (income) expense............ (27) -- (27) -- (27 ) -------- ----- -------- ------------ --------- Income (loss) before income taxes........................... 1,653 87 1,740 (2,676) (936 ) Provision (benefit) for income taxes........................... 1,222 37(5) 1,259 (1,150)(5) 109 -------- ----- -------- ------------ --------- Net income (loss)................. $ 431 $ 50 $ 481 $ (1,526) $ (1,045 ) -------- ----- -------- ------------ --------- -------- ----- -------- ------------ --------- OTHER FINANCIAL DATA: EBITDA (10)....................... $ 17,257 Depreciation and amortization..... 7,004 Ratio of earnings to fixed charges (11).................... -- Ratio of EBITDA to interest expense......................... 1.7 x Ratio of total debt to EBITDA..... 5.3 x
See accompanying notes to Unaudited Pro Forma Consolidated Statement of Income and Operating Data. 28 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME AND OPERATING DATA (1) Reflects the following adjustments:
YEAR THREE MONTHS TWELVE MONTHS ENDED ENDED ENDED DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1997 ----------------- -------------- -------------- (DOLLARS IN THOUSANDS) Reduction for quantity discounts on material purchases at Tredegar facilities for the period prior to the acquisition date..................... $ (67) $ -- $ -- Elimination of certain positions at Tredegar facilities in April and May of 1996, resulting in a decrease in compensation and benefit expense for the periods prior thereto......................... (625) -- (107) Increase in incremental benefit expense related to Tredegar and Unity employees for the periods prior to the respective acquisition dates............... 50 -- 20 Reflects the elimination of historical depreciation for the periods prior to the respective acquisition dates and the addition of pro forma depreciation in connection with the Acquisitions as follows: Pro forma depreciation............................ 769 -- -- Historical depreciation........................... (1,017) -- -- -------- ------ ------ Acquisitions adjustment............................. $ (890) $ -- $ 87 -------- ------ ------ -------- ------ ------
(2) Reflects the elimination of certain administrative staff positions at Tredegar resulting in a reduction in compensation expense aggregating $269,000 for the period prior to the acquisition date. (3) Reflects the elimination of historical amortization and the addition of pro forma amortization based on the amortization of noncompete agreements, deferred financing fees and goodwill over useful lives ranging from 3 to 25 years as follows:
YEAR THREE MONTHS TWELVE MONTHS ENDED ENDED ENDED DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1997 ----------------- -------------- -------------- (DOLLARS IN THOUSANDS) Pro forma amortization.............................. $ 2,008 $ -- $ -- Historical amortization............................. (1,673) -- -- -------- ------ ------ Acquisitions adjustment............................. $ 335 $ -- $ -- -------- ------ ------ -------- ------ ------
(4) Reflects the elimination of historical interest expense and the addition of pro forma interest expense based on indebtedness incurred in connection with the financing of the Acquisitions as follows:
YEAR THREE MONTHS TWELVE MONTHS ENDED ENDED ENDED DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1997 ----------------- -------------- -------------- (DOLLARS IN THOUSANDS) Interest on Existing Credit Agreement............... $ 3,810 $ -- $ -- Interest on Existing Notes.......................... 2,578 -- -- Interest on other debt.............................. 35 -- -- Interest on capital lease obligations............... 573 -- -- Historical interest................................. (5,564) -- -- -------- ------ ------ Acquisitions adjustment............................. $ 1,432 $ -- $ -- -------- ------ ------ -------- ------ ------
(5) The provision for income taxes is computed by applying the Company's statutory rate of 43%, excluding the impact of non-deductible goodwill amortization. 29 (6) Reflects the elimination of pro forma amortization of deferred financing costs based on indebtedness incurred in connection with the Acquisitions and the addition of pro forma amortization of deferred financing costs after giving effect to the Refinancing Transactions as follows:
YEAR THREE MONTHS TWELVE MONTHS ENDED ENDED ENDED DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1997 ----------------- -------------- -------------- (DOLLARS IN THOUSANDS) Amortization of deferred financing costs pro forma for the Refinancing Transactions.................. $ 508 $ 127 $ 508 Amortization of deferred financing costs pro forma for the Acquisitions.............................. (758) (158) (730) -------- ------ ------ Refinancing Transactions adjustment................. $ (250) $ (31) $ (222) -------- ------ ------ -------- ------ ------
(7) Reflects the elimination of pro forma interest expense based on indebtedness incurred in connection with the Acquisitions and the addition of pro forma interest expense after giving effect to the Refinancing Transactions as follows:
YEAR THREE MONTHS TWELVE MONTHS ENDED ENDED ENDED DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1997 ----------------- -------------- -------------- (DOLLARS IN THOUSANDS) Interest on New Credit Agreement.................... $ 886 $ 222 $ 886 Interest on the Notes............................... 8,344 2,086 8,344 Interest on Existing Credit Agreement............... (3,751) (891) (3,754) Interest on Existing Notes.......................... (2,578) (644) (2,578) -------- -------------- -------------- Refinancing Transactions adjustment................. $ 2,901 $ 773 $ 2,898 -------- -------------- -------------- -------- -------------- --------------
(8) Excludes a non-recurring charge of $500,000 representing financial advisory fees paid to Mentmore in connection with the Refinancing Transactions. See 'Certain Transactions--Management Agreement with Mentmore.' (9) Excludes an extraordinary loss from the early extinguishment of indebtedness, net of tax benefit, of $4,538,000, resulting from the repayment of the Existing Notes and the termination of the Existing Credit Agreement in connection with the Refinancing Transactions. (10) 'EBITDA' represents net income plus income taxes, interest expense, depreciation and amortization and certain non-recurring charges and non-cash charges. Non-recurring charges and non-cash charges for the pro forma year ended December 31, 1996 include operating losses (excluding depreciation expense) related to the Company's Graham, North Carolina facility which was closed in September 1996 ($580,000), plant closure costs ($671,000) and the elimination of pension costs associated with a terminated defined benefit plan ($122,000). Non-recurring charges and non-cash charges for the twelve months ended March 31, 1997 include operating losses (excluding depreciation expense) related to the Company's Graham, North Carolina facility which was closed in September 1996 ($510,000), plant closure costs ($671,000) and the elimination of pension costs associated with a terminated defined benefit plan ($122,000). 'EBITDA margin' is defined as EBITDA divided by net sales. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service indebtedness. However, EBITDA should not be considered an alternative to operating income or cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. (11) In calculating the ratio of earnings to fixed charges, earnings consist of income before taxes plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing costs, whether expensed or capitalized, plus the portion of operating lease expense attributable to interest. For the three months and twelve months ended March 31, 1997, the Company's pro forma earnings were inadequate to cover fixed charges by $288,000 and $936,000, respectively. Adjusted to eliminate non-cash charges of depreciation and amortization of $1,731,000 and $7,004,000 for the pro forma three months and twelve months ended March 31, 1997, respectively, such earnings would have exceeded fixed charges by $1,443,000 and $6,068,000, respectively. 30 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company is a leading full-service, custom injection molder of precision plastic products, focusing on three broad markets: healthcare, packaging and consumer/industrial products. The Company is capable of providing its customers with comprehensive custom manufacturing services, including extensive product design and prototype development, mold design and manufacturing, close tolerance injection molding and value-added finishing services such as packaging, assembly and decoration. Precise was acquired in 1990 by an entity managed by Mentmore, a privately-held investment management company. Mentmore recruited an experienced management team to implement several key strategic initiatives aimed at improving the Company's competitive standing and profitability and promoting internal and external growth. In January and March of 1996, the Company completed the acquisitions of Unity and Tredegar, respectively, more than tripling the Company's net sales on a pro forma basis. Management believes that the Acquisitions significantly enhanced the Company's prospects for future growth by expanding its manufacturing and technological capabilities, enlarging its customer base, strengthening its relationships with certain existing customers and broadening its geographic presence. Since the consummation of the Tredegar Acquisition, management has implemented several strategic initiatives designed to improve Tredegar's operating performance and integrate Tredegar's operations with those of the Company. These initiatives have included improved raw material purchasing, reductions in plant labor and administrative costs and the closure of Tredegar's Graham, North Carolina facility. More specifically, following the Tredegar Acquisition, the Company (i) eliminated 31 direct and indirect labor positions and reduced payroll rates for certain Tredegar employees, resulting in an annualized cost savings, based on actual costs incurred in 1996, of approximately $2.0 million; (ii) consolidated Tredegar's corporate sales and administrative functions with those of the Company, resulting in a net annualized reduction in selling, general and administrative expenses, based on actual expenses incurred in 1996, of approximately $1.0 million and (iii) renegotiated Tredegar's resin supply agreements, which resulted in annualized cost savings, based on actual costs incurred in 1996, of approximately $268,000 based on the volume of resin purchased in 1996 following the Tredegar Acquisition. In addition, in September 1996 the Company closed the Graham facility, which had pro forma operating losses (excluding depreciation expense) of $580,000 in 1996, and transferred its equipment and business to other facilities, primarily the Company's facility in St. Petersburg, Florida. Management believes that these initiatives have significantly improved Tredegar's operating profitability since its acquisition by the Company and that further improvements are possible at the former Tredegar and Unity facilities. Tredegar's gross margin increased from approximately 12.0% in 1995 to approximately 15.0% in 1996. Management believes that it will be able to achieve additional cost savings as a result of further improvements in operating processes and material purchasing and reductions in selling, general and administrative expenses. The Company experienced a decrease in net sales and operating income during the first quarter of 1997 compared to the pro forma combined results of operations for the first quarter of 1996. The 13.6% decrease in net sales to $26.3 million for the three months ended March 31, 1997 from $30.5 million for the pro forma combined three months ended March 31, 1996 was primarily caused by delays in certain molding and mold making programs, lower than anticipated volume requirements of certain customers' end-product lines due to an unsuccessful consumer product launch and product line maturity, customer insourcing, the loss of a molding program to a competitor with a closer customer 'ship-to' point and the discontinuance of a low margin, proprietary manufacturing process. Management believes that although certain of the losses described above are temporary and that most program delays are expected to be remedied, the Company's net sales will continue to be negatively impacted in the near term. In response to the lower level of expected net sales, the Company laid off 25 employees during April 1997, resulting in an annualized cost savings, based on current compensation levels, of approximately $1.2 million (excluding severance costs estimated to be $161,000). Management believes that the prolonged and well publicized sale of Tredegar created customer uncertainty in the period prior to the Tredegar Acquisition resulting in fewer new program awards in late 1995 and throughout 1996. Since the Tredegar Acquisition, the Company's management has focused on reorganizing and strengthening its sales and marketing efforts to obtain new business. The Company expects to begin to realize the benefit of these efforts in the latter part of 1997. 31 Operating income for the three months ended March 31, 1997 decreased from $3.3 million to $2.2 million, or 33.7%, compared to the pro forma combined operating income for the same period in the prior year. This decrease resulted primarily from the overall decrease in net sales coupled with additional compensation expense associated with the expansion of the Company's sales force. The Company's operating data for fiscal years ended December 31, 1994, 1995 and 1996 and the three months ended March 31, 1996 and 1997 are set forth below as percentages of net sales:
UNAUDITED THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ---------------------------- --------------------------- 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- Net sales................................ 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales............................ 80.8 77.1 82.0 78.7 82.1 ----- ----- ----- ----- ----- Gross profit............................. 19.2 22.9 18.0 21.3 17.9 Selling, general and administrative...... 11.8 13.3 7.8 12.1 8.1 Plant closure costs...................... 0.0 0.0 0.7 0.0 0.0 Amortization of intangible assets........ 0.1 0.1 1.7 0.5 1.7 ----- ----- ----- ----- ----- Operating income......................... 7.3 9.5 7.8 8.7 8.1 Interest expense......................... 2.9 2.5 6.0 2.9 6.4 Other (income) expense................... (0.2) 0.4 0.0 0.0 0.0 ----- ----- ----- ----- ----- Income before income taxes............... 4.6 6.6 1.9 5.8 1.7 Provision for income taxes............... 1.7 2.8 1.4 1.9 1.1 ----- ----- ----- ----- ----- Net income............................... 2.9% 3.8% 0.5% 3.9% 0.6% ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- EBITDA margin............................ 10.7% 13.3% 15.6% 13.8% 14.8%
RESULTS OF OPERATIONS Three Months Ended March 31, 1997 compared to Three Months Ended March 31, 1996 Net sales. The Company's net sales increased to $26.3 million for the three months ended March 31, 1997, an increase of $17.2 million, or 189.6%, over the comparable period in the prior year. The increase in net sales was primarily attributable to the Tredegar Acquisition. Excluding net sales of $17.3 million during the three months ended March 31, 1997 related to the former Tredegar operations, the Company's net sales were approximately $9.0 million, a decrease of $0.1 million from the comparable period in the prior year. Gross profit. The Company's gross profit increased to $4.7 million in the three months ended March 31, 1997, an increase of $2.8 million, or 143.8%, over the comparable period in the prior year. The increase in gross profit was primarily attributable to higher net sales volume resulting from the Tredegar Acquisition. Gross profit margin declined to 17.9% for the three months ended March 31, 1997 from 21.3% in the comparable period in the prior year. The decrease in gross profit margin was primarily attributable to the Tredegar Acquisition, as Tredegar had historically generated lower gross profit margins than the Company. Selling, general and administrative. Selling, general and administrative expenses increased to $2.1 million in the three months ended March 31, 1997, an increase of $1.0 million, or 94.4%, over the comparable period in the prior year. The increase in selling, general and administrative expenses was primarily attributable to incremental expenses related to the Tredegar Acquisition and to the subsequent hiring of an additional six sales persons. Selling, general and administrative expense expressed as a percentage of net sales decreased to 8.1% for the three months ended March 31, 1997 from 12.1% in the comparable period in the prior year. This improvement was primarily attributable to the consolidation of Tredegar's accounting, purchasing and other administrative functions with those of the Company. Amortization. The Company's amortization of intangible assets increased to $433,000 for the three months ended March 31, 1997 from $42,000 in the comparable period in the prior year due primarily to the amortization of goodwill, non-compete agreements and deferred financing costs associated with the Tredegar Acquisition. Operating income. Operating income increased to $2.1 million for the three months ended March 31, 1997, an increase of $1.3 million, or 170.5%, over the comparable period in the prior year. Operating income as a percentage of net sales declined to 8.1% for the three months ended March 31, 1997 from 8.7% in the comparable 32 period in the prior year due primarily to the lower gross profit margin and the increase in amortization of intangible assets associated with the Tredegar Acquisition. Interest expense. Interest expense increased to $1.7 million for the three months ended March 31, 1997 from $261,000 in the comparable period in the prior year due primarily to interest expense on indebtedness incurred to finance the Tredegar Acquisition. Provision for income taxes. The Company's provision for income taxes increased to $304,000 for the three months ended March 31, 1997 from $245,000 in the comparable period in the prior year, representing effective tax rates on reported taxable income of 67.0% and 46.1% in each of the two periods, respectively. The higher effective tax rate in 1997 is due primarily to non-deductible goodwill amortization resulting from the Tredegar Acquisition. Year Ended December 31, 1996 compared to Year Ended December 31, 1995 Net sales. The Company's net sales increased to $93.3 million in 1996, an increase of $59.8 million, or 178.1%, over 1995. The increase in net sales was primarily attributable to the Company's January 25, 1996 acquisition of Unity and March 29, 1996 acquisition of Tredegar. Unity and Tredegar generated net sales of approximately $4.9 million and $58.5 million, respectively, after they were acquired by the Company. Excluding the net sales of Unity and Tredegar, the Company's net sales totaled approximately $29.9 million, a decrease of $3.6 million from 1995. This decrease was primarily attributable to lower net sales of thin-wall consumer product containers for Baby Fresh(Trademark) baby wipes resulting from marketing discontinuities caused by the merger of Scott Paper Company with Kimberly-Clark and the subsequent sale by Kimberly-Clark of the Baby Fresh(Trademark) product line to Procter & Gamble. Also contributing to the decline in net sales was a reduction in net sales to a customer which moved its injection molding to another molder located near its largest distribution center. Gross profit. The Company's gross profit increased to $16.8 million in 1996, an increase of $9.1 million, or 119.3%, over fiscal year 1995. The increase in gross profit was attributable to higher net sales volume resulting from the Acquisitions. Gross profit margin declined to 18.0% in 1996 from 22.9% in the prior year. The decrease in gross profit margin was primarily attributable to the Acquisitions, as Unity and Tredegar had historically generated lower gross profit margins than the Company. Selling, general and administrative. Selling, general and administrative expenses increased to $7.3 million in 1996, an increase of $2.8 million, or 63.0%, from 1995. The increase in selling, general and administrative expense was due primarily to incremental selling, general and administrative expenses related to the Acquisitions and an increase in management fees. Selling, general and administrative expense as a percentage of net sales decreased to 7.8% in 1996 from 13.3% in 1995. This improvement was primarily attributable to the consolidation of accounting, purchasing and other administrative functions related to the Acquisitions. Plant closure costs. In September 1996, the Company closed its Graham, North Carolina manufacturing facility, which was acquired in the Tredegar Acquisition. In December 1996, the Company decided to close its Rochester, New York manufacturing facility, which was sold in May 1997. The Company recorded plant closing costs in 1996 of $671,000. These costs include $110,000 of expenses associated with the relocation of machinery and equipment from the Graham facility to the Company's other facilities, $260,000 of expenses associated with employee termination benefits which were accrued in connection with the decision to close the Rochester facility, and an impairment loss of $301,000 which represents the difference between the net book value of the assets to be sold at the Rochester facility and the offer price for those assets of $900,000. Amortization. The Company's amortization of intangible assets increased to $1.6 million in 1996 from $37,000 in 1995 due primarily to the amortization of goodwill, non-compete agreements and deferred financing costs associated with the Acquisitions. Operating income. Operating income increased to $7.3 million in 1996, an increase of $4.1 million, or 128.9%, over 1995. Operating income as a percentage of net sales declined to 7.8% in 1996 from 9.5% in the prior year due primarily to the lower gross profit margin, the increase in amortization of intangible assets associated with the Acquisitions and expenses associated with the closure of the Graham and the decision to close the Rochester manufacturing facilities. Interest expense. Interest expense increased to $5.6 million in 1996 from $810,000 in 1995 due primarily to interest expense on indebtedness incurred to finance the Acquisitions. 33 Provision for income taxes. The Company's provision for income taxes increased to $1.3 million in 1996 from $941,000 in 1995, representing effective tax rates on reported taxable income of 73.0% and 42.5% in each of the two years, respectively. The higher effective tax rate in 1996 is due primarily to non-deductible goodwill amortization resulting from the Acquisitions. Year Ended December 31, 1995 compared to Year Ended December 31, 1994 Net sales. The Company's net sales increased to $33.5 million in 1995, an increase of $385,000, or 1.2%, over 1994. The increase in net sales was attributable to a full year of operations at the Delaware CAP Facility, which contributed additional net sales of approximately $6.0 million in 1995, as well as increased sales to existing customers of approximately $2.2 million. This increase was partially offset by a decrease in mold making sales resulting from the completion of a large mold making program ($3.9 million) as well as from a reduction in net sales to certain of the Company's existing customers ($4.2 million). Gross profit. The Company's gross profit increased to $7.7 million in 1995, an increase of $1.3 million, or 20.7%, over fiscal year 1994. Gross profit margin improved to 22.9% in 1995 from 19.2% in the prior year. Efficiencies realized at the Delaware CAP Facility as operations at that facility transitioned from a start-up phase in 1994 contributed to increases in both gross profit and gross margin. The improvement in gross margin was also the result of a reduction in 1995 of the Company's mold making sales, which typically generate lower gross profit margins than the Company's molding sales. Selling, general and administrative. Selling, general and administrative expenses increased to $4.5 million in 1995, an increase of $539,000, or 13.8%, from 1994, due primarily to increased incentive-based compensation expense, travel expenses resulting from the transition of the Delaware CAP Facility from a start-up phase and management fees. Selling, general and administrative expense as a percentage of net sales increased to 13.3% in 1995 from 11.8% in 1994. Amortization. The Company's amortization of intangible assets increased to $37,000 in 1995 from $26,000 in 1994 due primarily to a full year's amortization of deferred financing costs associated with the financing of the construction of the Delaware CAP Facility. Operating income. Operating income increased to $3.2 million in 1995, an increase of $766,000, or 31.8%, over 1994. Operating income as a percentage of net sales increased to 9.5% in 1995 from 7.3% in the prior year due primarily to the improvement in gross profit margins resulting from the transition of the Delaware CAP Facility from a start-up phase. This improvement was partially offset by increased selling, general and administrative expenses. Interest expense. Interest expense decreased to $810,000 in 1995 from $956,000 in 1994 due primarily to the net repayment of approximately $1.7 million of long-term debt. Provision for income taxes. The Company's provision for income taxes increased to $941,000 in 1995 from $574,000 in 1994, representing effective tax rates on reported taxable income of 42.5% and 37.7% in each of the two years, respectively. The higher effective tax rate in 1995 was primarily due to higher state income taxes. LIQUIDITY AND CAPITAL RESOURCES The Company completed a significant refinancing in March 1996 in connection with the Tredegar Acquisition. The purchase price for Tredegar, along with the refinancing of certain existing debt and related transaction costs, was financed through (i) the incurrence of approximately $44.0 million of indebtedness under the Existing Credit Agreement, of which $39.5 million was outstanding as of March 31, 1997, (ii) the issuance of the Existing Notes in an aggregate principal amount of $20.0 million (including $1.9 million of original issue discount), (iii) the issuance of $8.3 million of Redeemable Preferred Stock (as defined) and (iv) a capital contribution of $0.8 million from Parent. The Company permanently repaid all indebtedness outstanding under the Existing Credit Agreement and the Existing Notes and redeemed the Redeemable Preferred Stock in connection with the Refinancing Transactions. See 'Capitalization.' The Company generated cash flows from operations totaling $1.3 million, $3.2 million and $9.6 million in 1994, 1995 and 1996, respectively, and $0.9 million and $0.7 million in the three months ended March 31, 1996 and 1997, respectively. The progressive increase in annual cash flows from operations over the three-year period was driven primarily by the increased profitability of the Company's existing business and an increase in net 34 sales resulting from the Acquisitions. Cash flows from operations were negatively impacted during 1996 as a result of costs associated with the closure of the Company's plant in Graham, North Carolina. During 1996, $0.5 million was expended to satisfy the cash requirements for employee termination benefits, noncancellable operating lease accruals, equipment relocation costs and other costs associated with the closure of this facility. As of March 31, 1997, the balance of costs associated with plant closures, including the scheduled closure of the Company's Rochester, New York plant (which occurred in May 1997), are expected to require cash payouts of approximately $1.2 million through March 2000. The decrease in cash flows from operations during the three months ended March 31, 1997 compared to the same period in the prior year resulted primarily from taking advantage of payment term discount opportunities on raw material purchases. The Company's cash flows used in investing activities totaled $2.0 million, $1.0 million and $65.6 million, excluding capital lease agreements for equipment totaling $2.3 million, $0.5 million and $4.2 million in 1994, 1995 and 1996, respectively. The Company's cash flows used in investing activities totaled $64.1 million and $0.8 million, excluding capital lease agreements for equipment totaling $1.7 million and $0.5 million, for the three months ended March 31, 1996 and 1997, respectively. During 1994, the Company completed leasehold improvements totaling $0.8 million and the purchase and lease of several molding machines and related equipment totaling $3.2 million for the Delaware CAP Facility. During 1996, the Company effected a replacement program for molding machines in its Pittsburgh plant which involved capital lease agreements for 17 machines totaling $2.8 million. Additionally, $63.8 million was attributed to the net cash used in the Acquisitions during the first quarter of 1996. The Company's cash flows provided by (used in) financing activities totaled $0.6 million, $(2.2) million and $57.3 million in 1994, 1995 and 1996, respectively, and $63.8 million and $(0.7) million in the three months ended March 31, 1996 and 1997, respectively. During 1994, debt repayments were offset mainly by the incurrence of a $1.3 million term loan to finance the purchase of equipment for the Delaware CAP Facility. During 1995, cash flows were used to repay indebtedness. During 1996, cash financing activities for the Tredegar Acquisition, as described above, contributed significantly to resulting cash provided. During the three months ended March 31, 1997 net borrowings under the revolving line of credit were more than offset by repayment of long-term debt and dividends to preferred shareholders. In May 1997, the Company sold its Rochester, New York manufacturing facility and realized net proceeds of approximately $1.3 million, which proceeds were subsequently used to repay indebtedness outstanding under the Existing Credit Agreement. Since the consummation of the Refinancing Transactions, the Company's liquidity requirements consist primarily of capital expenditures, required debt service under the Notes, the New Credit Agreement and various capital lease obligations and working capital needs. The Company estimates that its capital expenditures during 1997 will total $10.2 million, of which approximately $6.6 million is expected to be in the form of capital leases. Included in the amount of total projected capital expenditures for 1997 is $3.9 million of expenditures for building improvements, molding presses and ancillary equipment for a significant new program expected to begin production by the end of the year. Equipment refurbishment programs for 1997, which mainly relate to Tredegar plants, are expected to cost $4.0 million. The Company is in a capital intensive business and will have significant ongoing requirements for capital which management believes will be satisfied through cash flow from operations, borrowings under the New Credit Agreement and capital leases. Management believes that due to the significance of capital expenditures anticipated for 1997, the Company will be required to incur additional indebtedness under the New Credit Agreement or through capital leases. However, certain equipment refurbishment programs could be delayed, if necessary. The New Credit Agreement and the Indenture place significant restrictions on the Company's ability to, among other things, incur additional indebtedness, grant liens or sell assets. See 'Description of Notes--Certain Covenants,' 'Risk Factors--Substantial Leverage' and 'Risk Factors--Restrictions under Debt Agreements.' The New Credit Agreement provides for revolving loans to, and the issuance of letters of credit on behalf of Precise, in an aggregate amount not to exceed $30.0 million, of which approximately $9.5 million would have been outstanding if the Refinancing Transactions had been consummated on March 31, 1997. See 'Capitalization.' The New Credit Agreement matures in 2002, and contains certain covenants customary for a financing of this nature. The New Credit Agreement requires prepayments and concurrent reductions of the total commitments thereunder in the amount of certain portions of the net proceeds from certain asset sales, capital 35 contributions or issuances of debt or equity. See 'Description of Certain Indebtedness--New Credit Agreement.' Capital leases are used extensively by the Company to finance new molding presses and certain ancillary equipment. Capital lease obligations totaled $6.4 million as of March 31, 1997, and current maturities relating to these obligations totaled $2.0 million. Management believes that the Company has sufficient liquidity necessary to fund capital improvements, service indebtedness and meet working capital requirements for the Company's existing operations. However, the Company's anticipated cash flow from operations in 1997 is expected to be insufficient to cover the Company's cash requirements during such period. In addition, the Company is highly leveraged and, as a result, funds available for working capital, capital expenditures, acquisitions and general corporate purposes may be limited or unavailable in the event the Company does not generate cash flow at or above expected levels. See 'Risk Factors--Substantial Leverage.' INFLATION AND CHANGING PRICES The Company's sales and costs are subject to inflation and price fluctuations. However, because a significant portion of changes in the cost of plastic resins, the Company's principal raw materials, are passed through to customers, such changes historically have not, and in the future are not expected to have, a material effect on the Company's results of operations. ENVIRONMENTAL MATTERS The Company's operations are subject to a range of environmental requirements in the various jurisdictions in which it operates. These environmental requirements relate to, among other things, air emissions, wastewater discharges and waste management. The Company can be expected to incur capital and operating expenses to maintain compliance with applicable environmental requirements and to meet new regulatory requirements. Based upon the underlying facts giving rise to its environmental regulatory obligations and technical reports prepared on the Company's facilities, the Company does not anticipate that any such capital and operating expenses will have a material adverse effect on the Company's results of operations. There can be no assurance, however, that unanticipated, future regulatory programs or previously unidentified environmental conditions will not impose material capital operating expenses. See 'Risk Factors--Environmental Matters' and 'Business--Regulation and Legislation.' The Company has been identified as one of the several hundred Potentially Responsible Parties ('PRPs') in connection with the shipment of hazardous wastes to the Envirotek II Superfund site in Tonawanda, New York. The Company has records of having shipped 20 drums of waste to this site, which, according to presently available records, would appear to represent a small percentage of the total waste sent to the site. Accordingly, the Company has entered into an Administrative Order on Consent with the United States Environmental Protection Agency (the 'EPA') as a de minimis contributor to the site. The final remedy for this site has not yet been decided, and thus the Company's potential liability, while de minimis compared to other PRPs at the site, cannot be fully quantified at this time. Because of the Company's status as a PRP at the Envirotek II site, the New York State Department of Environmental Conservation (the 'NYSDEC') has identified the Company as a PRP for the Roblin Steel Complex, a New York State cleanup site, which surrounds the Envirotek II site. The Company's potential liability in connection with the Roblin Steel site is, therefore, based upon a small percentage of the total waste sent to Envirotek II, and the Company shall similarly be regarded by the NYSDEC as a de minimis contributor to Roblin Steel. Because the Company is recognized by the EPA as a de minimis contributor at Envirotek II, and because the Company's involvement at Roblin Steel is limited to its involvement at Envirotek II, management believes that the Company's potential liability with respect to these sites will not have a material adverse effect on the Company's results of operations, cash flows or financial condition. 36 BUSINESS OVERVIEW The Company is a leading full-service, custom injection molder of precision plastic products, focusing on three broad markets: healthcare, packaging and consumer/industrial products. These markets are characterized by high volume requirements, long product life cycles, limited vulnerability to recessionary trends and relatively low susceptibility to off-shore competition. The Company differentiates itself by providing total project management, including value-added services, for the manufacture of highly engineered, close tolerance products, such as disposable medical devices, thin-wall consumer product containers and electrical connectors. The Company currently serves a diverse base of OEMs, including Fortune 500 companies such as Abbott Labs, Gillette and Procter & Gamble. The Company is the sole or primary source supplier of the products that it manufactures for many of its customers. On a pro forma basis, after giving effect to the Acquisitions, the Company generated net sales and EBITDA of $110.5 million and $17.3 million, respectively, in the twelve months ended March 31, 1997. The Company operates approximately 185 molding machines in nine strategically located facilities throughout the eastern and midwestern United States, three of which have advanced mold making capabilities. The Company is capable of providing its customers with comprehensive custom manufacturing services, including extensive product design and prototype development, mold design and manufacturing, close tolerance injection molding and value-added finishing services such as packaging, assembly and decoration. The Company's technologically advanced, computer-aided manufacturing facilities and equipment enable it to engineer custom solutions to technically demanding customer requirements, which are generally characterized by close tolerances and high speed, volume and durability parameters. The high level of automation in many of the Company's manufacturing facilities minimizes both direct labor input and scrap loss. The Company believes that its leading technical capabilities and reputation for high quality products, on-time deliveries and reliability have enabled it to both obtain new customers and further penetrate existing customers. Precise was acquired in 1990 by an entity managed by Mentmore, a privately-held investment and management company. Mentmore recruited an experienced management team beginning in 1990 to implement several key strategic initiatives aimed at improving the Company's competitive standing and profitability, as well as promoting internal and external growth. As a result of these initiatives, the Company's net sales and EBITDA increased from $22.8 million and $(129,000), respectively, in 1991 to $33.5 million and $4.5 million, respectively, in 1995 (prior to the Acquisitions). In addition, during the same period, the Company's EBITDA margin improved from (0.6)% to 13.3%. In 1996, the Company acquired Tredegar Molded Products Company ('Tredegar'), a full-service plastics injection molder supplying OEMs primarily in the healthcare, packaging and consumer/industrial markets, and Unity, a plastics injection molder specializing in medical diagnostic products and precision valves. The Acquisitions more than tripled the Company's net sales on a pro forma basis, making it one of the larger custom injection molders in the United States. Management believes that the Acquisitions also significantly enhanced the Company's prospects for future growth by expanding its manufacturing and technological capabilities, enlarging its customer base, strengthening relationships with certain existing customers and broadening its geographic presence. In addition, the Acquisitions provided the Company with significant opportunities for economies of scale in raw material purchasing and reductions in manufacturing and administrative costs. As a result of operating improvements implemented by the Company since the Acquisitions were completed, the Company's EBITDA and EBITDA margin increased from $12.7 million and 9.8%, respectively, on a combined basis in 1995 to $17.3 million and 15.6%, respectively, on a pro forma basis in the twelve months ended March 31, 1997. COMPETITIVE STRENGTHS Management believes that the Company is well positioned to capitalize on the favorable trends in the plastics injection molding industry and to enhance its position in its target markets. The following are, in management's view, the Company's principal competitive strengths: FULL-SERVICE CAPABILITIES. The Company offers comprehensive services ranging from product design, product development and mold making through molding, decorating and assembly. As one of a limited number of injection molders in the United States capable of offering such comprehensive services, management believes 37 that the Company is well positioned to benefit from the consolidation currently taking place in the injection molding industry and the trend among high volume OEMs to increasingly rely upon custom injection molders for total project management. ADVANCED MANUFACTURING CAPABILITIES. The Company uses state-of-the-art CAD/CAM technology in the design and manufacture of its molds and subjects each mold to extensive testing to ensure that it meets high quality standards. The Company has also made substantial investments in advanced high speed molding machines and significantly expanded its use of automation and robotics in its manufacturing and assembly operations. As a result of its efforts, the Company has received numerous quality awards, including Gillette's OmniMark Award, the Lexmark International Prestige Supplier Award and the bioMerieux Vitek World Class Supplier Award. In addition, the Company has achieved 'ship-to-stock' status with many of its customers. Management believes that the Company's mold making capabilities and the high quality of its molding have been integral in the Company's strategy of focusing on highly engineered products. LOW COST PRODUCTION. The Company has been successful in reducing costs by improving manufacturing efficiency, introducing advanced molding technology and realigning facilities and production to increase facility utilization. In addition, as one of the largest manufacturers in the plastics injection molding industry, the Company is able to realize significant economies of scale in raw material purchasing. Management believes that by being one of the industry's low cost producers, the Company enjoys a significant advantage over many of its competitors in obtaining new business. MULTIPLE PLANT LOCATIONS. Management believes that the Company's nine plants, located throughout the eastern and midwestern United States, provide it with the opportunity to effectively compete for new product contracts that require large volume runs and multiple distribution points. The Company's multiple plant locations enable it to allocate production to the facility best suited for a job in view of its relative capabilities and proximity to the customer. As a result, the Company provides its customers with a broad range of injection molding capabilities and better service through improved responsiveness, timely delivery and reduced freight costs. In addition, by operating numerous plants, the Company can mitigate customer sourcing risks associated with single facility production. EXPERIENCED MANAGEMENT. The six members of the Company's senior management team have, on average, approximately 19 years of experience in the plastics injection molding industry. The members of the management team, most of whom were recruited by Mentmore in 1990 and 1991 from other leading plastics companies, are largely responsible for the substantial growth and improved operating performance that the Company has experienced over the past five years. BUSINESS STRATEGY The Company's objective is to become the leading supplier of plastic molded products to leading OEMs in the healthcare, packaging and consumer/industrial markets. The key elements of the Company's business strategy to achieve this objective are as follows: FOCUS ON TARGET MARKETS. The Company focuses its marketing efforts on high margin accounts in the healthcare, packaging and consumer/industrial markets. These markets are characterized by high volume requirements, long product life cycles, limited vulnerability to recessionary trends, and relatively low susceptibility to off-shore molding competition. By focusing on high volume, long run manufacturing for products in these markets, management believes that the Company will be able to maximize its profitability and best utilize its resources. FURTHER PENETRATE EXISTING CUSTOMER BASE. Substantially all of the Company's sales are to major consumer product and healthcare companies. In most cases, the Company manufactures plastic products for specific applications required by one or more divisions of a single customer. The trend by OEMs to reduce their supplier base and outsource their injection molding needs provides the Company with the opportunity to increase sales to its existing customers and participate in their domestic and international growth. The Company seeks to capitalize on these favorable industry trends and growth opportunities by expanding its sales force, emphasizing its full-service capabilities and developing close working relationships with its customers by improving communication and coordination between the Company's marketing, product design and production personnel and its customers' counterpart employees. The Company has increased the size of its sales force from nine sales 38 persons as of August 31, 1996 to 16 sales persons as of May 31, 1997. In addition, the Company plans to designate key account specialists for each of its largest customers whose sole responsibility will be to serve the diverse injection molding needs of that customer. By pursuing these and other strategies, management believes that the Company can capitalize on its full-service capabilities and customer relationships. INVEST IN TECHNOLOGY AND QUALITY IMPROVEMENTS. The Company continues to improve productivity through an on-going program of upgrading equipment and facilities and investing in automation, robotics and other technological improvements. Since 1991, the Company has made substantial investments in new mold making equipment and injection molding machines which have led to improved cycle times, lower operating expenses and higher quality products. In addition, four of the Company's facilities are currently ISO 9000 registered, and the Company is actively pursuing ISO certification of all of its remaining facilities. Management believes that less than 10% of all molders in the United States are ISO 9000 registered. Management also believes that by continuing to invest in new technology and focusing on quality, the Company is well positioned to increase sales to existing customers, develop new customer relationships and improve its profit margins through increased operating efficiencies. REDUCE COSTS AND INCREASE PRODUCTIVITY. The Company focuses on simultaneously reducing costs while meeting the high quality standards of its customers. Each of the Company's facilities utilizes total quality management techniques, including the use of statistical process control and extensive employee involvement. The Company's employees receive in excess of 30 hours of training each year, designed to increase productivity, safety and manufacturing quality and to foster the concept of 'continuous improvement.' Through an innovative Performance Sharing Program, the Company's employees focus on cost of goods sold and receive incentives to maximize gross margins by minimizing costs. Management also continues to improve asset utilization and increase manufacturing productivity by consolidating underperforming facilities and streamlining the Company's workforce. These initiatives have resulted in an increase in the Company's net sales per employee from $87,000 in 1991 to $127,000, on a pro forma basis, in 1996. During the same period, the Company's EBITDA margin improved from (0.6)% to 15.8%. The Company intends to continue to implement measures that minimize costs, increase margins and result in competitive prices for its customers. DEVELOP PARTNERSHIPS WITH KEY CUSTOMERS. In response to customers' increasing focus on outsourcing non-core activities such as injection molding, management continues to pursue customer partnerships that involve sole or primary source production and total project management under long-term contracts. Management believes that these partnerships enable suppliers and OEMs to focus on long-term strategy and often result in faster product development, design flexibility, lower costs and improved product quality. For example, the Company's 51,000 square foot, state-of-the-art Delaware CAP Facility is specifically designed to serve the needs of Procter & Gamble and other customers in the thin-wall packaging market segment. At this facility, using state-of-the-art molding machines, highly engineered stack molds and high speed automation, the Company currently is the sole source manufacturer of polypropylene containers for Baby Fresh(Trademark) baby wipes for Procter & Gamble and Softkins(Trademark) moist tissues for Kimberly-Clark, producing approximately 18 million units in 1996. Because of its highly automated manufacturing process, the Delaware CAP Facility's direct labor costs as a percentage of net sales in 1996 were 1.9%, compared to what management believes to be an industry average of approximately 10.0%. The Company intends to continue to pursue CAP facilities and similar partnerships with other customers. SELECTIVELY PURSUE ACQUISITION OPPORTUNITIES. Strategic acquisitions have been, and management believes will continue to be, an important element in the Company's growth and in its efforts to capitalize on favorable industry trends. The Company's recent acquisitions have expanded its OEM customer base, complemented its existing technological and manufacturing capabilities, presented substantial cost savings opportunities and provided significant growth opportunities. The Company will consider future acquisition opportunities that are attractively priced and that it believes will strengthen its customer base, broaden its geographic presence, enhance its production capabilities and/or provide significant operating synergies. INTEGRATION OF TREDEGAR AND UNITY In 1996, the Company completed the acquisitions of Tredegar and Unity, which significantly increased the size and geographic scope of the Company's operations and, in management's view, enhanced the Company's prospects for future growth. 39 Tredegar Precise acquired all of the issued and outstanding common stock of Tredegar in March 1996 for an aggregate purchase price of $60.0 million (plus $5.2 million of fees and expenses incurred in connection with the acquisition). At the time of the acquisition, Tredegar was a full-service supplier to OEMs primarily in the healthcare, packaging and consumer/industrial markets. It had 143 injection molding machines in six facilities, including a state-of-the-art mold manufacturing facility in St. Petersburg, Florida. Tredegar generated net sales and EBITDA of $90.7 million and $10.0 million, respectively, during the year ended December 31, 1995. In addition to making the Company one of the larger custom plastic injection molders in the United States, the Tredegar Acquisition expanded the Company's manufacturing and technological capabilities, enlarged its customer base, strengthened its relationships with certain existing customers and broadened its geographic presence. By more than tripling the Company's net sales on a pro forma basis, Tredegar also provided the Company with opportunities for economies of scale in raw material purchasing and reductions in manufacturing and administrative costs. Since the consummation of the Tredegar Acquisition, management has implemented several strategic initiatives designed to improve Tredegar's operating performance and integrate Tredegar's operations with those of the Company. These initiatives have included improved raw material purchasing, reductions in plant labor and administrative costs and the closure of Tredegar's Graham, North Carolina facility and the transfer of its equipment and business to the Company's St. Petersburg, Florida facility. More specifically, following the Tredegar Acquisition, the Company (i) eliminated 31 direct and indirect labor positions and reduced payroll rates for certain Tredegar employees, resulting in annualized cost savings, based on actual costs incurred in 1996, of approximately $2.0 million; (ii) consolidated Tredegar's corporate sales and administrative functions with those of the Company, resulting in a net an annualized reduction in selling, general and administrative expenses, based on actual expenses incurred in 1996, of approximately $1.0 million; and (iii) renegotiated Tredegar's resin supply agreements, which resulted in annualized cost savings, based on actual costs incurred in 1996, of approximately $268,000 based on the volume of resin purchased in 1996 following the Tredegar Acquistion. In addition, in September 1996, the Company closed Tredegar's Graham, North Carolina manufacturing facility, which had pro forma operating losses (excluding depreciation expense) of $580,000 in 1996, and transferred its equipment and business to other facilities, primarily the Company's facility in St. Petersburg, Florida. Management believes that these initiatives and other operating improvements at Tredegar, many of which were successfully implemented at Precise following its acquisition by Sunderland, have significantly improved Tredegar's operating profitability since its acquisition by the Company and that further improvements are possible. Tredegar's gross margin increased from approximately 12.0% in 1995 to approximately 15.0% in 1996. Management believes that it will be able to achieve additional cost savings at the former Tredegar and Unity facilities as a result of further improvements in operating processes and material purchasing and reductions in selling, general and administrative expenses. Unity The Company acquired all of the issued and outstanding common stock of Unity in January 1996 for an aggregate purchase price of $3.6 million (plus $125,000 of fees and expenses incurred in connection with the acquisition). Unity expanded the Company's presence in the Midwest and in the healthcare market by fostering the Company's relationship with Abbott Labs, Unity's largest customer. Unity also possessed a mold manufacturing facility which specialized in close tolerance molds for producing medical diagnostic products, including diagnostic disposables and intravenous components. INDUSTRY Injection molding is one of the most widely used plastic processing methods in the world due to the high-quality properties of the finished product and its cost effectiveness. According to The Freedonia Group, annual shipments of injection molded plastic products, which have increased from approximately 7 billion pounds in 1985 to over 11 billion pounds in 1996, are expected to exceed 13 billion pounds by the year 2000. Despite the increased demand for plastic injection molded products, the United States injection molding industry remains highly fragmented. The United States injection molding industry is currently comprised of over 7,000 molders, a 40 substantial majority of which are small operators or captive divisions of larger companies. The capabilities of these molders vary widely, as do their end markets. In recent years, plastic injection molders have benefited from technology improvements that have enabled plastic to replace other materials (most notably metal, glass and paper) in a variety of applications. Plastic has been substituted for these materials primarily because of its disposability, ease of manufacture, durability, aesthetic appeal, flexibility of form and weight. Additionally, plastic often provides significant cost savings over other materials due to design and fabrication advantages. By successfully substituting plastic for other materials, manufacturers can significantly reduce the amount of necessary parts, manufacturing steps, labor costs, energy costs and transportation expenses associated with producing their products. As a result, management believes that substantial growth potential exists for plastics through further materials substitution. In addition to the growth projected for the plastics industry as a whole, growth for larger injection molders such as the Company is driven by industry consolidation and the trend among OEMs to outsource their injection molding needs. Management believes that the consolidation of the highly fragmented plastics injection molding industry has accelerated in recent years as a result of customer preferences toward larger, full-service independent molders that are able to provide total project management. As OEMs place increasing emphasis on minimizing the 'time to market' for their new products and ensuring that their requirements for production, quality and timely delivery are satisfied, they are increasingly relying on one full-service supplier for each new product launch. In many cases, the combination of increasingly complex applications for plastic molded parts, the limited number of qualified molders and the desire of OEMs to reduce sourcing costs has resulted in the creation of partnerships between OEMs and molders who have proven their ability to provide effective total project management, high quality products and timely delivery. These partnerships enable OEMs and molders to focus on long-range strategy and often result in faster product development, greater design flexibility, lower costs and improved product quality. Given that molders in these partnerships are involved in many decisions that affect cost and prevent complications in production, they are better able to preserve attractive margins. The industry-wide trend toward OEM consolidation of suppliers has created significant opportunities for injection molders such as the Company who possess full-service capabilities. Given the capital investment required to successfully compete as a full-service injection molder, management believes that an increasingly limited number of injection molders will be capable of providing the breadth of services increasingly being demanded by high volume OEMs. Furthermore, management believes that the trend among OEMs to develop closer relationships with full-service injection molders mitigates the potential threat of foreign competition. Inconsistent product quality, weak tooling capabilities and significant distance from customers' manufacturing locations have traditionally hindered foreign competitors from competing effectively for projects that require full-service capabilities, outstanding quality and quick response time. MARKETS AND PRODUCTS The Company is a leading supplier of plastic injection molded products for the healthcare, packaging and consumer/industrial markets. The Company is also one of the largest mold makers in the United States producing a wide variety of products. The following is a description of the principal markets served by the Company as well as the products the Company produces for those markets. Healthcare Plastic molded components for healthcare applications represented approximately 19.7% of the Company's pro forma net sales in 1996. The Company's primary healthcare products in 1996 included disposable diagnostic cards, syringes, sample systems and surgical components. During 1996, the Company's four largest healthcare market customers were Abbott Labs, bioMerieux Vitek, Dade and Ethicon Endo-Surgery, a division of Johnson & Johnson ('Ethicon'), with bioMerieux Vitek and Dade having entered into sole or primary source supply agreements with the Company. Demand for plastic injection molded components within the healthcare market is driven by both the aging population and the overall demand for new medical products. In addition, heightened cost consciousness on the part of the United States government and private insurers has increased demand for medical devices and supplies that can reduce labor costs, improve productivity and/or facilitate patient care in a more cost-effective manner. Plastics are being used more widely in medical devices as customers increasingly recognize the value of reduced 41 breakage, the ability to manufacture consistent parts in a cost-effective manner and the infection control benefits of disposable products. According to The Freedonia Group, annual demand in the United States for injection molded healthcare products is expected to increase by approximately 3.8% per year through 2000, reaching over 430 million pounds. Packaging Plastic molded components for packaging applications represented approximately 30.4% of the Company's pro forma net sales in 1996. The Company's primary packaging products in 1996 included moist tissue containers, caps and cap liners, closures and packaging for shaving cream, deodorant and feminine products. During 1996, the Company's four largest packaging market customers were Carter Wallace, Inc., Chesebrough-Pond's USA Co., a division of Unilever United States, Inc. ('Chesebrough-Pond's'), Gillette and Kimberly-Clark. The Company's packaging sales are primarily related to personal care and household products. Given the intense competition among consumer products companies, consumer goods marketers are increasingly focusing on packaging as a relatively inexpensive method of creating brand differentiation. According to The Freedonia Group, annual demand in the United States for injection molded packaging is expected to increase by approximately 3.8% per year through 2000, reaching nearly 3.6 billion pounds. As a result of the continuing substitution of plastic for alternative materials, such as metal, glass and paper, plastic packaging has been the fastest growing sector within the packaging industry. See '--Industry.' In connection with the Tredegar Acquisition, the Company acquired Tredegar's existing line of proprietary packaging products for the private label market, which includes lip balm assemblies and dropper caps. The Company believes that the private label market offers attractive growth opportunities and will consider developing additional proprietary products in the future. Consumer/Industrial Plastic molded components for consumer/industrial applications represented approximately 38.9% of the Company's pro forma net sales in 1996. The Company's primary consumer/industrial products in 1996 included printer components, electrical connectors and air freshener components. During 1996, the Company's four largest consumer/industrial market customers were AMP, The Dial Corporation ('Dial'), Lexmark and Procter & Gamble. The Company has entered into sole or primary source supply agreements with Procter & Gamble and Dial. The consumer/industrial markets the Company serves primarily include consumer containers and audio/electronics components. The consumer containers market segment has been growing rapidly due in part to the conversion of many products from metal, glass and paper to plastic. Plastic is the preferred material for many applications due to its low cost, functional performance, reusability and recyclability. Demand for plastic audio/electronic components is driven by both the overall demand for audio/electronic products and the percentage of those products composed of plastic. Strong projected growth for increased use of plastics is fueled by long product life cycles and consumer demand for more durable, lightweight and low-cost products. Based on information contained in a recent report by The Freedonia Group, annual demand in the United States for injection molded consumer/industrial products is expected to increase approximately 2.7% per year through 2000, reaching nearly 4.0 billion pounds. Annual demand in the United States for injection molded electrical components is expected to increase by approximately 3.4% per year through 2000. Mold Making Mold making operations represented approximately 11.0% of the Company's pro forma net sales in 1996. Products produced with the molds manufactured by the Company in 1996 included deodorant dispensers, personal care products, medical disposables and containers. The Company performs, or expects to perform, the injection molding for a majority of the products for which it make molds. Plastic products for which the Company built the mold but which are not injection molded by the Company are typically molded in-house by the customer. During 1996, the Company's four largest mold making customers were Spalding and Evenflo Companies, Inc., Gillette, Abbott Labs and Rubbermaid Incorporated. 42 The Company operates three facilities with mold making capabilities, including one of the largest facilities in the United States. These facilities offer a full range of services, including conceptual part and mold design, building and testing. Management views the Company's mold designing and building operations not simply as supportive of its manufacturing business, but as an independent profit center. CUSTOMERS Substantially all of the Company's sales are made to major OEMs in the healthcare, packaging and consumer/industrial markets. During 1996, the Company produced a wide variety of products for over 100 customers, with the Company's ten largest customers accounting for approximately 57.3% of its pro forma net sales. The Company's largest customers are Procter & Gamble, Gillette, AMP and Lexmark, which represented approximately 12.3%, 10.7%, 5.2% and 5.1%, respectively, of the Company's pro forma net sales in 1996. Approximately 25% of the Company's pro forma net sales in 1996 were made pursuant to multiple year supply agreements, including sales to Procter & Gamble, bioMerieux Vitek and Dade. The Company is the sole or primary source supplier of the products that it manufacturers for many of its customers. The Company may have individual contracts for specific products or, in certain instances, separate contracts with one or more operating divisions of a single customer. These contracts typically have resin price pass-through provisions and range in term from three to five years. See 'Risk Factors--Reliance on Key Customers and Supply Agreements.' As one of a limited number of full-service injection molders increasingly relied upon by OEMs to provide total project management, the Company seeks to develop lasting relationships with its customers by working closely with them in the early stages of product design and development. Management believes that the Company's use of state-of-the-art CAD/CAM technology and robotics in mold making and molding and its advanced facilities and equipment are integral to its ability to meet customer requirements. While OEMs are generally reluctant to change suppliers due to the high switching costs associated with reengineering, requalifying and restarting production, the plastic injection molding industry is highly competitive. Management believes that the Company's strong customer base will provide it with the opportunity to anticipate and generate business opportunities in the future. SALES AND MARKETING Substantially all of the Company's sales are made through the Company's direct sales force, which consists of 16 employees located throughout the regions in which the Company operates. The Company's sales and marketing team is organized according to the Company's target markets: healthcare, packaging and consumer/industrial. Management believes that organizing its sales and marketing team by market segment is the most efficient and effective way to develop and maintain customer relationships, stay abreast of technical and other developments that may result in changing customer or consumer preferences and take advantage of new business opportunities. Sales and marketing personnel emphasize the Company's full-service injection molding capabilities to customers and focus on improving communication and coordination between the Company's marketing, production and product design personnel and customers' counterpart employees to develop customized products that enhance customer product differentiation and improve functional performance. The Company has added seven sales representatives since August 31, 1996. The Company has also established new business sales teams which are organized by geographic region and are responsible solely for developing new business opportunities in the Company's target markets. In addition, the Company plans to designate key account specialists to serve its largest customers. By providing dedicated support, the Company believes it can better serve these customers, who, in many cases, have a variety of different product applications or production requirements in multiple locations. The Company's marketing approach will continue to remain focused on meeting the integrated needs of OEMs that require full-service injection molding capabilities. Customer service is also a critical component of the Company's marketing efforts. The Company's customers operate high speed, high volume production lines. In order to operate their production lines efficiently and avoid costly line stoppages, customers rely on the Company's ability to provide reliable, on-time delivery of high quality products. Customer service representatives are located at each of the Company's facilities. Management believes that this decentralized approach, which provides primary support closer to the customer 43 and the production process, is efficient and best suited to serve customer needs. In addition, a small staff of customer service personnel is located at Company headquarters to provide additional support. MANUFACTURING AND OPERATIONS The Company differentiates itself in the marketplace by being a full-service injection molder capable of meeting the integrated needs of leading OEMs from product design, development and mold making through molding, decorating and assembly. As one of a limited number of companies in the United States capable of offering such comprehensive services, management believes that the Company is well positioned to benefit from the consolidation currently taking place in the injection molding industry. Large, high volume OEMs are increasingly relying on custom injection molders for total project management to reduce costs, streamline production processes and to ensure timely completion of their new product launches. Mold Making and Technical Capabilities The Company's three facilities with mold making capabilities, which include one of the largest facilities in the United States, offer a full range of services, including conceptual part and mold design, building and testing. In addition, the Company's mold manufacturing facilities provide mold and technical consulting for troubleshooting, repair and preproduction evaluation of parts or drawings. The Company's target markets, selected for their relatively long product life cycles, demand durable molds which can be produced only with the highest-quality mold making equipment. The Company's mold making and technical operations serve this demand by combining craftsmanship with technologically advanced computer-aided design and Computer Numerical Control ('CNC') machining. As a result, the Company consistently delivers molds that are produced to the proper specifications and delivered on-time. Management views the Company's mold designing and building operations not simply as supportive of its manufacturing business, but as an independent profit center. The mold making process is generally initiated with the Company's engineers analyzing a customer's production requirements. Based on that analysis, a design is created or optimized for the part in question. This design is downloaded into the Company's computer database and serves as the foundation for the mold that will be built utilizing state-of-the-art CAD/CAM technology. The Company's mold design database is linked via a data communications network to the production floor, which allows for CNC machining of mold bases and components directly from the original design. The use of CNC technology and constant in-process monitoring enhances the Company's ability to create high-tolerance molds and deliver its molds on time. Moreover, after final assembly each of the Company's molds is tested for performance. The Company's St. Petersburg, Florida mold manufacturing facility is one of the largest and most technologically advanced in the injection molding industry. The facility comprises 55,000 square feet and employs approximately 60 mold makers with extensive experience in designing and manufacturing high cavitation production molds and stack molds. The facility contains advanced mold testing and design centers and has five injection molding presses to provide qualification and testing of new molds. The Company's two other mold manufacturing facilities, one of which is located at Company headquarters near Pittsburgh, Pennsylvania and the other of which is located outside Chicago, Illinois, are smaller than the St. Petersburg facility and specialize in molds for smaller, close tolerance plastic parts. Each facility employs approximately 20 mold makers and has product design and testing capabilities. Injection Molding The Company manufactures its products using the plastic injection molding process. The molding operation processes are comparable at each of the Company's facilities. Raw material arrives at each facility where it is inventoried in silos or boxes in the plant (depending upon the volume requirements). In conventional and clean room molding, raw material in the form of pellets is blended to ensure a homogenous mix, dried when necessary, and conveyed through a pneumatically controlled material handling system to the molding presses. The raw material enters the heating chamber where it is melted to a fluid state. Coloring agents are added as appropriate and a reciprocating screw pushes the fluid raw material at high pressure through a nozzle into a closed temperature-controlled mold. At the end of each molding cycle (five to eighteen seconds), the mold opens and the finished parts are ejected from the mold into automated handling systems from which they are packaged for further processing or shipment. 44 The Company operates approximately 185 conventional injection molding presses ranging in capacity from 44 to 750 tons. These presses are located in nine strategically located plants, allowing production to be allocated so that the customer's needs are met in a cost-effective and timely manner. The Company also operates ten proprietary closure presses and five presses used in the qualification and testing of new molds. The Company's molding operations also include white room and Class 100,000 clean room environments that offer a controlled manufacturing atmosphere for the molding of components used in medical devices. The Company's molds and molding machines are continuously monitored through process and manufacturing systems, which include a preventative maintenance program. Molds in need of repair or scheduled for maintenance are sent to the plant tool shop for cleaning and repairs. If significant repairs are required, the molds are sent to one of the Company's three mold making facilities. In order to produce high quality products while containing costs, the Company utilizes the most advanced molding capabilities available in the industry. For example, the Company operates two-by-two 'stack' molds, which allow twice the molding capacity of conventional molding systems. For customer specific projects, the Company has developed engineering and automation systems resulting in improved manufacturing efficiencies and lower costs. In addition to its molding capabilities, the Company has significant experience with commodity and engineered thermoplastic polymers. Each of the Company's plants is managed by a local plant manager and is treated as a profit center. The Company seeks to be a low-cost producer by using high speed molding machines, modern multi-cavity hot runner, cold runner and insulated runner molds and extensive material handling automation. Many of the Company's products are packaged and delivered to OEMs in a manner which allows them to be integrated directly into the production process, minimizing inventories and fixed costs for both the Company and the customer. Each of the Company's injection molding plants has complete tool maintenance capability to support molding operations. As of March 31, 1997, the Company had invested approximately $15.4 million, since 1991 on a pro forma basis, in new injection molding machines and related plant and equipment improvements to further its growth objectives, improve productivity and maintain competitive advantages. The Company's 51,000 square foot, state-of-the-art facility in Newark, Delaware demonstrates its injection molding capabilities as well as its commitment to developing strategic partnerships with key customers. This facility was specifically designed to produce Baby Fresh(Trademark) polypropylene containers for Procter & Gamble and serve other customers in the thin-wall packaging market. Using state-of-the-art molding machines, highly engineered stack molds and high-speed automation, this facility produced approximately 18 million units in 1996 and is able to maintain short cycle times seven days a week. This type of production demands high levels of accuracy and repeatability. To maintain this level of shot-to-shot consistency, the Company uses in-line process control software to monitor critical molding parameters. The success of the Delaware CAP Facility is enhanced through computerization and close customer communication. A bar-coding system automatically tracks inventories and shipments and provides product traceability. The Company's investment in highly automated equipment enables the entire facility to be operated by only 22 employees, keeping labor costs to a minimum. Because of its highly automated manufacturing process, the Delaware CAP Facility's direct labor costs as a percentage of net sales in 1996 were 1.9%, as compared to what management believes to be an industry average of 10.0%. Secondary Processes The Company further differentiates itself in the market by offering a variety of secondary processes at most plant facilities. These secondary processes typically include assembly and the lining of caps, as well as other services, including various decorating techniques, such as hot stamping, pad printing and labeling. Additional complementary services are performed by outside vendors on an as needed basis when a special application is required by the customer, including screen printing, metalizing and offset printing. Quality Assurance Programs A commitment to consistently producing high-quality products is critical to the success of custom injection molders serving the Company's target markets. With packaging playing an ever-increasing role in the functionality and aesthetics of new product launches within the consumer products industry, OEMs demand high 45 quality products from their injection molding suppliers. Similarly, given the applications for which their products are used, healthcare companies demand the highest quality products from their suppliers. In recognition of these customer demands, the Company has centered its manufacturing philosophy on being the highest quality custom injection molder in its targeted end markets. Each of the Company's facilities utilizes total quality management techniques, including the use of statistical process control and the extensive involvement of employees to increase productivity. As a result, the Company is consistently recognized as a leading supplier of quality injection molded parts to the majority of its key customers. The Company has received numerous quality awards, including Gillette's OmniMark Award, the Lexmark International Prestige Supplier Award and the bioMerieux Vitek World Class Supplier Award. 'Ship-to-stock' status has been achieved with many customers, including Ethicon, Warner Lambert, Swisher and Outer Circle Products. In addition, four of the Company's facilities are ISO 9000 registered, and the Company is actively pursuing ISO certification in all of its remaining facilities. ISO 9000-series certification certifies compliance by a company with a set of shipping, trading and technology standards promulgated by the International Standardization Organization. COMPETITION The Company faces intense competition throughout its product lines from numerous competitors, a number of whom have greater financial resources than the Company. In addition, the markets for certain of the Company's products are characterized by low costs of entry or competition based primarily on price. Other important competitive factors include product quality, service and the ability to supply products to customers in a timely manner. The Company faces competition from well-established independent molders operating nationally, smaller independent molders operating regionally and captive divisions of larger companies. In most instances, small regional competitors lack the production and technological capabilities to service national consumer product and healthcare companies. The plastic injection molding industry is highly fragmented. In all three of its target markets the Company competes with Nypro, Inc., which is headquartered in Clinton, Massachusetts, and The Tech Group, Inc. ('The Tech Group'), which is headquartered in Scottsdale, Arizona. The Company competes with Erie Plastics Corp. in both the consumer/industrial and the packaging markets. In addition, in the healthcare market, the Company competes with Tenax Corporation, a primary supplier of surgical devices, and Courtesy Corporation, one of four major suppliers to Abbott Labs. In the packaging market, the Company also competes with The West Company, Inc., which recently announced it was being acquired by Owens-Illinois, Inc., and Plastek Industries Incorporated. RAW MATERIALS AND SUPPLIERS The principal raw materials utilized by the Company's molding processes are commodity and engineered thermo-plastic polymers, primarily polypropylene, polyethylene and polycarbonate. The selection of raw material is developed between the customer and the Company and specified to provide optimum processing, efficient handling, dimensional stability, end use and pricing requirements. Raw materials are purchased either from distributors or directly from polymer producers. Larger volumes are generally acquired from producers while smaller volumes are secured from large distributors that carry a wide variety of raw material types and manufacturers. The Company's purchasing strategy is to deal with high quality, dependable suppliers. With the acquisition of Tredegar, the Company has been able to achieve larger volume discounts, rebates and overall better resin pricing because of larger purchase quantities. The Company's largest resin suppliers in 1996 were Huntsman and General Polymers, two of the largest plastic resin manufacturers in North America. In an effort to improve quality and reduce costs, the Company has recently implemented a 'preferred supplier' program which requires the Company's suppliers to adhere to strict performance criteria, including satisfaction of high quality standards, commitment to continuous improvement and participation in the Company's quality assurance and cost improvement initiatives. The 'preferred supplier' program also requires supply agreements to incorporate transactional reduction initiatives and include extended and/or discounted payment terms, performance rebates and price protection provisions with respect to commodities that can be effected by changing market conditions. The Company has agreements in place with its primary suppliers pursuant to the program and will generally require that its other suppliers achieve 'preferred supplier' status as a condition to future orders. 46 The Company does not anticipate having any material difficulties obtaining raw materials in the foreseeable future. However, over the past four years, the raw material market has been volatile due to increased demand and irregular producer capacity. With respect to raw material pricing, the Company has experienced price escalation comparable to industry trends over the last 18 months. Pursuant to the terms of multi-year supply agreements and purchase orders, the Company historically has had the ability to pass through resin price increases. The Company does not otherwise hedge its exposure to increases in raw material prices. See 'Risk Factors--Exposure to Fluctuations in Resin Cost and Supply.' REGULATION AND LEGISLATION The past and present operations of the Company, including its past and present ownership of real property, are subject to extensive and changing federal, state and local environmental laws and regulations pertaining to the discharge of materials into the environment, the handling and disposition of wastes or otherwise relating to the protection of the environment. The Company believes that it is in substantial compliance with applicable environmental laws and regulations. However, the Company cannot predict with any certainty that it will not in the future incur liability under environmental statutes and regulations with respect to contamination of sites formerly or currently owned or operated by the Company (including contamination caused by prior owners and operators of such sites) and the off-site disposal of hazardous substances. See 'Risk Factors--Environmental Matters.' Sampling in 1995 at Tredegar's South Grafton, Massachusetts facility revealed the presence of contaminants in the soil and groundwater at the facility. The concentration of certain substances in the soil exceeded minimum reportable concentrations under Massachusetts environmental regulations; none of the substances detected in groundwater exceeded minimum reportable concentrations. In connection with the Tredegar Acquisition, the seller agreed, at its cost, to determine the extent of the onsite and off-site contamination resulting from these reportable releases and to perform the clean-up activities necessary to achieve a permanent remediation under the applicable Massachusetts regulations. In December 1996, the seller's consultant issued its final report, which concluded that a condition of 'no significant risk' to safety, health, public welfare or the environment had been achieved by remediation activities at the site and stated that no further response actions were recommended for the site. Remediation of the South Grafton site in accordance with the Massachusetts program, however, will not necessarily ensure that the Company might not be subject to further state or federal cleanup orders with respect to the site or claims by adjacent landowners and/or other third parties allegedly impacted by releases at the site, and no assurance can be given that the Company will not incur or elect to assume any liabilities for such remediation as a result of subsequent negotiations, by operation of law or otherwise. The operations at the Company's facilities require permits and approvals from certain federal, state and local authorities. In addition, the Company's operations are heavily dependent upon its continued ability, under applicable laws, regulations, policies, permits, licenses or contractual arrangements, to operate its facilities, and otherwise to conduct its operations. The Company believes it has all permits, licenses and approvals from governmental authorities material to the operation of the facilities as currently configured. In addition, the Company has not received any notice of material non-compliance with permits, licenses or approvals necessary for the operation of its properties. However, there can be no assurance that new applications of existing laws, regulations and policies, or changes in such laws, regulations and policies will not occur in a manner that could have such an effect, or that important permits, licenses or agreements will not be canceled, non-renewed, or renewed on terms materially less favorable to the Company. Although the Company has no reason to believe that it will not be successful in implementing its operations and development plans, no assurance can be given that necessary permits and approvals will be obtained. The plastics industry in general, and the Company in particular, is also subject to existing and potential federal, state, local and foreign legislation designed to reduce solid wastes by requiring, among other things, plastics to be degradable in landfills, minimum levels of recycled content, various recycling requirements, disposal fees and limits on the use of plastic products. In addition, various consumer and special interest groups have lobbied from time to time for the implementation of these and other similar measures. The principal resin used in the Company's products, HDPE, is recyclable, and, accordingly, the legislation promulgated to date and such consumer interest group initiatives to date have not had a material adverse effect on the Company. There 47 can be no assurance that any such future legislative or regulatory efforts or future initiatives would not have a material adverse effect on the Company. EMPLOYEES As of June 30, 1997, the Company employed 875 individuals, of which 208 were salaried and 667 were hourly. Approximately 40 employees at the Company's Pittsburgh, Pennsylvania facility are members of a union and are covered by a collective bargaining agreement which expires in February 1998. The Company believes that its relationship with its employees is generally good. The Company's employees are given extensive training, in excess of 30 hours each year, which is designed to increase productivity, safety and manufacturing quality and to foster the concept of 'continuous improvement.' Through an innovative Performance Sharing Program, the Company's employees focus on cost of goods sold and are given incentives to maximize gross margins by minimizing costs. Operational performance by plant is posted each month and quarterly meetings are held with all employees to discuss performance outcomes. Plants which exceed the budgeted gross margins receive a bonus based on hours of pay. Rewards under the Performance Sharing Program are also dependent upon attendance. Management believes that the Performance Sharing Program has been successful in motivating employees to reduce costs and increase productivity. PROPERTIES The Company operates nine facilities located in the eastern and midwestern United States. Management believes that these facilities are adequate for its present needs. A summary of the Company's facilities is presented in the chart below.
APPROXIMATE LOCATION SQUARE FOOTAGE OWNERSHIP MARKETS SERVED - ------------------------------------------- -------------- --------- ------------------------ North Versailles (Pittsburgh), PA (Headquarters)........................... 70,000 Owned Mold making, Healthcare, Packaging West Lafayette, IN......................... 35,000 Owned Healthcare, Consumer/Industrial Newark, DE................................. 51,000 Leased Packaging Des Plaines, IL............................ 30,000 * Mold making, Healthcare, Consumer/Industrial St. Petersburg, FL......................... 136,000 Owned Mold making, Packaging, Consumer/Industrial South Grafton, MA.......................... 127,000 * Packaging, Consumer/Industrial Excelsior Springs, MO...................... 70,000 Owned Packaging, Consumer/Industrial State College, PA.......................... 31,000 Leased Healthcare, Consumer/Industrial Phillipsburg, PA........................... 32,000 Leased Healthcare, Consumer/Industrial
- ------------------------------ * This facility is partially owned and partially leased by the Company. LEGAL PROCEEDINGS The Company does not believe that it or any of its facilities are involved in any litigation that will, individually or in the aggregate, have a material adverse effect on its financial condition or future results of operations. The Company maintains liability insurance that the Company considers adequate to insure claims related to usual and customary risks associated with the operation of its facilities. 48 MANAGEMENT DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES The following table sets forth information with respect to the directors, executive officers and other key employees of the Company.
YEARS IN NAME AGE POSITION INDUSTRY - ------------------------------------------- --- ---------------------------------------------------- -------- Richard L. Kramer.......................... 48 Chairman, Secretary and Director 7 William L. Remley.......................... 46 Vice Chairman, Treasurer and Director 7 John R. Weeks.............................. 51 President and Chief Executive Officer 29 Michael M. Farrell......................... 42 Vice President, Marketing & Sales 15 Ronald A. Seegers.......................... 50 Vice President, Engineering 27 Clarence E. Stevens, Jr.................... 48 Vice President, Manufacturing 10 Michael D. Bornak.......................... 35 Controller 5 Raymond J. Veno............................ 46 Director of Continuous Improvement and Product 25 Development Richard C. Hoffman......................... 49 Director 1 Elaine E. Healy............................ 35 Director --
RICHARD L. KRAMER became the Chairman of the Board and a director of the Company in April 1990 and Secretary of the Company in August 1991. Mr. Kramer is also Chairman and a director of Mentmore Holdings Corporation, Texfi Industries Inc., a textile and apparel manufacturing firm, CPT Holdings, Inc., a manufacturer of specialty structural steel profiles, Weldotron Corporation, a packaging equipment manufacturer, Orion Acquisition Corp. II, an investment company, MC Equities, Inc., an insurance holding company, and Republic Properties Corporation. Mr. Kramer is a director of J&L Structural, Inc., Precise Holding Corporation and Sunderland Industrial Holdings Corporation. WILLIAM L. REMLEY became the Vice Chairman of the Board and a director of the Company in April 1990 and Treasurer of the Company in August 1991. Mr. Remley is also President, Chief Executive Officer and a director of Mentmore Holdings Corporation and Weldotron Corporation, Vice-Chairman, Chief Executive Officer and a director of Texfi Industries Inc., and President and a director of CPT Holdings, Inc. Mr. Remley is a director of J&L Structural, Inc., MC Equities, Inc., Orion Acquisition Corp. II, Republic Properties Corporation, Precise Holding Corporation and Sunderland Industrial Holdings Corporation. JOHN R. WEEKS became President and Chief Executive Officer of the Company in August 1990. Prior to joining Precise, from 1986 to 1990 Mr. Weeks was employed as a Vice President of Corporate Development for The Tech Group, a custom molder for the medical, electronic, packaging and consumer product markets. Previously, from 1977 to 1986 Mr. Weeks was Vice President of Sales with Nypro Inc. Mr. Weeks began his career with Arco Polymers in 1968. MICHAEL M. FARRELL became Vice President, Marketing & Sales of the Company in 1991. Prior to joining Precise, from 1987 to 1991 Mr. Farrell was employed as the Director of Sales for Medical Products for The Tech Group. Mr. Farrell began his career at Nypro Inc. in 1984. RONALD A. SEEGERS became Vice President, Engineering of the Company in 1993. Prior to joining Precise, from 1984 to 1993, Mr. Seegers was employed as Director of New Business with The Tech Group. Prior to joining The Tech Group, Mr. Seegers worked for 16 years at Major Tools in Chicago. CLARENCE E. STEVENS, JR. became Vice President, Manufacturing of the Company in 1994. Prior thereto, he served as Director of Continuous Improvement of Precise since 1991. Prior to joining Precise, from 1988 to 1991, Mr. Stevens was employed as Manager of Process Improvement for The Tech Group. Prior to joining The Tech Group, Mr. Stevens worked at Carlisle Syntec, a synthetic roofing company, as a plant manager for 10 years. MICHAEL D. BORNAK became Controller of the Company in May 1992. Prior to joining Precise, from 1986 to 1992 Mr. Bornak was employed in the accounting and treasury departments of National Steel Corp. Prior to joining National Steel, Mr. Bornak was a Senior Auditor with Ernst & Young. Mr. Bornak is a certified public accountant. 49 RAYMOND J. VENO became the Company's Director of Continuous Improvement and Product Development in September 1996. Prior to joining Precise, from June 1986 to February 1995 Mr. Veno was employed as Manager of Plastics Technology and Development Group for Digital Equipment Corporation. Prior to joining Digital Equipment Corporation, Mr. Veno was employed at Nypro, Inc. as Business Manager for seven years. RICHARD C. HOFFMAN became a director of the Company in January 1996. Mr. Hoffman has been President and Principal of Richard C. Hoffman, P.C., a law firm with offices in Greenwich, Connecticut, since 1988. From January 1995 to March 1997, Mr. Hoffman served as Vice President and General Counsel of Mentmore Holdings Corporation. From 1985 to 1992 Mr. Hoffman was a partner at Freytag, LaForce, Rubinstein & Teofan, a law firm in Dallas, Texas. Mr. Hoffman is a director of MC Equities, Inc., Orion Acquisition Corp. II, Texfi Industries, Inc., Precise Holding Corporation and Weldotron Corporation. ELAINE E. HEALY is currently a director of Precise Holding Corporation and became a director of Precise upon consummation of the Refinancing Transactions. Ms. Healy has been a Vice President of Pecks Management Partners Ltd., an investment management firm, since May 1993. Prior to joining Pecks Management Partners Ltd., Ms. Healy was a General Partner of Quantum Partners, Ltd., a venture capital partnership with which she was associated for eight years. During that time Ms. Healy also served as Vice President of The Revere Fund, Inc., a public closed-end investment company. Ms. Healy is also a director of Dolan Media Company, Inc. EXECUTIVE COMPENSATION The following table sets forth information regarding the compensation paid during the Company's last completed fiscal year to the Chief Executive Officer of the Company and each of the other four most highly compensated executive officers of the Company as of December 31, 1996 (collectively, the 'Named Executive Officers'). SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION COMPENSATION -------------------------------------------- --------------------- OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(A) OPTIONS/SARS ($) COMPENSATION ($) - ------------------------------- ---- ---------- --------- ------------------- --------------------- ---------------- John R. Weeks.................. 1996 $ 239,400 $72,500 -- -- $ 18,580(b) President and Chief Executive Officer Michael M. Farrell............. 1996 123,200 32,400 -- -- 10,120(c) Vice President, Marketing & Sales Ronald A. Seegers.............. 1996 112,800 28,900 -- -- 9,220(d) Vice President, Engineering Clarence E. Stevens, Jr........ 1996 96,800 25,600 -- -- 7,920(e) Vice President, Manufacturing Michael D. Bornak.............. 1996 75,700 39,500 -- -- 6,220(f) Controller
- ------------------------------ (a) Below amounts which would require disclosure under Commission rules and regulations. (b) Included in such amount is $12,300 representing an employer matching contribution under the 401(k) Plan (as defined), $1,200 in net premiums for a life insurance policy on behalf of Mr. Weeks and $5,080 representing a profit sharing bonus. (c) Included in such amount is $7,400 representing an employer matching contribution under the 401(k) Plan and $2,720 representing a profit sharing bonus. (d) Included in such amount is $6,800 representing an employer matching contribution under the 401(k) Plan and $2,420 representing a profit sharing bonus. (e) Included in such amount is $5,800 representing an employer matching contribution under the 401(k) Plan and $2,120 representing a profit sharing bonus. (f) Included in such amount is $4,500 representing an employer matching contribution under the 401(k) Plan and $1,720 representing a profit sharing bonus. 50 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company's compensation policies are determined and executive officer compensation decisions are made by the Board of Directors. No member of the Board of Directors received director fees in 1996. 401(K) PENSION PLAN Precise sponsors a defined contribution savings plan (the '401(k) Plan') whereby eligible employees of Precise or its subsidiaries may (under current administrative rules) elect to defer a portion of their compensation each year and may also make after-tax contributions to the 401(k) Plan. Employee and Company contributions are paid by the Company to the trustee under the 401(k) Plan. The Company has a policy of (i) making an annual discretionary contribution on behalf of each eligible employee in an amount equal to 3.5% of such employee's total annual compensation, regardless of such employee's actual contribution to the 401(k) Plan, and (ii) making matching contributions equal to 50% of the first 5% of compensation deferred by employees. The Company's contributions are subject to vesting and forfeiture. The Company's contributions to the accounts of the Named Executive Officers during 1996 are included in the Summary Compensation Table. 1997 STOCK OPTION PLAN In April 1997, Sunderland established the Sunderland Industrial Holdings Corporation 1997 Key Employee Nonqualified Stock Option Plan (the '1997 Stock Option Plan') to provide incentives to, encourage stock ownership by and retain the services of certain of, its key employees and those of its subsidiaries. The Board of Directors of Sunderland (the 'Sunderland Board') administers the 1997 Stock Option Plan, which provides for the grant of options with respect to a maximum of 15% of the issued and outstanding shares of common stock, par value $0.01 per share, of Sunderland ('Sunderland Common Stock'). Each option granted under the 1997 Stock Option Plan will be evidenced by a written option agreement between the optionee and Sunderland, which agreement may contain additional terms not inconsistent with the 1997 Stock Option Plan and as the Sunderland Board may deem appropriate. Under Nonqualified Stock Option Agreements (the 'Option Agreements') entered into in April 1997 pursuant to the 1997 Stock Option Plan, John R. Weeks, President and Chief Executive Officer of Precise, and Michael M. Farrell, Vice President, Marketing & Sales of Precise, received options to purchase 1,200 and 400 shares of Sunderland Common Stock, respectively (the 'First Options'), and additional options to purchase 225 and 75 shares of Sunderland Common Stock, respectively (the 'Second Options,' and together with the First Options, the 'Options'). The Options are exercisable at a price of $1,500 per share of Sunderland Common Stock. The First Options will become exercisable over a three-year period following the grant date. The Second Options will become exercisable in 25% increments upon the 90th day following each successful annual determination by the Sunderland Board that Sunderland's EBITDA (as defined in the Option Agreements) for the years ended December 31, 1997 through 2000 exceeded certain annual targets. In addition, the Options may be exercised during the one year period following the optionee's retirement at or above age 65, or upon his or her death or disability, and all of the First Options and the then exercisable portions of the Second Options may be exercised during the ten business day period following notice of a Change of Control (as defined in the Option Agreements). Once exercisable, the Options may be exercised at any time, in whole or in part, prior to the earlier of (i) the termination of the optionee's employment with Sunderland or any of its subsidiaries or (ii) January 31, 2005. It is intended that the Options shall not constitute 'incentive stock options,' as that term is used in Section 422 of the Internal Revenue Code of 1986, as amended. Pursuant to the Option Agreements, Sunderland has the right to repurchase Sunderland Common Stock purchased pursuant to the Options upon the occurrence of a Call Event (as defined in the Option Agreements) at a repurchase price of either 75% or 100% of the Fair Market Value (as defined in the Option Agreements) of such stock depending on the reason underlying the Call Event, subject to adjustment under certain specified circumstances. In addition, pursuant to the Option Agreements, Sunderland has a right of first refusal prior to the sale to any third party of any Sunderland Common Stock purchased pursuant to the Options. 51 CERTAIN TRANSACTIONS TREDEGAR FINANCING TRANSACTIONS In connection with the Tredegar Acquisition, (i) the Company and Parent entered into a Securities Purchase Agreement dated March 29, 1996 (as amended, the 'Securities Purchase Agreement') with Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc. and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. (each advised by Pecks Management Partners Ltd. and collectively referred to herein as the 'Pecks Funds') pursuant to which the Pecks Funds purchased (a) 575 shares of the Company's Cumulative Exchangeable Preferred Stock having an aggregate liquidation preference equal to $5,750,000 (the 'Exchangeable Preferred Stock') for an aggregate consideration of $5,750,000 and (b) 250 shares of Parent Common Stock for an aggregate consideration of $750,000; (ii) the Company entered into a Note Purchase Agreement dated March 29, 1996 (the 'Note Purchase Agreement') with John Hancock Mutual Life Insurance Company ('John Hancock') and Rice Partners II, L.P. ('Rice') pursuant to which John Hancock and Rice purchased $20.0 million aggregate principal amount of the Company's 12.25% Senior Subordinated Notes due 2006 (the 'Existing Notes'); (iii) Parent entered into a Warrant Purchase Agreement dated March 29, 1996 (as amended, the 'Warrant Purchase Agreement') with Rice, John Hancock and the Pecks Funds pursuant to which, in connection with their purchase of the Existing Notes, Rice and John Hancock each acquired warrants ('Warrants') to purchase 570 shares of Parent Common Stock and, in connection with its purchase of the Exchangeable Preferred Stock, the Pecks Funds acquired Warrants to purchase 575 shares of Parent Common Stock; and (iv) Parent entered into a Shareholder Agreement dated March 29, 1996 (as amended, the 'Shareholder Agreement') with Sunderland, Hamilton Holdings Ltd. Corporation ('Hamilton Holdings'), the Pecks Funds, Rice and John Hancock. In addition, Precise and Parent entered into the Existing Credit Agreement, under which Precise incurred approximately $44.0 million of indebtedness to finance the Tredegar Acquisition, and Precise issued 250 shares of its Series B Cumulative Redeemable Preferred Stock (the 'Seller Preferred Stock' and, together with the Exchangeable Preferred Stock, the 'Redeemable Preferred Stock'), having a liquidation preference of $10,000 per share, to the former owners of Tredegar. In connection with the consummation of the Refinancing Transactions, the Company entered into certain consents and amendments to the Securities Purchase Agreement, the Warrant Purchase Agreement and the Shareholder Agreement to, among other things, approve the terms of the Refinancing Transactions and to modify certain covenants contained therein. The Warrants are exercisable, in whole or in part, at a per share price of $0.01 at any time prior to March 29, 2006. The Warrant Purchase Agreement contains customary anti-dilution protection, restrictions on the transfer of Warrants and shares of Parent Common Stock issuable thereunder ('Warrant Shares') and provisions requiring that Warrants and Warrant Shares be offered to Parent prior to any sale to a third party. In addition, the Warrant Purchase Agreement contains certain covenants pertaining to Parent and its subsidiaries which, among other things, give the holders of Warrants the right to consent to certain corporate actions, including certain sales of assets, acquisitions, issuances of capital stock, amendments to corporate organizational documents, affiliate transactions and investments. The Warrant Purchase Agreement also provides Hancock and Rice with Parent Board of Director observation rights and the Pecks Funds with the right to designate one member of the Board of Directors of each of Parent and Precise. Precise used a portion of the net proceeds from the Initial Offering to (i) redeem the Exchangeable Preferred Stock and the Seller Preferred Stock and (ii) repay the indebtedness outstanding under the Existing Credit Agreement and the Existing Notes. In addition, Precise used a portion of the net proceeds from the Initial Offering to repurchase 124 shares of Common Stock of Precise from Parent, the proceeds of which were used to redeem shares of Parent Preferred Stock held by Hamilton Holdings. Richard L. Kramer and William L. Remley are executive officers and directors of Hamilton Holdings, and the holders of record of the capital stock of Hamilton Holdings are trusts established for the benefit of certain relatives of Messrs. Kramer and Remley. SHAREHOLDER AGREEMENT In connection with the Tredegar Acquisition, Parent, Sunderland, Parent's other shareholders (collectively, the 'Shareholders') and the holders of the Warrants (collectively, the 'Warrantholders') entered into the Shareholder Agreement. Pursuant to the Shareholder Agreement, the Warrantholders have the right to require Parent to purchase (a 'Put Option') their Warrant Shares and certain other shares of capital stock of Parent held by the Shareholders (collectively, the 'Put Shares'), in whole or in part, at any time after March 29, 2001. In addition, the Warrantholders are entitled to sell their Put Shares to Parent at any time prior to the occurrence of an Initial Public Offering (as defined in the Shareholder Agreement) in the event of (i) a change in control (as 52 defined in the Shareholder Agreement) of Parent, (ii) a merger, consolidation, share exchange or similar transaction involving Parent, (iii) a sale in one or more related transactions of all or a majority of the assets, business or revenue or income generating operations of Parent or (iv) any substantial change in the type of business conducted by Parent. The Shareholder Agreement also provides Parent with an option to purchase (the 'Call Option') all outstanding Warrants and Warrant Shares at any time on or after April 1, 2002 and prior to an Initial Public Offering. The price to be paid to the Warrantholders upon the exercise of the Put Option or the Call Option is to be determined in accordance with a formula and procedures set forth in the Shareholder Agreement. In the event Parent is unable to pay the purchase price for the Put Shares in cash after exercise of the Put Option, it may be required to execute and deliver a promissory note or notes to the Warrantholders in satisfaction of all or part of its purchase price obligation. Such promissory notes would mature on April 1, 2006 and bear interest at rates ranging from 14% to 18% during the term of the notes. The Shareholder Agreement further provides, under certain circumstances, John Hancock, Rice and the Pecks Funds with certain co-sale rights upon the sale or other transfer of capital stock of Parent by the Shareholders. In addition, subject to certain conditions, if prior to an Initial Public Offering holders of at least 66 2/3% of the issued and outstanding shares of Parent Common Stock and Common Stock Equivalents (as defined in the Shareholder Agreement) elect to sell their shares to a bona fide third party (other than in connection with a registered offering under the Securities Act), then all holders shall be obligated to sell any shares of Parent Common Stock and Common Stock Equivalents then owned by such holders in such sale. Pursuant to the Shareholder Agreement, John Hancock, Rice and the Pecks Funds also have certain demand registration rights, which become effective after the date Parent has consummated an Initial Public Offering, and incidental registration rights. These rights are subject to customary cut-back provisions. MANAGEMENT AGREEMENT WITH MENTMORE Mentmore provides management services to Precise and its subsidiaries pursuant to the Management Agreement dated March 15, 1996, as amended (the 'Management Agreement'), between Precise and Mentmore. Pursuant to the Management Agreement, Mentmore provides the Company with general management, advisory and consulting services with respect to Precise's business and with respect to such other matters as Precise may reasonably request from time to time, including, without limitation, strategic planning, financial planning, business acquisition and general business development services. Under the terms of the Management Agreement, the Company provides customary indemnification, reimburses certain costs and pays Mentmore an annual management fee of $300,000 (subject to adjustment), which is payable monthly after the consummation of the Offering. In addition, pursuant to the Management Agreement, Mentmore is entitled to customary investment banking fees for services rendered in connection with the Company's financing transactions and acquisitions. The Management Agreement had an original term of ten years and is automatically extended for one additional year on each April 1 during the term of the agreement unless either party shall have previously notified the other in writing of its desire not to further extend the term. In addition, Mentmore may terminate the Management Agreement at any time upon 90 days prior written notice to Precise, and Precise may terminate the Management Agreement 'for cause' (as defined in the Management Agreement). The sole executive officers and directors of Mentmore are Richard L. Kramer and William L. Remley. Payments under the Management Agreement are subject to the restrictions set forth under 'Description of Notes--Certain Covenants--Transactions with Affiliates' as well as certain limitations set forth in the Warrant Purchase Agreement. The Company has paid Mentmore fees of $0, $450,000, $300,000 and $150,000 in the three months ended March 31, 1997 and in 1996, 1995 and 1994, respectively, for management and other advisory services and has reimbursed Mentmore for certain expenses incurred in connection with the rendering of such services. Mentmore received total fees of $500,000 and the reimbursement of certain expenses in connection with financial advisory and other services rendered to the Company in connection with the Refinancing Transactions. FEES PAID TO RICHARD C. HOFFMAN The Company paid the law firm of Richard C. Hoffman, P.C., whose principal is a director of Precise, a total of approximately $257,500 in legal fees in 1996 and $5,000 in legal fees in the three months ended March 31, 1997. During this period, Mr. Hoffman served as Vice President and General Counsel of Mentmore. FEES PAID TO MICHAEL D. SCHENKER The Company paid the law firm of Michael D. Schenker Co. L.P.A., whose principal is an officer of Mentmore, a total of approximately $300,000 in legal fees in connection with the Refinancing Transactions. 53 PRINCIPAL STOCKHOLDERS Precise is a wholly owned subsidiary of Precise Holding Corporation. The following table sets forth information concerning the beneficial ownership of Parent Common Stock as of March 31, 1997 and after giving effect to the Refinancing Transactions by (i) each person known to the Company to own beneficially more than 5% of the outstanding Parent Common Stock, (ii) by each Named Executive Officer and (iii) all directors and executive officers of the Company as a group. All shares are owned with sole voting and investment power, unless otherwise indicated.
PARENT COMMON STOCK BENEFICIALLY OWNED ------------------ BENEFICIAL OWNER SHARES % - ---------------------------------------------------------------------------------- -------- ---- Sunderland Industrial Holdings Corporation (1).................................... 8,035.00 97.0 John Hancock Mutual Life Insurance Company........................................ 570.00(2) 6.4 Rice Partners II, L.P............................................................. 570.00(2) 6.4 Delaware State Employees' Retirement Fund (3)..................................... 552.67(4) 6.4 Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc.(3)......... 110.33(5) 1.4 Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. (3).................................................. 162.00(6) 2.0 Pecks Management Partners, Ltd. (3)............................................... 825.00(7) 9.3 Total Executive Officers and Directors as a Group (nine persons).................. -- --
- ------------------------------ (1) According to information supplied to the Company by Sunderland, Biscayne Trust, The Sunderland I Trust and The Remley 1990 Trust own beneficially 72%, 18% and 10%, respectively, of the outstanding shares of common stock of Sunderland. The beneficiaries of these trusts are certain relatives of Richard L. Kramer and William L. Remley. The trustees of Biscayne Trust and The Sunderland I Trust are Lewis H. Ferguson III and Gary R. Siegel. All powers with respect to investment or voting of securities owned by Biscayne Trust and The Sunderland I Trust are exercisable by Messrs. Ferguson and Siegel jointly. The trustee of The Remley 1990 Trust is F. Richard Remley, who exercises all voting and investment power with respect to securities held by such trust. The business address of Sunderland, Biscayne Trust, The Sunderland I Trust, The Remley 1990 Trust, Lewis H. Ferguson III, Gary R. Siegel and F. Richard Remley is c/o Mentmore Holdings Corporation, 1430 Broadway, 13th Floor, New York, New York 10018-3308. Richard L. Kramer, Chairman of the Board of Directors of the Company, and William L. Remley, Vice Chairman of the Board of Directors of the Company, are directors and executive officers of Parent and Sunderland. F. Richard Remley, the trustee of The Remley 1990 Trust, is the brother of William L. Remley. Mentmore provides management services to the Company. Messrs. Kramer and William L. Remley are the sole executive officers and directors of Mentmore. (2) Comprised of Warrants to purchase 570 shares of Parent Common Stock held by each of John Hancock Mutual Life Insurance Company ('John Hancock') and Rice Partners II, L.P. ('Rice'). The business address of John Hancock is John Hancock Place, 200 Clarendon Street, Boston, Massachusetts 02117. The business address of Rice is c/o Rice Capital Management, 5847 San Felipe, Suite 4350, Houston, Texas 77057. (3) Pecks Management Partners, Ltd. serves as the investment advisor to The Delaware State Employees' Retirement Fund, the Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc. and the Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. (collectively, the 'Pecks Funds') and, in such capacity, exercises voting and investment control with respect to the Parent Common Stock beneficially owned by the Pecks Funds. The business address of Pecks Management Partners, Ltd. and the Pecks Funds is One Rockefeller Plaza, New York, New York 10020. (4) Comprised of 167.67 shares of Parent Common Stock and Warrants to purchase 385 shares of Parent Common Stock. (5) Comprised of 33.33 shares of Parent Common Stock and Warrants to purchase 77 shares of Parent Common Stock. (6) Comprised of 49 shares of Parent Common Stock and Warrants to purchase 113 shares of Parent Common Stock. (7) Comprised of 250 shares of Parent Common Stock and Warrants to purchase 575 shares of Parent Common Stock held of record by the Pecks Funds. Pecks Management Partners, Ltd. disclaims beneficial ownership of the Parent Common Stock and Warrants held of record by the Pecks Funds. 54 DESCRIPTION OF CERTAIN INDEBTEDNESS NEW CREDIT AGREEMENT Upon consummation of the Initial Offering, the Company entered into a revolving credit facility (the 'New Credit Agreement') with Fleet National Bank, as administrative agent (the 'Agent'), for a syndicate of financial institutions. The following is a summary of the material terms of the New Credit Agreement. The following summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, all of the provisions of the New Credit Agreement, including all of the definitions therein of terms not defined in this Prospectus. General. The New Credit Agreement provides for borrowings in a principal amount of up to $30.0 million at any one time outstanding. Borrowings may be used by the Company to fund the Company's working capital requirements, finance certain permitted acquisitions and general corporate requirements of the Company and pay related fees and expenses of the foregoing. Prior to making any advance under the New Credit Agreement to fund an acquisition, the Company will be required to be in compliance, on a pro forma basis after giving effect to such acquisition, with the financial covenants described below. Up to $2.0 million of the total commitment will be available for the issuance of standby letters of credit. Borrowings under the New Credit Agreement are collectively referred to herein as the 'Advances.' See 'Capitalization' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations.' Interest. For purposes of calculating interest, the Advances can be, at the election of the Company, Base Rate Advances or Eurodollar Rate Advances or a combination thereof. Subsequent to the Offering, Base Rate Advances will bear interest at Fleet National Bank's base rate plus 1.5%, and Eurodollar Rate Advances will bear interest at the Eurodollar Rate (adjusted for reserve requirements) plus 2.5%. Repayment. Subject to the provisions of the New Credit Agreement, the Company may, from time to time, borrow, repay and reborrow under the New Credit Agreement. The New Credit Agreement requires prepayments and concurrent reductions of the total commitment in the amount of 100% of net proceeds from certain asset sales, equity issuances and Extraordinary Receipts (as defined in the New Credit Agreement) and 50% of the net proceeds from certain debt issuances. The entire unpaid balance under the New Credit Agreement is payable in 2002. Guarantees. Precise's payment obligations under the New Credit Agreement are jointly and severally guaranteed, on a senior secured basis, by Parent and each of Precise's direct and indirect subsidiaries. Security. Borrowings under the New Credit Agreement are secured by (i) a first priority pledge to the Agent for the ratable benefit of the financial institutions party to the New Credit Agreement of the Common Stock of Precise owned by Parent and all of the notes and capital stock owned by Precise and its direct and indirect subsidiaries and (ii) a grant of a first priority perfected security interest in substantially all of the consolidated assets of Precise and its direct and indirect subsidiaries. Covenants. The New Credit Agreement contains financial covenants relating to the maintenance of (i) ratios of (a) consolidated funded indebtedness to consolidated EBITDA (as defined in the New Credit Agreement), (b) consolidated funded senior indebtedness to consolidated EBITDA, (c) consolidated EBITDA to consolidated fixed charges and (d) consolidated EBITDA to consolidated interest expense and (ii) minimum consolidated net worth. The New Credit Agreement also contains covenants pertaining to the management and operation of Precise and its subsidiaries. These covenants include, among others, requirements that the Company comply with applicable laws, including environmental laws, and maintain adequate insurance coverage with respect to its properties. The New Credit Agreement also places significant limitations on indebtedness, guarantees, mergers, acquisitions, fundamental corporate changes, capital expenditures, asset sales, leases, investments, loans and advances, liens, dividends and other stock payments, transactions with affiliates, optional payments and modification of debt instruments and issuances of stock. In addition, the New Credit Agreement contains restrictive covenants pertaining to the management and operation of Parent, including, among others, significant limitations on liens and mergers and reorganizations. Events of Default. The New Credit Agreement provides for events of default customary in facilities of this type, including: (i) failure to make payments when due; (ii) breach of covenants; (iii) breach of representations or warranties in any material respect when made; (iv) default by Precise or any Guarantor under any material 55 agreement relating to debt for borrowed money or for the lease or license of property; (v) bankruptcy defaults; (vi) environmental defaults; and (vii) a Change of Control (as defined in the New Credit Agreement). THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Old Notes were originally sold by the Company to the Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers subsequently resold the Old Notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act. As a condition to the Purchase Agreement, the Company and the Guarantors entered into the Registration Rights Agreement with the Initial Purchasers pursuant to which the Company and the Guarantors have agreed, for the benefit of the holders of the Old Notes, at the Company's cost, to (i) file the Exchange Offer Registration Statement within 45 days after the date of the original issue of the Old Notes with the Commission with respect to the Exchange Offer for the New Notes; (ii) use their best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 150 days after the date of the original issuance of the Old Notes and (iii) unless the Exchange Offer would not be permitted by applicable law or Commission policy, commence the Exchange Offer and use their best efforts to issue on or prior to 30 days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission (the 'Exchange Offer Effectiveness Date') New Notes in exchange for all Old Notes tendered prior thereto in the Exchange Offer. Upon the Exchange Offer Registration Statement being declared effective, the Company will offer the New Notes in exchange for surrender of the Old Notes. The Company will keep the Exchange Offer open for not less than 20 business days (or longer if required by applicable law) after the date on which notice of the Exchange Offer is mailed to the holders of the Old Notes. For each Old Note surrendered to the Company pursuant to the Exchange Offer, the holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. Each New Note will bear interest from its issuance date. Holders of Old Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the issuance date of the New Notes. Such interest will be paid with the first interest payment on the New Notes. Interest on the Old Notes accepted for exchange will cease to accrue upon issuance of the New Notes. Under existing interpretations of the staff of the Commission contained in several no-action letters to third parties, the New Notes will in general be freely tradeable after the Exchange Offer without further registration under the Securities Act. However, any purchaser of Old Notes who is an 'affiliate' of the Company or who intends to participate in the Exchange Offer for the purpose of distributing the New Notes (i) will not be able to rely on the interpretation of the staff of the Commission, (ii) will not be able to tender its Old Notes in the Exchange Offer and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the Old Notes, unless such sale or transfer is made pursuant to an exemption from such requirements. As contemplated by these no-action letters and the Registration Rights Agreement, each holder accepting the Exchange Offer is required to represent to the Company in the Letter of Transmittal that (i) the New Notes are to be acquired by the holder or the person receiving such New Notes, whether or not such person is the holder, in the ordinary course of business, (ii) the holder or any such other person (other than a broker-dealer referred to in the next sentence) is not engaging, and does not intend to engage, in distribution of the New Notes, (iii) the holder or any such other person has no arrangement or understanding with any person to participate in the distribution of the New Notes, (iv) neither the holder nor any such other person is an 'affiliate' of the Company within the meaning of Rule 405 under the Securities Act, and (v) the holder or any such other person acknowledges that if such holder or any other person participates in the Exchange Offer for the purpose of distributing the New Notes it must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the New Notes and cannot rely on those no-action letters. As indicated above, each Participating Broker-Dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that it (i) acquired the Old Notes for its own account as a result of market-making activities or other trading activities, (ii) has not entered into any arrangement or understanding with the Company or any 'affiliate' of the Company (within the meaning of Rule 405 under the Securities Act) to distribute the New Notes to be received in the Exchange Offer and (iii) will deliver a prospectus meeting the requirements of 56 the Securities Act in connection with any resale of such New Notes. For a description of the procedures for resales by Participating Broker-Dealers, see 'Plan of Distribution.' Upon the effectiveness of the Exchange Offer Registration Statement, the Company will offer to the Holders of Transfer Restricted Securities who are able to make certain representations the opportunity pursuant to the Exchange Offer to exchange their Transfer Restricted Securities for New Notes. If (i) the Company is not required to file the Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy or (ii) any Holder of Transfer Restricted Securities notifies the Company prior to the 20th day following consummation of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer or (B) that it may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales for (C) that it is a broker-dealer and owns Notes acquired directly from the Company or an affiliate of the Company, the Company will file with the Commission a Shelf Registration Statement to cover resales of the Notes by the Holders thereof who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement. The Company will use its best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. For purposes of the foregoing, 'Transfer Restricted Securities' means each Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for a New Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a Note for a New Note, the date on which such New Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act. The Company will, in the event of the filing of the Shelf Registration Statement, provide to each holder of the Old Notes copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resale of the Old Notes. A holder of the Old Notes that sells such Old Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a holder (including certain indemnification obligations). The Registration Rights Agreement provides that (i) the Company will file an Exchange Offer Registration Statement with the Commission on or prior to 45 days after the Closing Date, (ii) the Company will use its best efforts to have the Exchange Offer Regsitration Statement declared effective by the Commission on or prior to 150 days after the Closing Date, (iii) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company will commence the Exchange Offer and use its best efforts to issue on or prior to 30 business days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission, New Notes in exchange for all Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file the Shelf Registration Statement, the Company will use its best efforts to file the Shelf Registration Statement with the Commission on or prior to 30 days after such filing obligation arises and to cause the Shelf Registration Statement to be declared effective by the Commission on or prior to 90 days after such obligation arises. If (a) the Company fails to file any of the Registration Statements required by the Registration Rights Agreement on or before the date specified for such filing, (b) any of such Registration Statements is not declared effective by the Commission on or prior to the date specified for such effectiveness (the 'Effectiveness Target Date'), (c) the Company fails to consummate the Exchange Offer within 30 business days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement, or (d) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (d) above a 'Registration Default'), then the Company will pay liquidated damages ('Liquidated Damages') to each Holder of Notes, with respect to the first 90-day period immediately following the occurrence of the first Registration Default in an amount equal to $.05 per week per $1,000 principal amount of Notes held by such Holder. The amount of the Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of Notes with 57 respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50 per week per $1,000 principal amount of Notes. All accrued Liquidated Damages will be paid by the Company on each Damages Payment Date to the Global Note Holder by wire transfer of immediately available funds or by federal funds check and to Holders of Certificated Securities by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. Notwithstanding the foregoing, the Company may issue a notice that the Shelf Registration Statement is unusable pending the announcement of a material corporate transaction and may issue any notice suspending the use of the Shelf Registration Statement required under applicable securities laws to be issued and, in the event that the aggregate number of days in any consecutive twelve-month period for which all such notices are issued and effective does not exceed 45 days in the aggregate, then Liquidated Damages will not be payable as described above as a result of such suspension. Holders of Old Notes will be required to make certain representations (as described in the Registration Rights Agreement) in order to participate in the Exchange Offer and will be required to deliver information to be used in connection with the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Old Notes included in the Shelf Registration Statement and benefit from the provisions regarding Liquidated Damages set forth above. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, all the provisions of the Registration Rights Agreement, a copy of which is filed as an exhibit to the Exchange Offer Registration Statement of which this Prospectus is a part. Following the consummation of the Exchange Offer, holders of the Old Notes who were eligible to participate in the Exchange Offer but who did not tender their Old Notes will not have any further registration rights and such Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Old Notes could be adversely affected. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Company will accept any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes accepted in the Exchange Offer. Holders may tender some or all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in integral multiples of $1,000. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that (i) the New Notes bear a Series B designation and a different CUSIP number from the Old Notes, (ii) the New Notes have been registered under the Securities Act and hence will not bear legends restricting the transfer thereof and (iii) the holders of the New Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for the payment of Liquidated Damages in certain circumstances relating to the timing of the Exchange Offer, all of which rights will terminate when the Exchange Offer is terminated. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. As of the date of this Prospectus, $75,000,000 aggregate principal amount of Old Notes were outstanding. The Company has fixed the close of business on , 1997 as the record date for the Exchange Offer for purposes of determining the persons to whom this Prospectus and the Letter of Transmittal will be mailed initially. Holders of Old Notes do not have any appraisal or dissenters' rights under the General Corporation Law of Delaware or the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the New Notes from the Company. 58 If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, the certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders who tender Old Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the Exchange Offer. See '--Fees and Expenses.' EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term 'Expiration Date' shall mean 5:00 p.m., New York City time, on , 1997, unless the Company in its sole discretion extends the Exchange Offer, in which case the term 'Expiration Date' shall mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the registered holders an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. The Company reserves the right, in its sole discretion, prior to the Expiration Date (i) to delay accepting any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under 'Conditions' shall not have been satisfied, by giving oral or written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders. INTEREST ON THE NEW NOTES The New Notes will bear interest from their date of issuance. Holders of Old Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the date of issuance of the New Notes. Such interest will be paid with the first interest payment on the New Notes on December 15, 1997. Interest on the Old Notes accepted for exchange will cease to accrue upon issuance of the New Notes. Interest on the New Notes is payable semi-annually on each June 15 and December 15, commencing on December 15, 1997. PROCEDURES FOR TENDERING Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the Old Notes and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. To be tendered effectively, the Old Notes, Letter of Transmittal or an Agent's Message in connection with a book-entry transfer and other required documents must be completed and received by the Exchange Agent at the address set forth below under 'Exchange Agent' prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the Old Notes may be made by book-entry transfer in accordance with the procedures described below. Confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date. The term 'Agent's Message' means a message, transmitted by a book-entry transfer facility to, and received by, the Exchange Agent forming a part of a confirmation of a book-entry transfer, which states that such book-entry transfer facility has received an express acknowledgment from the participant in such book-entry transfer facility tendering the Notes that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Company may enforce such agreement against such participant. By executing the Letter of Transmittal, each holder will make the representations set forth above in the third paragraph under the heading '--Purpose and Effect of the Exchange Offer.' The tender by a holder and the acceptance thereof by the Company will constitute agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. 59 THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALER, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See 'Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner' included with the Letter of Transmittal. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined) unless the Old Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled 'Special Registration Instructions' or 'Special Delivery Instructions' on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member firm of the Medallion System (an 'Eligible Institution'). If the Letter of Transmittal is signed by a person other than the registered holder of any Old Notes listed therein, such Old Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Old Notes with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, offices of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Old Notes at DTC for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in DTC's system may make book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's account with respect to the Old Notes in accordance with DTC's procedures for such transfer. Although delivery of the Old Notes may be effected through book-entry transfer into the Exchange Agent's account at DTC, an appropriate Letter of Transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Delivery of documents to DTC does not constitute delivery to the Exchange Agent. All questions as to the validity, form eligibility (including time of receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right in its sole discretion to waive any defects, irregularities or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or 60 waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, (ii) who cannot deliver their Old Notes, the Letter of Transmittal or any other required documents to the Exchange Agent or (iii) who cannot complete the procedures for book-entry transfer, prior to the Expiration Date, may effect a tender if: (a) the tender is made through an Eligible Institution, (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Old Notes and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Old Notes (or a confirmation of book-entry transfer of such Notes into the Exchange Agent's account at DTC), and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) representing all tendered Old Notes in proper form for transfer (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at DTC), and all other documents required by the Letter of Transmittal are received by the Exchange Agent upon three New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex, letter or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the 'Depositor'); (ii) identify the Old Notes to be withdrawn (including the certificate number(s) and principal amount of such Old Notes, or, in the case of Old Notes transferred by book-entry transfer, the name and number of the account at the DTC to be credited); (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Old Notes register the transfer of such Old Notes into the name of the person withdrawing the tender and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes which have been tendered but which are not accepted for exchange will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described above under '--Procedures for Tendering' at any time prior to the Expiration Date. 61 CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange New Notes for, any Old Notes, and may terminate or amend the Exchange Offer as provided herein prior to the Expiration Date, if: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or any material adverse development has occurred in any existing action or proceeding with respect to the Company or any of its subsidiaries; or (b) any law, statute, rule, regulation or interpretation by the staff of the Commission is proposed, adopted or enacted, which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; or (c) any govemmental approval has not been obtained, which approval the Company shall, in its reasonable discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby. If the Company determines in its reasonable discretion that any of the above conditions are not satisfied, the Company may (i) refuse to accept any Old Notes and retum all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Old Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Old Notes (see '--Withdrawal of Tenders') or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Old Notes which have not been withdrawn. EXCHANGE AGENT Marine Midland Bank has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: By Mail: By Overnight Courier: MARINE MIDLAND BANK MARINE MIDLAND BANK 140 Broadway--Level A 140 Broadway--Level A New York, New York 10005-1180 New York, New York 10005-1180 Attention: Corporate Trust Services Attention: Corporate Trust Services (registered or certified mail recommended) By Hand: Facsimile Transmission: MARINE MIDLAND BANK (212) 658-2292 140 Broadway--Level A Confirm by Telephone: New York, New York 10005-1180 (212) 658-5931 Attention: Corporate Trust Services
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telecopy, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers, or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. 62 The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. ACCOUNTING TREATMENT The New Notes will be recorded at the same carrying value as the Old Notes, which is face value, as reflected in the Company's accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Company. The expenses of the Exchange Offer will be expensed over the term of the New Notes. CONSEQUENCES OF FAILURE TO EXCHANGE The Old Notes that are not exchanged for New Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Old Notes may be resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to a person inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, (iii) in accordance with Rule 144 under the Securities Act, or pursuant to another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel reasonably acceptable to the Company), (iv) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act, or (v) pursuant to an effective registration under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. RESALE OF THE NEW NOTES With respect to resales of New Notes, based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that a holder or other person who receives New Notes, whether or not such person is the holder (other than a person that is an 'affiliate' of the Company within the meaning of Rule 405 under the Securities Act) who receives New Notes in exchange for Old Notes in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the New Notes, will be allowed to resell the New Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the New Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires New Notes in the Exchange Offer for the purpose of distributing or participating in a distribution of the New Notes, such holder cannot rely on the position of the staff of the Commission enunciated in such no-action letters or any similar interpretive letters, and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Further, each Participating Broker-Dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. As contemplated by these no-action letters and the Registration Rights Agreement, each holder accepting the Exchange Offer is required to represent to the Company in the Letter of Transmittal that (i) the New Notes are to be acquired by the holder or the person receiving such New Notes, whether or not such person is the holder, in the ordinary course of business, (ii) the holder or any such other person (other than a broker-dealer referred to in the next sentence) is not engaging, and does not intend to engage, in the distribution of the New Notes, (iii) the holder of any such other person has no arrangement or understanding with any person to participate in the distribution of the New Notes, (iv) neither the holder nor any such other person is an 'affiliate' of the Company within the meaning of Rule 405 under the Securities Act, and (v) the holder of any such other person acknowledges that if such holder or other person participates in the Exchange Offer for the purpose of distributing the New Notes it most comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the New Notes and cannot rely on those no-action letters. As indicated above, each Participating Broker-Dealer that receives a New Note for its own account in exchange for Old Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. For a description of the procedures for such resales by Participating Broker-Dealers, see 'Plan of Distribution.' 63 DESCRIPTION OF NOTES GENERAL The New Notes will be issued pursuant to an Indenture (the 'Indenture'), dated as of June 13, 1997, between the Company, the Guarantors and Marine Midland Bank, as trustee (the 'Trustee'). The terms of the New Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the 'Trust Indenture Act') as in effect on the date of the Indenture. The form and terms of the New Notes are the same as the form and terms of the Old Notes (which they replace) except that (i) the New Notes bear a Series B designation, (ii) the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (iii) the holders of New Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for the payment of Liquidated Damages in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. The New Notes are subject to all such terms, and holders of the New Notes are referred to the Indenture and the Trust Indenture Act for a statement of them. The following is a summary of the material terms and provisions of the New Notes. This summary does not purport to be a complete description of the New Notes and is subject to the detailed provisions of, and qualified in its entirety by reference to, the New Notes and the Indenture (including the definitions contained therein). A copy of the form of Indenture has been filed as an exhibit to the Exchange Offer Registration Statement of which this Prospectus is a part. See 'Available Information.' Definitions relating to certain capitalized terms are set forth under '--Certain Definitions' and throughout this description. Capitalized terms that are used but not otherwise defined herein have the meanings assigned to them in the Indenture and such definitions are incorporated herein by reference. The Old Notes and the New Notes are sometimes referred to herein collectively as the 'Notes.' For purposes of this summary, the term 'Company' refers only to Precise Technology, Inc. and not to any of its Subsidiaries. The Notes will be general unsecured obligations of the Company and will be subordinated in right of payment to all existing and future Senior Debt. As of March 31, 1997, after giving pro forma effect to the Refinancing Transactions, the Company and the Guarantors would have had consolidated Senior Debt of approximately $16.4 million outstanding. The Indenture, subject to certain limitations, permits the incurrence of additional Senior Debt in the future. As of the Issue Date, all of the Company's Subsidiaries will be Restricted Subsidiaries. However, under certain circumstances, the Company will be able to designate current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the restrictive covenants set forth in the Indenture. A significant portion of the operations of the Company are conducted through its Subsidiaries and, therefore, the Company is dependent upon the cash flow of its Subsidiaries to meet its obligations, including its obligations under the Notes. The Notes will be effectively subordinated to all Indebtedness and other liabilities and commitments (including trade payables and lease obligations) of the Company's Subsidiaries. Any right of the Company to receive assets of any of its Subsidiaries upon the latter's liquidation or reorganization (and the consequent right of the Holders of the Notes to participate in those assets) will be effectively subordinated to the claims of that Subsidiary's creditors, except to the extent that the Company is itself recognized as a creditor of such Subsidiary, in which case the claims of the Company would still be subordinate to any security in the assets of such Subsidiary and any indebtedness of such Subsidiary senior to that held by the Company. As of March 31, 1997, the Company's Subsidiaries would have had approximately $2.6 million of Indebtedness (exclusive of the guarantees of the Credit Agreement and the Subsidiary Guarantees) and $6.6 million of trade payables and other liabilities outstanding after giving pro forma effect to the Refinancing Transactions and the application of the proceeds therefrom. See 'Risk Factors--Holding Company Structure; Effects of Asset Encumbrances.' PRINCIPAL, MATURITY AND INTEREST The Notes will be limited in aggregate principal amount to $200.0 million, of which $75.0 million in aggregate principal amount were issued in the Initial Offering. Additional amounts may be issued in one or more series from time to time subject to the limitations set forth under '--Incurrence of Indebtedness and Issuance of Preferred Stock' and restrictions contained in the Credit Agreement. The Notes will mature on June 15, 2007. Interest on the Notes will accrue at the rate of 11 1/8% per annum and will be payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 1997, to Holders of record on the immediately preceding June 1 and December 1. Interest on the Notes will accrue from the most recent date to which interest 64 has been paid or, if no interest has been paid, from the date of original issuance. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal, premium, if any, and interest and Liquidated Damages, if any, on the Notes will be payable at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium, interest and Liquidated Damages, if any, with respect to Notes the Holders of which have given wire transfer instructions to the Company will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. SUBORDINATION The payment (by set-off or otherwise) of principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes (including with respect to any repurchases of the Notes) will be subordinated in right of payment, as set forth in the Indenture, to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents, of all Obligations in respect of Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. Upon any distribution to creditors of the Company upon any total or partial liquidation, dissolution or winding up of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, whether voluntary or involuntary, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities, the holders of Senior Debt will be entitled to receive payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents, of all Obligations due or to become due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before the Holders of Notes will be entitled to receive any payment of any kind or character with respect to the Notes, and until all Obligations with respect to Senior Debt are paid in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents, any distribution of any kind or character to which the Holders of Notes would be entitled shall be made to the holders of Senior Debt (except that Holders of Notes may receive Permitted Junior Securities and payments made from the trust described under '--Legal Defeasance and Covenant Defeasance'). The Company also shall not make, directly or indirectly, (x) any payment upon or in respect of the Notes (except in Permitted Junior Securities or from the trust described under '--Legal Defeasance and Covenant Defeasance') or (y) acquire any of the Notes for cash or property or otherwise or make any other distribution with respect to the Notes if (i) any default occurs and is continuing (beyond any applicable grace period) in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Designated Senior Debt or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a 'Payment Blockage Notice') from the Company or the holders of any Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No new period of payment blockage may be commenced unless and until (i) 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium, if any, and interest and Liquidated Damages, if any, on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such nonpayment default shall have been waived for a period of not less than 90 days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of delivery of any Payment Blockage Notice which, in either case, would give rise to a default pursuant to any provision under which a default previously existed or was continuing shall constitute a new default for this purpose). Each Holder by his acceptance of a Note irrevocably agrees that if any payment or payments shall be made pursuant to the Indenture and the amount or total amount of such payment or payments 65 exceeds the amount, if any, that such Holder would be entitled to receive upon the proper application of the subordination provisions of the Indenture, the payment of such excess amount shall be deemed null and void, and the Holder agrees that it will be obliged to return the amount of the excess payment to the Company, as instructed in a written notice of such excess payment, within ten days of receiving such notice. The Indenture further requires that the Company promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a liquidation or insolvency, Holders of Notes may recover less ratably than creditors of the Company who are holders of Senior Debt. On a pro forma basis, after giving effect to the Refinancing Transactions, the principal amount of consolidated Senior Debt outstanding at March 31, 1997 would have been approximately $16.4 million. The Indenture limits, through certain financial tests, the amount of additional Indebtedness, including Senior Debt, that the Company and its subsidiaries can incur. See '--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock.' 'Designated Senior Debt' means (i) any Indebtedness outstanding under the Credit Agreement and (ii) any other Senior Debt, the principal amount of which is $5.0 million or more and that has been designated by the Company as 'Designated Senior Debt.' 'Permitted Junior Securities' means Equity Interests in the Company or debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Debt. 'Senior Debt' of any Person means (i) all Indebtedness of such Person under the Credit Agreement, including, without limitation, obligations to pay principal and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law), reimbursement obligations under letters of credit, fees, expenses and indemnities, and all Hedging Obligations with respect thereto, whether outstanding on the date of the Indenture or thereafter incurred, (ii) the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other Obligations with respect to, any other Indebtedness of such Person permitted to be incurred by such Person under the terms of the Indenture, whether outstanding on the date of the Indenture or thereafter incurred, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes and (iii) all Obligations of such Person with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (w) any liability for federal, state, local or other taxes owed or owing by such Person, (x) any Indebtedness of such Person to any of its Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of the Indenture. SUBSIDIARY GUARANTEES The Company's payment obligations under the Notes are jointly and severally guaranteed (the 'Subsidiary Guarantees') by the Guarantors. The Subsidiary Guarantee of each Guarantor is subordinated in right of payment, as set forth in the Indenture, to the prior payment in full in cash or, at the option of holders of Senior Debt, in Cash Equivalents, of all Senior Debt of such Guarantor, which would include the amounts for which the Guarantors are liable under the guarantees issued from time to time with respect to Senior Debt. The obligations of each Guarantor under its Subsidiary Guarantee are limited so as not to constitute a fraudulent conveyance under applicable law. The Indenture provides that no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another corporation, Person or entity whether or not affiliated with such Guarantor unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) is a corporation organized and existing under the laws of the United States of America, any state thereof, or the District of Columbia and expressly assumes all the obligations of such Guarantor pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes and the Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction (on a pro forma basis), to 66 incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described below under the caption '--Incurrence of Indebtedness and Issuance of Preferred Stock.' The Indenture provides that in the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture. See 'Repurchase at the Option of Holders--Asset Sales.' 'Guarantors' means each of (i) the Company's existing and future Restricted Subsidiaries (having either assets or stockholder's equity in excess of $50,000) and (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. OPTIONAL REDEMPTION Except as described below, the Notes will not be redeemable at the Company's option prior to June 15, 2002. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below:
YEAR PERCENTAGE - -------------------------------------------------------------- ---------- 2002.......................................................... 105.563% 2003.......................................................... 103.708% 2004.......................................................... 101.854% 2005 and thereafter........................................... 100.000%
Notwithstanding the foregoing, on or prior to June 15, 2000, the Company may on any one or more occasions redeem up to 33 1/3% of the aggregate principal amount of Notes originally issued (including, for this purpose, one or more series of notes issued under the Indenture after the date of the Indenture) at a redemption price of 111.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the redemption date, with the net cash proceeds of one or more Public Equity Offerings; provided that at least 66 2/3% of the aggregate principal amount of Notes originally issued (including, for this purpose, one or more series of notes issued under the Indenture after the date of the Indenture) remain outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 60 days of the date of the closing of any such Public Equity Offering. In addition, at any time prior to June 15, 2002, the Company may, at its option, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium. SELECTION AND NOTICE If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. 67 MANDATORY REDEMPTION Except as set forth below under 'Repurchase at the Option of Holders,' the Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. REPURCHASE AT THE OPTION OF HOLDERS Change of Control Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the 'Change of Control Offer') at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase (the 'Change of Control Payment'). Prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control, the Company covenants to (i) repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all such other Senior Debt and to repay the Indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer or (ii) obtain the requisite consents under the Credit Agreement and all such other Senior Debt to permit the repurchase of the Notes as provided below. The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Notes pursuant to the provisions described below. Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the 'Change of Control Payment Date'), pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. On the Change of Control Payment Date, the Company will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Credit Agreement currently prohibits the Company from repurchasing any Notes and also provides that certain change of control events with respect to the Company would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Debt to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when the Company is prohibited from repurchasing Notes, the Company could seek the consent of its lenders to the repurchase of Notes or could attempt to refinance or repay the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from repurchasing Notes. In such case, the Company's failure to repurchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, constitute a default under the Credit Agreement. In such circumstances, the subordination provisions in the Indenture would likely restrict payments to the Holders of Notes. 68 The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. 'Change of Control' means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any 'person' (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Principals or their Related Parties (as defined below), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any 'person' (as defined above), other than the Principals and their Related Parties, becomes the 'beneficial owner' (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have 'beneficial ownership' of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares) or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of 'all or substantially all' of the assets of the Company and its Restricted Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase 'substantially all,' there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain. 'Continuing Directors' means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of the Indenture or (ii) was nominated by the Principals or a Related Party to serve on such Board of Directors. 'Principals' means Richard L. Kramer and/or William L. Remley. 'Related Parties' with respect to any Principal means (A) any spouse or immediate family member of such Principal and any child or spouse of any spouse or immediate family member of such Principal, (B) a trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding, directly or indirectly, a controlling interest of which consist of any of such Principal and/or such other Persons referred to in the immediately preceding clause (A) or (C) the trustees of any trust referred to in clause (B). Asset Sales The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors and as set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash; provided that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability and (y) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to permanently reduce (or, in the case of letters of credit or Eurodollar loans under the Credit Agreement, cash collateralize) any Senior Debt (and to correspondingly reduce commitments with respect thereto in the case of revolving borrowings), or (b) to the acquisition of a controlling interest in another business, the making of a capital expenditure or the acquisition of other long-term assets, in each case, in the same line of 69 business as the Company was engaged in on the date of the Indenture. Pending the final application of any such Net Proceeds, the Company may invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute 'Excess Proceeds.' When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be required to make an offer to all Holders of Notes (an 'Asset Sale Offer') to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. CERTAIN COVENANTS Restricted Payments The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or dividends or distributions payable to the Company or any Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Subsidiary of the Company); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes more than six months prior to any scheduled maturity, mandatory redemption, scheduled principal repayment or sinking fund payment date (other than regularly scheduled payments of interest); or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as 'Restricted Payments'), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under caption '--Incurrence of Indebtedness and Issuance of Preferred Stock;' and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (v), (vii) and (viii) of the next succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company from the issue or sale since the date of the Indenture of Equity Interests of the Company (other than Disqualified Stock) or of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Restricted Investment that was made after the date of the Indenture is sold for cash or otherwise liquidated or repaid for 70 cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) (but only to the extent not included in subclause (i) of this clause (c)), and (B) the initial amount of such Restricted Investment, plus (iv) $5.0 million. The foregoing provisions will not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of scheduled dividends on or the redemption, repurchase, retirement, defeasance or other acquisition of, any Disqualified Stock issued after the date hereof in compliance with the provisions of the Indenture; (v) after March 29, 2001, the Permitted Warrant Put Payment; (vi) payments made with respect to the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company, the Parent, Sunderland or any Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries'), Parent's or Sunderland's management pursuant to any management equity subscription agreement or stock option agreement in effect as of the date of the Indenture (provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in any twelve-month period); (vii) distributions to Parent in order to enable Parent to pay franchise taxes and other ordinary course operating expenses in an amount not to exceed $25,000 in any twelve-month period; and (viii) the application of the proceeds of the Offering in the manner contemplated in 'Use of Proceeds' above; provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (i) through (vii) no Default or Event of Default shall have occurred and be continuing. In addition, payments and transactions permitted pursuant to clauses (r) through (y) under '--Transactions with Affiliates' below shall not be deemed to be Restricted Payments. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the greatest of (x) the net book value of such Investments at the time of such designation and (y) the fair market value of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant 'Restricted Payments' were computed, together with a copy of any fairness opinion or appraisal required by the Indenture. Incurrence of Indebtedness and Issuance of Preferred Stock The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, 'incur') any Indebtedness (including Acquired Debt) and that the Company will not issue any Disqualified Stock and will not permit any of its Subsidiaries to issue any shares of preferred stock (other than to the Company or a Restricted Subsidiary of the Company); provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if: (i) the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional 71 Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period; and (ii) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to, such incurrence or issuance. The provisions of the first paragraph of this covenant will not apply to the incurrence of any of the following items of Indebtedness or the issuance of preferred stock or Disqualified Stock (collectively, 'Permitted Debt'): (i) the incurrence by the Company and its Subsidiaries of Indebtedness arising under or in connection with the Credit Agreement; provided that the aggregate principal amount of all Indebtedness (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) outstanding under the Credit Agreement after giving effect to such incurrence, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (i), does not exceed an amount equal to the greater of $50.0 million or $30.0 million plus the Borrowing Base, in each case less the aggregate amount of all Indebtedness permanently repaid with the Net Proceeds of any Asset Sale; (ii) the incurrence by the Company and its Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount not to exceed the principal amount of such Capital Lease Obligations outstanding on the date hereof plus $15.0 million at any time outstanding; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Acquired Debt in connection with the acquisition of assets or a new Restricted Subsidiary; provided that such Acquired Debt was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by the Company or one of its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, such acquisition by the Company or one of its Restricted Subsidiaries; and provided further that the aggregate principal amount, accreted value or liquidation preference, as applicable, of such Acquired Debt, together with any other outstanding Indebtedness or preferred stock incurred pursuant to this clause (iv), does not exceed $5.0 million; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness that was permitted by the Indenture to be incurred; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries; provided, however, that (A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly Owned Restricted Subsidiary and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Restricted Subsidiary (other than any pledge of such Indebtedness to the lenders under the Credit Agreement) shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be; (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding, provided that the notional principal amount of any Hedging Obligations does not significantly exceed the principal amount of Indebtedness to which such agreement relates, or for the purpose of hedging against fluctuations in currency values; (viii) the Guarantee by the Company or any of the Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this covenant; 72 (ix) the issuance by the Company's Unrestricted Subsidiaries of preferred stock or the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company; (x) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness represented by the Notes and the Subsidiary Guarantees as described under '--Subsidiary Guarantees' and the Indenture; and (xi) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) or the issuance of preferred stock with an aggregate liquidation preference at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (xi), not to exceed $10.0 million. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xi) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify or reclassify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness will be treated as having been incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this covenant. Liens The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness or trade payables on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. Dividend and Other Payment Restrictions Affecting Subsidiaries The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the date of the Indenture, (b) the Credit Agreement as in effect as of the date of the Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive on a whole with respect to such dividend and other payment restrictions than those contained in the Credit Agreement as in effect on the date of the Indenture, (c) the Indenture and the Notes, (d) applicable law, (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person (including any Subsidiary of the Person), so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred, (f) by reason of customary non-assignment and net worth provisions in leases or other agreements entered into in the ordinary course of business and consistent with past practices, (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, (i) customary restrictions in Capital Lease Obligations, security agreements or mortgages securing Indebtedness of the Company or a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such Capital 73 Lease Obligations, security agreements or mortgages, (j) customary restrictions with respect to an agreement that has been entered into for the sale or disposition of assets or Capital Stock held by the Company or any Restricted Subsidiary, (k) customary restrictions contained in any agreements or documentation governing Indebtedness or preferred stock issued pursuant to clause (xi) of the covenant described above under the caption '--Incurrence of Indebtedness and Issuance of Preferred Stock' and (l) the Warrant Agreement and the Shareholders Agreement. Merger, Consolidation or Sale of Assets The Indenture provides that the Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after giving effect to such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Wholly Owned Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption '--Incurrence of Indebtedness and Issuance of Preferred Stock.' Transactions with Affiliates The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an 'Affiliate Transaction'), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; provided that (r) the application of the proceeds of the Initial Offering and the transactions entered into in connection therewith in the manner described in 'Certain Transactions' above, (s) capital contributions, advances, loans or other investments made by Parent to the Company or any of its Restricted Subsidiaries, (t) (I) payments under the Management Agreement in an amount not to exceed $300,000 in any twelve-month period and (II) after the first anniversary of the original issuance of the Notes, additional payments under the Management Agreement in an amount not to exceed $700,000 in any twelve-month period provided that the Company's Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such payment under the Management Agreement is made, after giving pro forma effect to such payment, is equal to or greater than 2.25 to 1 (in each case, plus reasonable expenses incurred in connection with and reimbursable under the Management Agreement), (u) payments by the Company or any of its Restricted Subsidiaries to Mentmore and/or its Affiliates made for any financial advisory, financing, 74 underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures, which payments are approved by a majority of the Board of Directors of the Company in good faith, (v) payments under tax sharing agreements to the extent such payments do not otherwise exceed the tax liability the Company would have had were it not part of a consolidated group, (w) any employment agreement, compensation agreement or employee benefit arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business, (x) transactions between or among Parent, the Company and/or its Restricted Subsidiaries, (y) any other payment or reimbursement of reasonable and customary fees and expenses incurred by an Affiliate for services rendered to the Company or any of its Subsidiaries not to exceed $100,000 in any twelve-month period (without duplication for any amounts paid pursuant to any other clause of this covenant) and (z) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption '--Restricted Payments,' in each case, shall not be deemed Affiliate Transactions. Limitation on Issuances and Sales of Capital Stock of Wholly Owned Restricted Subsidiaries The Indenture provides that the Company (i) will not, and will not permit any Wholly Owned Restricted Subsidiary of the Company to, issue, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly Owned Restricted Subsidiary of the Company to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company), unless (a) such issuance, transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of such Wholly Owned Restricted Subsidiary and (b) the Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with the covenant described above under the caption '--Asset Sales,' and (ii) will not permit any Wholly Owned Restricted Subsidiary of the Company to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or a Wholly Owned Restricted Subsidiary of the Company. Limitation on Layering Debt The Indenture provides that (A) the Company will not incur, create, issue, assume, Guarantee or otherwise become liable for any Indebtedness that is by its terms subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes and (B) the Guarantors will not incur, create, issue, assume, Guarantee or otherwise become liable for any Indebtedness that is by its terms subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Subsidiary Guarantees. Additional Subsidiary Guarantees The Indenture provides that if the Company or any of its Subsidiaries shall acquire or create another Subsidiary after the date of the Indenture, then such newly acquired or created Subsidiary (at any time such Subsidiary has net assets or stockholder's equity in excess of $50,000) shall execute a Subsidiary Guarantee and deliver an opinion of counsel, in accordance with the terms of the Indenture; provided, however, that all Subsidiaries that have been properly designated as Unrestricted Subsidiaries in accordance with the Indenture shall not be subject to the preceding clause for so long as they continue to constitute Unrestricted Subsidiaries. Payments for Consent The Indenture provides that neither the Company nor any of its Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Reports The Indenture provides that, whether or not required by the rules and regulations of the Securities and Exchange Commission (the 'Commission'), so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including 75 a 'Management's Discussion and Analysis of Financial Condition and Results of Operations' that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company) and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports; provided, however, that the Company shall not be required to make any such filings on or prior to the date on which the Company's quarterly report on Form 10-Q for the fiscal quarter ended June 30, 1997 would have been required to be filed if, at the time such filings would have been required to be made with the Commission, either (i) the Company shall have provided to each Holder the information that would have been required to be filed or (ii) the Exchange Offer Registration Statement has been filed with the Commission but has not yet been declared effective and copies of the Exchange Offer Registration Statement and any amendments thereto (to the extent such registration statement and/or amendments contain additional information not disclosed in the Offering Memorandum that would have been the subject of a filing required to be made under Section 13 or 15(d) of the Exchange Act) have been provided to each Holder, provided that any exhibits to the Exchange Offer Registration Statement (or any amendments thereto) need not be delivered to any Holder of the Notes, but sufficient copies thereto shall be furnished to the Trustee as reasonably requested to permit the Trustee to deliver any such exhibits to any Holder upon request. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company and the Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages, if any, with respect to, the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due (whether payable at maturity, upon redemption or otherwise) of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company to comply with the provisions described under the captions '--Change of Control,' '--Asset Sales' or '--Merger, Sale or Consolidation of Assets'; (iv) failure by the Company for 30 days after written notice to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a 'Payment Default') or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any of its Restricted Subsidiaries to pay final and non-appealable judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid and such judgment has become final or non-appealable or shall cease for any other reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries that are Restricted Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in 76 writing to the Company and the Trustee; provided, that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any such Indebtedness under the Credit Agreement or (ii) five business days after receipt by the Company and the Agent of written notice of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes ('Legal Defeasance') except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest and Liquidated Damages, if any, on such Notes when such payments are due from the trust referred to below, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ('Covenant Defeasance') and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under 'Events of Default' will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages, if any, on the outstanding Notes on the stated maturity or on the applicable 77 redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (viii) the Company must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption '--Repurchase at the Option of Holders'), (iii) reduce the rate of or change the time for payment of interest on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to 78 receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption '--Repurchase at the Option of Holders') or (viii) make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing, without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. BOOK-ENTRY, DELIVERY AND FORM Except as set forth in the next paragraph, the New Notes will initially be issued in the form of one Global Note (the 'Global Note'). The Global Note will be deposited upon issuance with, or on behalf of, The Depository Trust Company (the 'Depositary') and registered in the name of Cede & Co., as nominee of the Depositary (such nominee being referred to herein as the 'Global Note Holder'). Notes that are issued as described below under '--Certificated Securities' will be issued in the form of registered definitive certificates (the 'Certificated Securities'). Upon the transfer of Certificated Securities, such Certificated Securities may, unless the Global Note has previously been exchanged for Certificated Securities, be exchanged for an interest in the Global Note representing the principal amount of Notes being transferred. The Depositary is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the 'Participants' or the 'Depositary's Participants') and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Depositary's Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the 'Indirect Participants' or the 'Depositary's Indirect Participants') that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only thorough the Depositary's Participants or the Depositary's Indirect Participants. The Company expects that pursuant to procedures established by the Depositary (i) upon deposit of the Global Note, the Depositary will credit the accounts of Participants designated by the Exchange Agent with portions of the principal amount of the Global Note and (ii) ownership of the Notes evidenced by the Global Note will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the interests of the Depositary's Participants), the Depositary's Participants and the Depositary's Indirect Participants. Some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer Notes evidenced by the Global Note will be limited to such extent. 79 So long as the Global Note Holder is the registered owner of any Notes, the Global Note Holder will be considered the sole Holder under the Indenture of any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the Global Note will not be considered the owners or Holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records of the Depositary or for maintaining, supervising or reviewing any records of the Depositary relating to the Notes. Payments in respect of the principal of, premium, if any, interest and Liquidated Damages, if any, on any Notes registered in the name of the Global Note Holder on the applicable record date will be payable by the Trustee to or at the direction of the Global Note Holder in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the persons in whose names Notes, including the Global Note, are registered as the owners thereof for the purpose of receiving such payments. Consequently, neither the Company nor the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Notes. The Company believes, however, that it is currently the policy of the Depositary to immediately credit the accounts of the relevant Participants with such payments, in amounts proportionate to their respective holdings of beneficial interests in the relevant security as shown on the records of the Depositary. Payments by the Depositary's Participants and the Depositary's Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practice and will be the responsibility of the Depositary's Participants or the Depositary's Indirect Participants. Certificated Securities Subject to certain conditions, any person having a beneficial interest in the Global Note may, upon request to the Trustee, exchange such beneficial interest for Notes in the form of Certificated Securities. Upon any such issuance, the Trustee is required to register such Certificated Securities in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). In addition, if (i) the Company notifies the Trustee in writing that the Depositary is no longer willing or able to act as a depositary and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in the form of Certificated Securities under the Indenture, then, upon surrender by the Global Note Holder of its Global Note, Notes in such form will be issued to each person that the Global Note Holder and the Depositary identify as being the beneficial owner of the related Notes. Neither the Company nor the Trustee will be liable for any delay by the Global Note Holder or the Depositary in identifying the beneficial owners of Notes and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Note Holder or the Depositary for all purposes. Settlement and Payment The Indenture will require that payments in respect of the Notes represented by the Global Note (including principal, premium, if any, interest and Liquidated Damages, if any) be made by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. With respect to Certificated Securities, the Company will make all payments of principal, premium, if any, interest and Liquidated Damages, if any, by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder's registered address. The Company expects that secondary trading in the Certificated Securities will also be settled in immediately available funds. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. 'Acquired Debt' means, with respect to any specified Person, (i) Indebtedness or preferred stock of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness or preferred stock incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. 80 'Affiliate' of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, 'control' (including, with correlative meanings, the terms 'controlling,' 'controlled by' and 'under common control with'), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. 'Asset Sale' means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption '--Change of Control' and/or the provisions described above under the caption '--Merger, Consolidation or Sale of Assets' and not by the provisions of the Asset Sale covenant), and (ii) the issuance of Equity Interests in any Restricted Subsidiary or the sale of Equity Interests in any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of assets or Equity Interests by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (iii) the disposal of obsolete equipment and machinery in the ordinary course of business and (iv) a Restricted Payment that is permitted by the covenant described above under the caption '--Restricted Payments' will not be deemed to be Asset Sales. 'Borrowing Base' means, as of any date, an amount equal to the sum of (a) 85% of the face amount of all trade receivables owned by the Company and its Restricted Subsidiaries as of such date that are not more than 90 days past due, less the allowance for doubtful accounts, each of the foregoing determined in accordance with GAAP, and (b) 50% of the book value of all inventory owned by the Company and its Restricted Subsidiaries as of such date, less any applicable reserves, each of the foregoing determined in accordance with GAAP. To the extent that information is not available as to the amount of trade receivables or inventory as of a specific date, the Company may utilize the most recent available information for purposes of calculating the Borrowing Base. 'Capital Lease Obligation' means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. 'Capital Stock' means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 'Cash Equivalents' means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper rated at least P-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition and (vi) investment funds with total assets in excess of $500 million that invest at least 95% of their assets in securities of the types described in clauses (i) through (v) above. 'Consolidated Cash Flow' means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary, non-recurring or unusual loss plus any net loss realized in connection with an asset sale (to the extent such losses were deducted or otherwise 81 excluded in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, plus (v) an amount equal to all premiums on prepayments of debt, minus (vi) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. 'Consolidated Net Income' means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof that is a Guarantor and, for purposes of determining Consolidated Cash Flow only, shall not exceed the consolidated net income of such Person for such period, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (iv) the cumulative effect of a change in accounting principles shall be excluded and (v) the Net Income of any Person that is an Unrestricted Subsidiary shall be included only to the extent of the amount of cash dividends or cash distributions paid to such Person or a Restricted Subsidiary thereof. 'Consolidated Net Worth' means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of the Indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Restricted Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. 'Credit Agreement' means that certain Credit Agreement, dated as of June 13, 1997, by and among Parent, the Company and each Subsidiary of the Company and Fleet National Bank, as Agent, providing for up to $30.0 82 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified (including any agreement extending the maturity of, increasing the total commitment under or otherwise restructuring all or any portion of the Indebtedness under such agreement or any successor or replacement agreement), renewed, refunded, replaced, restated, supplemented or refinanced from time to time. 'Default' means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. 'Disqualified Stock' means any Capital Stock 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 or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. 'Equity Interests' means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). 'Existing Indebtedness' means up to $6.8 million in aggregate principal amount of Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the date of the Indenture and set forth on a schedule thereto (including any refinancings thereof), until such amounts are permanently repaid. 'Fixed Charges' means, with respect to any Person and its Restricted Subsidiaries for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) all dividend payments (including all dividend payments within 60 days of the measurement date for any period), whether or not in cash, on any series of (A) Disqualified Stock of such Person and (B) preferred stock of any Subsidiary of such Person, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company and other than payments to such Person and its Restricted Subsidiaries, in each case, on a consolidated basis and in accordance with GAAP. 'Fixed Charge Coverage Ratio' means with respect to any Person and its Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the 'Calculation Date'), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, and the application of the net proceeds thereof, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed 83 Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. 'GAAP' means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. 'Guarantee' means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. 'Hedging Obligations' means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, currency rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency values. 'Indebtedness' means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (but only to the extent of the fair market value of the assets subject to such Lien) (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. 'Investments' means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; provided, however, that if the sole consideration for any such investment is Capital Stock of the Company or a Subsidiary that is not Disqualified Stock, then such investment shall not be deemed an Investment for purposes of the Indenture. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption '--Restricted Payments.' 'Lien' means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). 'Make-Whole Premium' means, with respect to a Note, an amount equal to the greater of (i) 5.563% of the outstanding principal amount of such Note and (ii) the excess of (a) the present value of the remaining interest, premium and principal payments due on such Note as if such Note were redeemed on June 15, 2002, computed using a discount rate equal to the Treasury Rate plus 75 basis points, over (b) the outstanding principal amount of such Note. 'Management Agreement' means the agreement, dated as of March 15, 1996, between the Company and Mentmore, as amended from time to time. 84 'Net Income' means, with respect to any Person for any period, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any asset sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). 'Net Proceeds' means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale, any provision for permitted minority interests in any Restricted Subsidiary as a result of such Asset Sale and any reserve established in accordance with GAAP against any liabilities associated with the assets sold or disposed of in such Asset Sale, including, without limitation, sales price adjustments, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with the assets sold or disposed of in such Asset Sale or provision for minority interest holders in any Restricted Subsidiary as a result of such Asset Sale. 'Non-Recourse Debt' means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries in excess of $5.0 million to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. 'Obligations' means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. 'Parent' means Precise Holding Corporation, a Delaware corporation. 'Permitted Investments' means (a) any Investment in the Company or in a Wholly Owned Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the Company and a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the Company; (d) any Restricted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption '--Repurchase at the Option of Holders-- Asset Sales;' (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) reasonable and customary loans and advances made to employees in connection with their relocation (including related travel expenses) not to exceed $250,000 in the aggregate at any one time outstanding; (g) any Investment existing on the date of the Indenture; (h) any Investment acquired by the Company or any of its Restricted Subsidiaries (x) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such Investment or accounts receivable or (y) as the result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; and (i) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (i) that are at the time outstanding, not to exceed $5.0 million. 85 'Permitted Liens' means (i) Liens securing Senior Debt that was permitted by the terms of the Indenture to be incurred; (ii) Liens in favor of the Company or any Restricted Subsidiary; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (v) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iii) of the second paragraph of the covenant entitled '--Incurrence of Indebtedness and Issuance of Preferred Stock' covering only the assets acquired with such Indebtedness; (vi) Liens existing on the date of the Indenture; (vii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (viii) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries; (ix) statutory Liens or landlords', carriers', warehousemens', mechanics', suppliers' or similar Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company; (x) easements, minor title defects, irregularities in title or other charges or encumbrances on property not interfering in any material respect with the use of such property by the Company or a Subsidiary of the Company; (xi) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (xii) liens securing industrial revenue bonds or other tax-favored financing; (xiii) deposit arrangements entered into in connection with acquisitions or in the ordinary course of business; (xiv) other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $5.0 million at any one time outstanding; and (xv) any extensions, substitutions, replacements or renewals of the foregoing. 'Permitted Refinancing Indebtedness' means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries; provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses and prepayment premiums incurred in connection therewith) (except to the extent such increase is a result of a simultaneous incurrence of additional Indebtedness permitted to be incurred under the Indenture); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. 'Permitted Warrant Put Payment' means any payment or distribution (whether in cash or securities of the Company) made after March 29, 2001 and in accordance with the following sentence, by the Company or any of its Restricted Subsidiaries to Parent in order to enable Parent to satisfy Parent's obligations under the Warrant Agreement and/or the Shareholders Agreement to repurchase the Put Shares (as defined in the Warrant Agreement) or to repay indebtedness incurred by Parent to satisfy such obligations. If, after giving pro forma effect to any Permitted Warrant Put Payment by the Company, the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such Permitted Warrant Put Payment is made is (i) greater than 2.50 to 1 and less than 2.75 to 1, then the Company will be permitted to make a Permitted Warrant Put Payment in an amount not to exceed $5.0 million, (ii) greater than or equal to 2.75 to 1 and less than 3.00 to 1, then the 86 Company will be permitted to make a Permitted Warrant Put Payment in an amount not to exceed $10.0 million and (iii) greater than or equal to 3.00 to 1, then the Company will be permitted to make a Permitted Warrant Put Payment in an amount not to exceed $15.0 million. 'Public Equity Offering' means a bona fide underwritten sale to the public of common stock of Parent or the Company pursuant to a registration statement (other than on Form S-8 or any other form relating to securities issuable under any benefit plan of Parent or the Company) that is declared effective by the Commission and results in aggregate gross equity proceeds to the Company of at least $20.0 million. 'Restricted Investment' means an Investment other than a Permitted Investment. 'Restricted Subsidiary' of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. 'Shareholders Agreement' means the shareholders agreement, dated as of March 29, 1996, as amended, among Parent, Sunderland, Hamilton Holdings Ltd. Corporation, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., Rice Partners II, L.P. and John Hancock Mutual Life Insurance Company, with respect to certain securities of Parent. 'Significant Subsidiary' means any Subsidiary that would be a 'significant subsidiary' as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof. 'Stated Maturity' means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. 'Subsidiary' means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). 'Sunderland' means Sunderland Industrial Holdings Corporation, a Delaware corporation. 'Treasury Rate' means the yield to maturity at the time of the computation of United States Treasury securities with a constant maturity (as compiled by and published in the most recent Federal Reserve Statistical Release H.15(519)), which has become publicly available at least two business days prior to the date fixed for prepayment (or, if such Statistical Release is no longer published, any publicly available source of similar market data) most nearly equal to the then remaining average life to the first date on which the Notes are subject to optional redemption by the Company; provided, however, that if the average life of such Note is not equal to the constant maturity of the United States Treasury security for which weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the average life of such Notes is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. 'Unrestricted Subsidiary' means (i) any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or 87 any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by the covenant described above under the caption '--Restricted Payments.' If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption '--Incurrence of Indebtedness and Issuance of Preferred Stock,' the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under the covenant described under the caption '--Incurrence of Indebtedness and Issuance of Preferred Stock,' calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. 'Voting Stock' of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. 'Warrant Agreement' means the warrant agreement, dated as of March 29, 1996, as amended, among Parent, Rice Partners II, L.P., John Hancock Mutual Life Insurance Company, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc. and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., with respect to certain warrants of Parent. 'Weighted Average Life to Maturity' means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. 'Wholly Owned Restricted Subsidiary' of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. 88 CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS The following discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury regulations, judical authority and administrative rulings and practice. There can be no assurance that the Internal Revenue Service (the 'IRS') will not take a contrary view, and no ruling from the IRS has been or will be sought. Legislative, judical or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conditions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences to holders. Certain holders (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. The Company recommends that each holder consult such holder's own tax adviser as to the particular tax consequences of exchanging such holder's Old Notes for New Notes, including the applicability and effect of any state, local or foreign tax laws. The Company believes that the exchange of Old Notes for New Notes pursuant to the Exchange Offer will not be treated as an 'exchange' for federal income tax purposes because the New Notes will not be considered to differ materially in kind or extent from the Old Notes. Rather, the New Notes received by a holder will be treated as a continuation of the Old Notes in the hands of such holder. As a result, there will be no federal income tax consequences to holders exchanging Old Notes for New Notes pursuant to the Exchange Offer. PLAN OF DISTRIBUTION Each Participating Broker-Dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that for a period of one year after the Exchange Offer Effectiveness Date, it will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale. In addition, until , 1997 (90 days after the commencement of the Exchange Offer), all dealers effecting transactions in the New Notes, whether or not participating in this distribution, may be required to deliver a prospectus. The Company will not receive any proceeds from any sales of the New Notes by Participating Broker-Dealers. New Notes received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer and/or the purchasers of any such New Notes. Any Participating Broker-Dealer that resells the New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an 'underwriter' within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. 89 LEGAL MATTERS The validity of the issuance of the New Notes being offered hereby will be passed upon for Precise and the Guarantors by Winston & Strawn, New York, New York. EXPERTS The consolidated financial statements of the Company at December 31, 1996 and 1995 and for each of the two years in the period ended December 31, 1996 appearing in this Prospectus have been audited by Ernst & Young LLP, independent auditors, and the information under the captions 'Summary Financial Data' and 'Selected Financial Data' for each of the two years in the period ended December 31, 1996 appearing in this Prospectus have been derived from consolidated financial statements audited by Ernst & Young LLP, as set forth in their report thereon appearing elsewhere herein. Such consolidated financial statements, summary financial data and selected financial data are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The financial statements of the Company for the year ended December 31, 1994 included in this Prospectus have been audited by Grant Thornton, LLP, independent auditors, as stated in their report appearing herein. The financial statements of Tredegar Molded Products Company (adjusted for certain allocations and assets retained and liabilities assumed by Tredegar Industries, Inc.) as of December 31, 1995 and 1994 and for each of the two years in the period ended December 31, 1995 included in this Prospectus have been audited by Coopers & Lybrand, LLP, independent auditors, as stated in their report appearing herein. 90 INDEX TO FINANCIAL STATEMENTS PRECISE TECHNOLOGY, INC. Report of Independent Auditors............................................................................ F-2 Report of Independent Certified Public Accountants........................................................ F-3 Consolidated Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996 and 1995.............................................................................. F-4 Consolidated Statements of Income for the three months ended March 31, 1997 and 1996 (unaudited) and for the years ended December 31, 1996, 1995, and 1994.......................... F-5 Consolidated Statements of Stockholder's Equity for the three months ended March 31, 1997 (unaudited) and for the years ended December 31, 1996, 1995, and 1994................................................... F-6 Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996 (unaudited) and for the years ended December 31, 1996, 1995, and 1994................................................... F-7 Notes to the Consolidated Financial Statements............................................................ F-9 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY Report of Independent Accountants......................................................................... F-21 Consolidated Statements of Operations and Changes in Accumulated Deficit for the years ended December 31, 1995 and 1994.......................................................... F-22 Consolidated Balance Sheets as of December 31, 1995, 1994 and 1993........................................ F-23 Consolidated Statements of Cash Flows for the years ended December 31, 1995 and 1994........................................................................................... F-24 Notes to Consolidated Financial Statements................................................................ F-25
F-1 REPORT OF INDEPENDENT AUDITORS Board of Directors Precise Technology, Inc. We have audited the accompanying consolidated balance sheets of Precise Technology, Inc. (a wholly owned subsidiary of Precise Holding Corporation) as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholder's equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Precise Technology, Inc. as of December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. ERNST & YOUNG LLP March 14, 1997, except for Note 16, as to which date is April 14, 1997 F-2 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Precise Technology, Inc. We have audited the accompanying consolidated statements of income, stockholder's equity and cash flows of Precise Technology, Inc. and Subsidiaries for the year ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Precise Technology, Inc. and Subsidiaries for the year ended December 31, 1994, in conformity with generally accepted accounting principles. GRANT THORNTON LLP Pittsburgh, Pennsylvania February 10, 1995 F-3 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) CONSOLIDATED BALANCE SHEETS
DECEMBER 31, -------------------------- 1996 1995 MARCH 31, ----------- ----------- 1997 ----------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents......................................... $ 525,027 $ 1,310,564 $ 25,676 Accounts receivable, net.......................................... 13,070,878 13,121,818 4,589,531 Inventories....................................................... 9,369,339 9,856,257 2,205,035 Prepaid expenses and other........................................ 165,580 440,356 113,574 Deferred income taxes............................................. 1,496,164 1,496,164 165,578 Assets held for sale.............................................. 900,000 900,000 -- ----------- ----------- ----------- TOTAL CURRENT ASSETS........................................... 25,526,988 27,125,159 7,099,394 Property, plant, and equipment, net................................. 42,003,541 42,063,423 11,567,762 Intangible and other assets, net.................................... 29,684,887 29,870,714 195,931 ----------- ----------- ----------- TOTAL ASSETS................................................... $97,215,416 $99,059,296 $18,863,087 ----------- ----------- ----------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Line of credit.................................................... $ 700,000 $ 300,000 $ 2,284,247 Current maturities of long-term debt.............................. 8,216,408 7,641,105 1,083,410 Accounts payable.................................................. 5,909,850 6,896,159 2,900,023 Accrued liabilities............................................... 3,672,971 4,865,381 794,960 Tooling deposits.................................................. 2,389,078 2,063,833 631,899 ----------- ----------- ----------- TOTAL CURRENT LIABILITIES...................................... 20,888,307 21,766,478 7,694,539 Long-term debt, less current maturities............................. 55,660,211 56,570,692 4,170,676 Deferred income taxes............................................... 5,189,259 5,189,259 1,388,059 Payable to Sunderland............................................... 330,000 330,000 210,000 COMMITMENTS AND CONTINGENCIES....................................... -- -- -- Redeemable preferred stock.......................................... 8,250,000 8,250,000 -- STOCKHOLDER'S EQUITY: 9- 1/2% preferred stock, $10,000 stated value; 500 shares authorized, 331.46 shares issued and outstanding (retired March 29, 1996)........................... -- -- 3,314,617 Common stock, no par value; 1,000 shares authorized, and 125 shares issued and outstanding.......................... 3,315,617 3,315,617 1,000 Additional paid-in capital........................................ 3,554,711 3,554,711 1,649,000 Minimum pension liability......................................... -- -- (119,744) Retained earnings................................................. 27,311 82,539 554,940 ----------- ----------- ----------- TOTAL STOCKHOLDER'S EQUITY..................................... 6,897,639 6,952,867 5,399,813 ----------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY..................... $97,215,416 $99,059,296 $18,863,087 ----------- ----------- ----------- ----------- ----------- -----------
See accompanying notes F-4 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ------------------------- ----------------------------------------- 1997 1996 1996 1995 1994 ----------- ---------- ----------- ----------- ----------- (UNAUDITED) Net sales............................. $26,324,663 $9,089,477 $93,289,323 $33,542,305 $33,156,938 Cost of sales......................... 21,612,984 7,156,139 76,477,016 25,876,623 26,807,339 ----------- ---------- ----------- ----------- ----------- Gross profit.......................... 4,711,679 1,933,338 16,812,307 7,665,682 6,349,599 Selling, general, and administrative.. 2,138,345 1,100,000 7,262,187 4,454,271 3,915,469 Plant closure costs................... -- -- 670,600 -- -- Amortization of intangible assets..... 432,882 42,501 1,614,533 37,013 26,073 ----------- ---------- ----------- ----------- ----------- Operating income...................... 2,140,452 790,837 7,264,987 3,174,398 2,408,057 Other expense (income): Interest expense.................... 1,690,444 261,060 5,559,234 810,174 956,160 Other............................... (3,839) (2,393) (25,423) 147,866 (71,896) ----------- ---------- ----------- ----------- ----------- Income before income taxes............ 453,847 532,170 1,731,176 2,216,358 1,523,793 Provision for income taxes............ 304,206 244,958 1,264,854 941,426 573,778 ----------- ---------- ----------- ----------- ----------- Net income............................ $ 149,641 $ 287,212 $ 466,322 $ 1,274,932 $ 950,015 ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- -----------
See accompanying notes F-5 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
PREFERRED STOCK 9 1/2% COMMON STOCK ADDITIONAL MINIMUM RETAINED --------------------- -------------------- PAID-IN PENSION EARNINGS SHARES AMOUNT SHARES AMOUNTS CAPITAL LIABILITY (DEFICIT) ------ ----------- ------ ---------- ---------- --------- ----------- Balance at December 31, 1993........................ -- $ -- 1 $ 1,000 $1,649,000 $ -- $(1,355,118) Issuance of preferred stock..................... 331 3,314,617 -- -- -- -- -- Minimum pension liability... -- -- -- -- -- (164,570 ) -- Net income.................. -- -- -- -- -- -- 950,015 ------ ----------- ------ ---------- ---------- --------- ----------- Balance at December 31, 1994........................ 331 3,314,617 1 1,000 1,649,000 (164,570 ) (405,103) Dividends declared.......... -- -- -- -- -- -- (314,889) Minimum pension liability... -- -- -- -- -- 44,826 -- Net income.................. -- -- -- -- -- -- 1,274,932 ------ ----------- ------ ---------- ---------- --------- ----------- Balance at December 31, 1995........................ 331 3,314,617 1 1,000 1,649,000 (119,744 ) 554,940 Capital contribution........ -- -- -- -- 750,000 -- -- Exchange of stock........... (331) (3,314,617) 124 3,314,617 -- -- -- Dividends declared.......... -- -- -- -- -- -- (938,723) Minimum pension liability... -- -- -- -- -- 119,744 -- Discounts related to warrants, net of tax................ -- -- -- -- 1,155,711 -- -- Net income.................. -- -- -- -- -- -- 466,322 ------ ----------- ------ ---------- ---------- --------- ----------- Balance at December 31, 1996........................ -- -- 125 3,315,617 3,554,711 -- 82,539 Dividends declared (unaudited)................. -- -- -- -- -- -- (204,869) Net income (unaudited)........ -- -- -- -- -- -- 149,641 ------ ----------- ------ ---------- ---------- --------- ----------- Balance at March 31, 1997 (unaudited)................. -- $ -- 125 $3,315,617 $3,554,711 $ -- $ 27,311 ------ ----------- ------ ---------- ---------- --------- ----------- ------ ----------- ------ ---------- ---------- --------- ----------- TOTAL ---------- Balance at December 31, 1993........................ $ 294,882 Issuance of preferred stock..................... 3,314,617 Minimum pension liability... (164,570) Net income.................. 950,015 ---------- Balance at December 31, 1994........................ 4,394,944 Dividends declared.......... (314,889) Minimum pension liability... 44,826 Net income.................. 1,274,932 ---------- Balance at December 31, 1995........................ 5,399,813 Capital contribution........ 750,000 Exchange of stock........... -- Dividends declared.......... (938,723) Minimum pension liability... 119,744 Discounts related to warrants, net of tax................ 1,155,711 Net income.................. 466,322 ---------- Balance at December 31, 1996........................ 6,952,867 Dividends declared (unaudited)................. (204,869) Net income (unaudited)........ 149,641 ---------- Balance at March 31, 1997 (unaudited)................. $6,897,639 ---------- ----------
See accompanying notes F-6 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, --------------------------- ------------------------------------------- 1997 1996 1996 1995 1994 ----------- ------------ ----------- ------------ ------------ (UNAUDITED) OPERATING ACTIVITIES Net income............................... $ 149,641 $ 287,212 $ 466,322 $ 1,274,932 $ 950,015 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........ 1,761,960 461,439 5,925,253 1,445,953 1,061,628 Amortization of original issue discount........................... 37,788 -- 97,945 -- -- Loss (gain) on sale of equipment..... 43,364 (5,171) (36,628) 140,637 (61,809) Provision for loss on sale of Rochester plant.................... -- -- 301,000 -- -- Deferred income taxes................ -- 113,574 348,388 527,426 368,061 Changes in assets and liabilities: Accounts receivable................ 50,940 (197,699) 3,021,575 800,300 (1,785,531) Inventories........................ 486,918 (565,930) (418,504) (79,888) 373,748 Other assets....................... 26,150 (279,521) 367,405 265,428 (60,694) Accounts payable................... (986,309) 204,674 (808,771) (460,851) 1,570,383 Tooling deposits................... 325,245 475,568 350,107 (213,853) (1,032,249) Accrued liabilities................ (1,192,410) 413,432 (11,997) (530,181) (56,120) ----------- ------------ ----------- ------------ ------------ Net cash provided by operating activities............................. 703,287 907,578 9,602,095 3,169,903 1,327,432 INVESTING ACTIVITIES Net cash used in business acquisitions... -- (63,801,356) (63,801,356) -- -- Capital expenditures..................... (823,812) (356,465) (2,175,425) (1,045,756) (2,075,197) Proceeds from sale of fixed assets....... 19,000 54,500 346,481 47,758 106,872 ----------- ------------ ----------- ------------ ------------ Net cash used in investing activities.... (804,812) (64,103,321) (65,630,300) (997,998) (1,968,325) FINANCING ACTIVITIES Borrowings on revolving line of credit... 700,000 4,600,276 25,941,687 34,981,655 32,563,998 Payments on revolving line of credit..... (300,000) (2,884,523) (27,925,934) (35,166,657) (31,919,296) Repayment of long-term debt.............. (879,143) (5,731,058) (7,605,189) (1,902,301) (1,226,699) Proceeds from senior term notes.......... -- 40,000,000 40,000,000 -- -- Proceeds from senior subordinated notes.. -- 20,000,000 20,000,000 -- -- Proceeds from issuance of preferred stock.................................. -- 8,250,000 8,250,000 -- -- Proceeds from term note.................. -- 3,585,000 3,585,000 200,000 1,300,000 Capital contribution..................... -- 750,000 750,000 -- -- Payment of financing costs............... -- (4,743,748) (4,743,748) -- (68,149) Dividends paid on common and preferred stock.................................. (204,869) -- (938,723) (314,889) -- ----------- ------------ ----------- ------------ ------------ Net cash provided by (used in) financing activities............................. (684,012) 63,825,947 57,313,093 (2,202,192) 649,854 ----------- ------------ ----------- ------------ ------------ Net increase (decrease) in cash.......... (785,537) 630,204 1,284,888 (30,287) 8,961 Cash at beginning of period.............. 1,310,564 25,676 25,676 55,963 47,002 ----------- ------------ ----------- ------------ ------------ Cash at end of period.................... $ 525,027 $ 655,880 $ 1,310,564 $ 25,676 $ 55,963 ----------- ------------ ----------- ------------ ------------ ----------- ------------ ----------- ------------ ------------
See accompanying notes F-7 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ------------------------ ----------------------------------------- 1997 1996 1996 1995 1994 ---------- ----------- ----------- ------------ ------------ (UNAUDITED) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest.................................. $1,692,308 $ 223,622 $ 5,197,957 $ 828,857 $ 796,379 ---------- ----------- ----------- ------------ ------------ ---------- ----------- ----------- ------------ ------------ Income taxes.............................. $ 416,276 $ 155,930 $ 773,528 $ 293,582 $ 41,016 ---------- ----------- ----------- ------------ ------------ ---------- ----------- ----------- ------------ ------------ SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Capital lease agreements for equipment.... $ 506,176 $ 1,732,100 $ 4,200,501 $ 535,812 $ 2,328,455 ---------- ----------- ----------- ------------ ------------ ---------- ----------- ----------- ------------ ------------ Assets acquired and liabilities assumed in connection with acquisitions Fair value of assets acquired.......... $ -- $81,200,112 $81,200,112 $ -- $ -- Liabilities assumed.................... -- 12,248,954 12,248,954 -- -- ---------- ----------- ----------- ------------ ------------ Cash paid.............................. -- 68,951,158 68,951,158 -- -- Less fees and expenses................. -- (4,743,748) (4,743,748) -- -- Less cash acquired..................... -- (406,054) (406,054) -- -- ---------- ----------- ----------- ------------ ------------ Net cash paid for acquisitions......... $ -- $63,801,356 $63,801,356 $ -- $ -- ---------- ----------- ----------- ------------ ------------ ---------- ----------- ----------- ------------ ------------ Issuance of preferred stock for cancellation of debt Note reduction............................ $ -- $ -- $ -- $ -- $ 2,862,500 Accrued interest reduction................ -- -- -- -- 452,117 ---------- ----------- ----------- ------------ ------------ Preferred stock issued.................... $ -- $ -- $ -- $ -- $ 3,314,617 ---------- ----------- ----------- ------------ ------------ ---------- ----------- ----------- ------------ ------------
See accompanying notes F-8 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 1. ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES ORGANIZATION AND ACTIVITIES The accompanying consolidated financial statements include the accounts of Precise Technology, Inc. (Company) and its wholly owned subsidiaries. Significant intercompany transactions have been eliminated. The Company is a wholly owned subsidiary of Precise Holding Corporation (Precise Holding) which is a majority-owned subsidiary of Sunderland Industrial Holdings Corporation (Sunderland). The Company is a full-service custom injection molder of highly engineered, close tolerance, precision plastic products. The Company also has extensive mold manufacturing capabilities. The Company's marketing focus is to service a diverse base of original equipment manufacturers in the health care, packaging, and consumer/industrial markets. The Company has nine facilities located throughout the Eastern and Midwestern United States. INTERIM FINANCIAL STATEMENTS The financial statements of the Company for the three months ended March 31, 1997 and 1996 and the related footnote information are unaudited but, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments and accruals) which the Company considers necessary for a fair presentation of the information set forth therein. Results of operations for interim periods are not necessarily indicative of the results that may be expected for the entire year. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of 90 days or less at the time of original purchase to be cash equivalents. INVENTORIES Inventories are valued at the lower of cost or market. Cost is determined on the first-in, first-out (FIFO) method. Market is net realizable value. REVENUE RECOGNITION Finished Products--Revenue from product sales is recognized at the time products are shipped. Tooling and Dies--Cost of tooling and dies purchased or produced are included in inventory. Tooling deposits represent progress billings related to the manufacture of tools and dies for customers. Income from contracts for the manufacture of customer tooling is accounted for under the completed-contract method of accounting, which recognizes revenue upon completion of contracts. PROPERTY, PLANT, AND EQUIPMENT Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is provided on the straight-line method based on estimated useful lives, as follows: Building and improvements 5-40 years Machinery and equipment 3-10 years
F-9 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED) Leasehold improvements are amortized over the shorter of the useful life of the asset or the term of the lease. Expenses for repairs, maintenance and renewals are charged to operations as incurred. Expenditures which improve an asset or extend its useful life are capitalized. INTANGIBLES Goodwill--Goodwill represents the excess of amounts paid and liabilities assumed over the fair value of identifiable tangible and intangible assets acquired. This amount is amortized using the straight-line method over a period of 25 years. The Company evaluates the carrying value of goodwill for potential impairment on an ongoing basis. Such evaluations compare operating income before amortization of goodwill to the amortization recorded for the operations to which the goodwill relates. The Company also considers projected future operating results, trends and other circumstances in making such estimates and evaluations. Deferred Financing Cost--Deferred financing costs relate to the costs of obtaining financing. These costs are being amortized over the period the related loans are outstanding. Noncompete Agreements--Noncompete agreements relate to contracts executed in conjunction with the acquisitions. Such agreements are being amortized over the life of the contracts. INCOME TAXES The Company is a member of a controlled group of companies. As such, annual elections are made to share credits and exemptions as allowed under federal income tax laws. Deferred taxes are provided for the tax consequences of temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Company adjusted their estimate for accrued workers' compensation expense as of March 31, 1997 due to recent favorable claims experience. The adjustment increased net income, by approximately $419,000 for the three months ended March 31, 1997. RECLASSIFICATION Certain reclassifications have been made to the 1995 and 1994 financial statements to conform to the 1996 presentation. 2. ACQUISITIONS (A) UNITY MOLD CORPORATION (UNITY) On January 25, 1996, the Company acquired all of the outstanding common stock of Unity for $3,710,000 including transaction costs of approximately $125,000. Unity operates in the same lines of business as the Company. The results of operations for Unity are included in the consolidated statement of income from the date of acquisition. The purchase price and transaction costs were primarily funded through the issuance of a F-10 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. ACQUISITIONS (CONTINUED) $3,585,000 term note. The acquisition was accounted for using the purchase method of accounting and accordingly, the purchase price and transaction costs were allocated to the assets acquired and liabilities assumed based upon their relative fair values. The Company recorded goodwill of approximately $1,610,000, in connection with the acquisition which is being amortized on a straight-line basis over 25 years. (B) TREDEGAR MOLDED PRODUCTS (TREDEGAR) On March 29, 1996, the Company purchased all of the issued and outstanding common stock of Tredegar and its wholly owned subsidiary, Polestar Plastics Manufacturing Co., for $65,241,000 including transaction costs of approximately $5,241,000. The results of operations for Tredegar are included in the consolidated statement of income from the date of acquisition. The purchase price and transaction costs were funded through the issuance of two senior term notes of $22,500,000 and $17,500,000, $20,000,000 in senior subordinated notes, $5,750,000 in Series A cumulative exchangeable preferred stock, $2,500,000 in Series B cumulative redeemable preferred stock, and a $750,000 capital contribution from Precise Holding. The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price and transaction costs were allocated to the assets acquired and liabilities assumed based upon their relative fair values. The Company recorded goodwill of approximately $24,400,000 in connection with the acquisition, which is being amortized on a straight-line basis over 25 years. The following table sets forth the pro forma unaudited results of operations for each period in which acquisitions occurred and for the immediately preceding period as if the above acquisitions were consummated at the beginning of the immediately preceding period.
DECEMBER 31, ---------------------------- 1996 1995 ------------ ------------ Net sales.......................................... $114,652,000 $129,692,000 Net income......................................... $ 1,405,000 $ (661,000)
3. ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS Accounts receivable are presented net of allowance for doubtful accounts of $223,000, $60,000 and $100,000 as of March 31, 1997, December 31, 1996 and 1995, respectively. For the three months ended March 31, 1997 and for the years ending December 31, 1996, 1995 and 1994, approximately 41%, 38%, 67% and 60% of the Company's sales were to five customers, respectively. At March 31, 1997, December 31, 1996 and 1995, the accounts receivable due from these customers was approximately $5,859,000, $5,027,000 and $2,907,000, respectively. The Company does not generally require collateral for its trade accounts receivable and maintains an allowance for doubtful accounts. 4. INVENTORIES The major components of inventories were as follows:
DECEMBER 31, MARCH 31, -------------------------- 1997 1996 1995 ----------- ----------- ----------- (UNAUDITED) Finished products............................... $ 2,909,919 $ 2,971,774 $ 742,462 Raw materials................................... 3,874,352 4,208,211 773,149 Tooling and dies................................ 2,585,068 2,676,272 689,424 ----------- ----------- ----------- $ 9,369,339 $ 9,856,257 $ 2,205,035 ----------- ----------- ----------- ----------- ----------- -----------
F-11 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. PROPERTY, PLANT, AND EQUIPMENT
DECEMBER 31, MARCH 31, -------------------------- 1997 1996 1995 ----------- ----------- ----------- (UNAUDITED) Land............................................ $ 2,193,750 $ 2,193,750 $ 686,609 Buildings and leasehold improvements............ 11,040,832 10,229,961 5,214,301 Machinery and equipment......................... 37,930,361 37,503,277 9,866,999 ----------- ----------- ----------- 51,164,943 49,926,988 15,767,909 Accumulated depreciation and amortization....... (9,161,402) (7,863,565) (4,200,147) ----------- ----------- ----------- Net property, plant, and equipment.............. $42,003,541 $42,063,423 $11,567,762 ----------- ----------- ----------- ----------- ----------- -----------
Depreciation and amortization expense on property, plant, and equipment was approximately $1,329,000, $4,213,000, $1,154,000, and $1,013,000 for the three months ended March 31, 1997 and for the years ended 1996, 1995, and 1994, respectively. 6. INTANGIBLE AND OTHER ASSETS Intangible and other assets consisted of the following:
DECEMBER 31, MARCH 31, -------------------------- 1997 1996 1995 ----------- ----------- ----------- (UNAUDITED) Goodwill........................................ $26,010,395 $26,010,395 $ -- Deferred financing costs........................ 4,743,748 4,743,748 68,148 Noncompete agreements........................... 556,666 556,666 -- Intangible pension asset and other.............. 394,288 147,235 161,528 ----------- ----------- ----------- Total........................................... 31,705,097 31,458,044 229,676 Accumulated amortization........................ (2,020,210) (1,587,330) (33,745) ----------- ----------- ----------- Intangible and other assets, net................ $29,684,887 $29,870,714 $ 195,931 ----------- ----------- ----------- ----------- ----------- -----------
7. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, MARCH 31, -------------------------- 1997 1996 1995 ----------- ----------- ----------- (UNAUDITED) Existing Credit Agreement (a): Term Note A.................................... $21,250,000 $21,562,500 $ -- Term Note B.................................... 17,500,000 17,500,000 -- Existing Notes (b) 20,000,000 20,000,000 -- Other notes (c).................................. 498,325 585,261 1,803,936 Capitalized lease obligations (Note 11).......... 6,392,561 6,366,091 3,450,150 ----------- ----------- ---------- 65,640,886 66,013,852 5,254,086 Less: Current maturities............................. (8,216,408) (7,641,105) (1,083,410) Unamortized discount on Existing Notes......... (1,764,267) (1,802,055) -- ----------- ----------- ---------- $55,660,211 $56,570,692 $4,170,676 ----------- ----------- ---------- ----------- ----------- ----------
F-12 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. LONG-TERM DEBT (CONTINUED) (A) EXISTING CREDIT AGREEMENT (ECA) On March 28, 1996, the Company entered into a $53,000,000 Credit Agreement with a financial institution that is comprised of a $13,000,000 revolving line of credit and two term notes (A and B) of $22,500,000 and $17,500,000, respectively. The revolving line of credit expires March 31, 2002. The revolving line of credit provides for borrowings of up to $13,000,000 and accrues interest at the financial institution's prime rate (8.5% at March 31, 1997) plus 1.50%. The Company has the option to change its method of accruing interest to LIBOR plus 2.75% to 3.25% on a monthly, quarterly or semi-annual basis. Advances can be in an amount up to 85% of the outstanding eligible accounts receivable plus 50% of the aggregate value of eligible inventory. The outstanding balance under the revolving line of credit was $700,000 at March 31, 1997. Term Note A is payable in 24 consecutive quarterly installments (payments escalate from $312,500 to $1,312,500) beginning June 30, 1996 through March 31, 2002. Monthly interest payments are currently at 8.19% on $21,000,000 of the outstanding note and prime plus 1.5% or 10% on $250,000 of the outstanding note at March 31, 1997. The Company has the option to change its method of accruing interest to LIBOR plus 2.75% on a monthly, quarterly or a semi-annual basis. Term Note B is payable in 24 consecutive quarterly installments (payments escalate from $125,000 to $3,750,000) beginning June 30, 1997 through March 31, 2003. Monthly interest payments are currently at 8.69% on $17,000,000 of the outstanding note and prime plus 2.0% or 10.5% on $500,000 of the outstanding note at March 31, 1997. The Company has the option to change its method of accruing interest to LIBOR plus 3.25% on a monthly, quarterly or a semi-annual basis. The ECA is guaranteed on a senior basis by all of the Company's subsidiaries and is collateralized by substantially all of the Company's and its subsidiaries' assets. The Agreement contains certain covenants, as defined in the ECA, which require the Company to maintain minimum levels of equity and cash flow from operations, a fixed charge coverage ratio, a ratio of total debt to cash flow from operations, an interest coverage ratio, and a minimum net worth calculation. The ECA further limits capital expenditures, declaration of dividends and additional indebtedness. The ECA also restricts the transferring of assets and transferring or encumbering the Company's stock. Term Notes A and B are subject to mandatory prepayment terms if the Company experiences Excess Cash Flows as defined in the ECA. A prepayment of approximately $3,293,000 is required as of March 31, 1997 and is included with current maturities. (B) EXISTING NOTE AGREEMENT (ENA) On March 29, 1996, the Company issued two $10,000,000 subordinated notes under the ENA. The subordinated notes accrue interest at 12.25% and are payable in three installments of $6,666,667 on March 31, 2004, 2005, and 2006. The ENA provides for certain prepayment penalties. The subordinated note holders also entered into a Warrant Purchase Agreement pursuant to which, in connection with their purchase of the subordinated notes, each note holder acquired warrants to purchase 570 shares of Precise Holding common stock. The warrants can be exercised at any time up to March 29, 2006 for an exercise price of $.01 per share. The value ascribed to the warrants to purchase the Precise Holding common stock resulted in a discount to the subordinated notes and an addition to paid-in capital of approximately $1,900,000. The discount is being amortized over the life of the subordinated notes using the interest method yielding an effective interest rate of 14.12%. The addition to paid-in capital is net of tax of approximately $744,000. F-13 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. LONG-TERM DEBT (CONTINUED) (C) OTHER NOTES The Company has various other notes of approximately $498,000 at March 31, 1997. The notes are payable in monthly installments ranging from $3,756 to $7,697 commencing March 1, 1995 through March 2, 2000. The notes accrue interest at rates varying from 4.8% to 8.15%. Five-year maturities of long-term debt are as follows:
DEBT OBLIGATIONS ---------------- Nine months ended December 31, 1997...................... $ 6,771,747 1998..................................................... 6,125,908 1999..................................................... 6,518,443 2000..................................................... 5,809,494 2001..................................................... 5,365,966 2002..................................................... 10,415,181 Thereafter............................................... 24,634,147 ---------------- $ 65,640,886 ---------------- ----------------
8. FAIR VALUES OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents--The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. Long-term debt--The carrying amounts of the Company's borrowings under its short-term revolving credit agreements approximate their fair value. The fair values of the Company's long-term debt are estimated using discounted cash flow analysis, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The carrying amounts and fair values of the Company's financial instruments at March 31, 1997, December 31, 1996 and 1995 are as follows:
MARCH 31, DECEMBER 31, 1997 ---------------------------------------------------- ------------------------- 1996 1995 (UNAUDITED) ------------------------- ----------------------- CARRYING FAIR CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE ----------- ----------- ----------- ----------- ---------- ---------- Cash and cash equivalents..... $ 525,027 $ 525,027 $ 1,310,564 $ 1,310,564 $ 25,676 $ 25,676 Line of credit................ $ 700,000 $ 700,000 $ 300,000 $ 300,000 $2,284,247 $2,284,247 Long-term debt................ $63,876,619 $63,876,619 $64,211,797 $64,211,797 $5,254,086 $5,254,086
9. EMPLOYEE BENEFIT PLANS Prior to October 31, 1995, the Company sponsored two noncontributory defined benefit pension plans covering substantially all union and tool shop employees. Benefits were generally based on years of service and benefit rates stated in the related plan agreements. The Company made annual contributions to these plans of at least the minimum funding required by the Employee Retirement Income Security Act of 1974. Pension costs were determined by an independent actuary using the projected unit credit cost method. Effective October 31, 1995, the Company amended the defined benefit pension plan covering tool shop employees to curtail the plan. Each participant had the option of receiving either a lump-sum distribution, or a direct distribution to another qualified F-14 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. EMPLOYEE BENEFIT PLANS (CONTINUED) plan. No gain or loss occurred as a result of the curtailment. As of December 31, 1996, all plan assets have been distributed to the tool shop employees. The union plan continues to accrue benefits and has not been amended. The plan's assets are held by independent trustees and are invested primarily in guaranteed fixed income insurance contracts. The weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 8.1% and 8%, respectively, at December 31, 1996 and 1995. The expected long-term rate of return on plan assets was 8.5% for both 1996 and 1995. The Company's pension expense for its defined benefit pension plan consists of the following components for the three months ended March 31, 1997 and for the years ended December 31, 1996, 1995 and 1994:
DECEMBER 31, MARCH 31, --------------------------------- 1997 1996 1995 1994 ------------ -------- --------- -------- (UNAUDITED) Service cost for benefits earned during the year................ $ 8,116 $ 34,515 $ 48,665 $ 52,850 Interest cost on projected benefit obligation................... 22,073 82,964 112,397 103,587 Actual return on plan assets.................................... (23,938) (88,642) (126,099) (77,375) Net amortization and deferral................................... 3,530 15,266 14,527 (18,567) ----------- -------- --------- -------- Net periodic pension cost $ 9,781 $ 44,103 $ 49,490 $ 60,495 ----------- -------- --------- -------- ----------- -------- --------- --------
The following sets forth the funded status of the Company's defined benefit plan and amounts recognized in the accompanying balance sheets as of December 31:
1996 1995 -------------- -------------- Vested benefit obligation......................................................... $1,056,958 $1,413,493 -------------- -------------- -------------- -------------- Accumulated benefit obligation (ABO).............................................. $1,113,079 $1,488,393 Plan assets at estimated fair value............................................... 1,119,555 1,524,796 -------------- -------------- Plan assets in excess of ABO...................................................... 6,476 36,403 Unrecognized net loss............................................................. 196,344 237,309 Unrecognized prior service cost................................................... 97,795 105,755 Minimum liability adjustment...................................................... -- (313,920) -------------- -------------- Prepaid pension asset............................................................. $ 300,615 $ 65,547 -------------- -------------- -------------- --------------
In addition, the Company sponsors a defined contribution 401(k) plan which covers substantially all non-union employees at the Tredegar and Unity facilities. Under the terms of the 401(k) plan, the Company matches 25% of employees' contributions up to 6% of employees' salaries. Contributions made by the Company to the defined contribution 401(k) plan were approximately $38,000 and $69,000 for the three months ended March 31, 1997 and for the year ended December 31, 1996, respectively. The Company also sponsors a defined contribution 401(k) plan which covers substantially all non-union employees at the other Company facilities. Under the terms of the 401(k) plan, the Company matches 50% of employees' contributions up to 5% of employee salary, and provides a discretionary contribution of 3.5% of eligible employees' salaries to the plan, for a combined total of up to 6% of eligible employees' earnings. Contributions made by the Company to the defined contribution 401(k) plan were approximately $90,000, $329,000, $257,000 and $138,000 for the three months ended March 31, 1997 and for the years ended December 31, 1996, 1995 and 1994, respectively. F-15 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. INCOME TAXES Income tax expense consisted of the following for the years ended December 31:
1996 1995 1994 ---------- -------- -------- Current: Federal........................................................ $ 586,466 $275,000 $145,297 State.......................................................... 330,000 139,000 60,420 ---------- -------- -------- 916,466 414,000 205,717 Deferred: Federal........................................................ 412,388 472,569 315,015 State.......................................................... (64,000) 54,857 53,046 ---------- -------- -------- 348,388 527,426 368,061 ---------- -------- -------- Total income taxes $1,264,854 $941,426 $573,778 ---------- -------- -------- ---------- -------- --------
A reconciliation of U.S. income tax computed at the statutory rate and actual expense is as follows for the years ending December 31:
1996 1995 1994 ---------- -------- -------- Amount computed at statutory rate................................ $ 589,000 $754,000 $518,000 State and local taxes less applicable federal income tax......... 156,000 212,000 91,000 Amortization of goodwill......................................... 367,000 -- -- Other............................................................ 152,854 (24,574) (35,222) ---------- -------- -------- $1,264,854 $941,426 $573,778 ---------- -------- -------- ---------- -------- --------
The components of the net deferred tax asset and liability at December 31 are as follows:
1996 1995 ---------- ---------- Deferred tax assets: Receivables............................................................... $ 111,271 $ 49,746 Inventory................................................................. 257,345 65,406 Accrued expenses.......................................................... 1,529,244 103,589 Plant closing costs....................................................... 643,006 -- State net operating losses................................................ 191,969 145,089 Pension................................................................... 142,519 100,896 AMT credit carryforward................................................... 33,433 56,109 ---------- ---------- Total deferred tax assets................................................... 2,908,787 520,835 Deferred tax liabilities: Inventory................................................................. 124,021 -- Property, plant, and equipment............................................ 5,741,059 1,628,480 Pension................................................................... -- 114,836 Debt discount............................................................. 736,802 -- ---------- ---------- Total deferred tax liabilities.............................................. 6,601,882 1,743,316 ---------- ---------- Net deferred tax liabilities................................................ $3,693,095 $1,222,481 ---------- ---------- ---------- ----------
The Company had net operating losses for state income tax purposes at December 31, 1996 and 1995 of approximately $3,711,000 and $1,557,000, respectively. The state net operating losses can be carried forward and used to offset the Company's taxable income in certain states. The state loss carryforwards are subject to F-16 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. INCOME TAXES (CONTINUED) limitations as to the amount and timing of their use. For financial reporting purposes, a valuation allowance has not been recognized to offset the deferred tax assets relating to those carryforwards at December 31, 1996 and 1995. The state net operating loss carryforwards will expire beginning in 1997 and ending in 2008. The Company had minimum tax credit carryforwards for federal tax purposes at December 31, 1996 and 1995 of approximately $33,000 and $56,000, respectively. The minimum tax credits can be carried forward indefinitely. The Company is included in the consolidated federal income tax return of Sunderland. For financial statement purposes, the Company calculates and reports its current and deferred income taxes as if a separate return was filed by the Company. The Company's federal taxable income can be offset by Sunderland's federal net operating losses. The Company reimburses Sunderland for the tax benefit it receives from Sunderland's net operating losses. The payable to Sunderland for the utilization of such tax benefit was $330,000 and $210,000 as of December 31, 1996 and 1995, respectively. 11. COMMITMENTS AND CONTINGENCIES (A) LEASE COMMITMENTS The Company leases certain production and office equipment and vehicles. These leases are subject to renewal options for varying periods. Future minimum payments under capital leases and noncancelable operating leases with initial or remaining terms of one year or more consisted of the following as of March 31, 1997:
CAPITAL OPERATING LEASES LEASES ----------- ---------- Nine months ended December 31, 1997........................................ $ 1,998,583 $1,091,966 1998....................................................................... 2,624,023 1,109,496 1999....................................................................... 1,694,616 1,022,261 2000....................................................................... 836,827 819,761 2001....................................................................... 188,394 293,340 2002....................................................................... -- 175,440 Thereafter................................................................. -- -- ----------- ---------- Total minimum lease payments $ 7,342,443 $4,512,264 ---------- ---------- Less amounts representing interest......................................... (949,882) ----------- Present value of net minimum lease payments................................ 6,392,561 Less current maturities of capital lease obligations....................... (2,207,514) ----------- Capital lease obligations.................................................. $ 4,185,047 ----------- -----------
The Company has two leasing lines of credit in the amounts of $3,200,000 and $5,000,000. These leasing lines of credit are available to support the Company's capital expenditures for certain machinery and equipment. As of March 31, 1997, the Company had approximately $1,463,000 of borrowings outstanding under the lease lines. The lessors' commitments to lease additional equipment to the Company under these lines expire on June 30, 1997 and November 1, 1997, respectively. Operating lease expense under such arrangements was $336,000, $1,219,600, $412,700 and $497,300 for the three months ended March 31, 1997 and for the years ended December 31, 1996, 1995 and 1994, respectively. F-17 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. COMMITMENTS AND CONTINGENCIES (CONTINUED) (A) LEASE COMMITMENTS Capitalized leases are as follows:
DECEMBER 31, MARCH 31, ------------------------------ 1997 1996 1995 ------------------ --------------- ----------- (UNAUDITED) Machinery and equipment............... $ 8,444,000 $ 8,656,000 $ 4,541,000 Leasehold improvements................ 799,000 799,000 799,000 ------------------ --------------- ----------- 9,243,000 9,455,000 5,340,000 Accumulated amortization.............. (1,788,000) (1,547,000) (1,010,000) ------------------ --------------- ----------- $ 7,455,000 $ 7,908,000 $ 4,330,000 ------------------ --------------- ----------- ------------------ --------------- -----------
Amortization expense related to capitalized leases was approximately $241,000, $749,000, $576,000, and $383,000 for the three months ended March 31, 1997 and for the years ended December 31, 1996, 1995, and 1994, respectively. (B) LITIGATION The Company is involved from time to time in lawsuits that arise in the normal course of business. The Company actively and vigorously defends all lawsuits. Management believes that there are no lawsuits that will have a material affect on the Company's financial position. (C) COLLECTIVE BARGAINING AGREEMENT Approximately 4% of the Company's employees are covered under a collective bargaining agreement which expires in February 1998. 12. REDEEMABLE PREFERRED STOCK Redeemable Preferred Stock consists of the following:
DECEMBER 31, MARCH 31, -------------------------- 1997 1996 1995 ----------- ----------- ----------- (UNAUDITED) Series A cumulative exchangeable preferred stock, no par value; 575 shares authorized, issued and outstanding $ 5,750,000 $ 5,750,000 $ -- Series B cumulative redeemable preferred stock, $10,000 stated value; 250 shares authorized, issued and outstanding 2,500,000 2,500,000 -- ----------- ----------- ----------- $ 8,250,000 $ 8,250,000 $ -- ----------- ----------- ----------- ----------- ----------- -----------
Effective March 29, 1996 in connection with the Tredegar acquisition, the Company authorized and issued 575 shares of Series A cumulative exchangeable preferred stock without par value (Series A preferred stock) for consideration of $5,750,000 (liquidation preference $10,000 per share). Dividends are cumulative, paid in arrears, on a quarterly basis at an annual rate of 11.25% of the liquidation preference. The Series A preferred stock ranks senior to all classifications of stock. The Series A preferred stock is optionally redeemable at any time, and manditorily redeemable on April 1, 2006, upon not less than 30 days notice at a redemption price equal to the liquidation preference thereof plus accrued and unpaid dividends to the redemption date. In connection with their purchase of Series A preferred stock, the stockholders also purchased 250 shares of Precise Holding common stock and $.01 per share warrants to acquire 575 shares of common stock for an aggregate consideration of $750,000. The warrants can be exercised at any time through March 29, 2006. The $750,000 was subsequently contributed to the Company as a capital contribution by Precise Holding. F-18 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. REDEEMABLE PREFERRED STOCK (CONTINUED) Effective March 29, 1996 in connection with the Tredegar acquisition, the Company authorized and issued 250 shares of Series B cumulative redeemable preferred stock (Series B stock) for consideration of $2,500,000 with a stated value of $10,000 per share (liquidation preference) under a securities purchase agreement. Dividends are cumulative, paid in arrears, on a quarterly basis at an annual rate of 7% of the stated value. The Series B preferred stock ranks junior to Series A preferred stock and is mandatorily redeemable based upon the occurrence of certain events, as defined in the securities purchase agreement, or no later than April 1, 2007. 13. PREFERRED STOCK On March 29, 1996, 331.46 shares of 9-1/2% preferred stock ('9-1/2% Preferred Stock') in the Company was exchanged by its holder for like-kind preferred stock in Precise Holding. Precise Holding simultaneously surrendered and retired the 9-1/2% Preferred Stock in the Company in exchange for an additional 124 shares of common stock in the Company. 14. PLANT CLOSING COSTS (A) GRAHAM, NORTH CAROLINA In connection with the acquisition of Tredegar, the Company decided to close its Graham, North Carolina plant and relocate the activities to other Company facilities. The Company incurred approximately $1,400,000 of costs related to the Graham closing for employee termination benefits, noncancellable operating lease accruals, and certain other costs. The closing costs were allocated to the acquisition purchase price. Approximately $424,000 of such closing costs have been paid as of March 31, 1997. Additionally, costs to relocate machinery and equipment from the Graham Plant to the Company's other facilities of $109,600 were expensed during 1996 and are included with the plant closure costs in the consolidated statement of income for the fiscal year ended December 31, 1996. (B) ROCHESTER, NEW YORK During 1996, the Company decided to sell its Rochester facility. Presently, the Company has a signed agreement from a buyer to purchase the land, buildings, and certain equipment for $900,000. In accordance with Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, the Company recorded an impairment loss of $301,000 which represents the difference between the net book value of the assets to be sold and the offer price of $900,000. Additionally, the Company has accrued approximately $260,000 of employee termination benefits related to the Rochester Facility sale. The impairment loss of $301,000 and the employee termination expense of $260,000 are included with the plant closure costs in the consolidated statement of income for the fiscal year ended December 31, 1996. 15. RELATED PARTY TRANSACTION The sole executive officers and directors of Mentmore are Richard L. Kramer and William L. Remley who are also directors of the Company. Mentmore provides management services to Precise and its subsidiaries pursuant to the Management Agreement dated March 15, 1996, as amended (the 'Management Agreement'), between Precise and Mentmore. Pursuant to the Mangement Agreement, Mentmore provides the Company with general management, advisory and consulting services with respect to the Company's business and with respect to such other matters as the Company may reasonably request from time to time, including, without limitation, strategic planning, financial planning, business acquisition and general business development services. The Company paid Mentmore fees of $0, $450,000, $300,000 and $150,000 in the three months of 1997 and for the 12 months in F-19 PRECISE TECHNOLOGY, INC. (A WHOLLY OWNED SUBSIDIARY OF PRECISE HOLDING CORPORATION) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 15. RELATED PARTY TRANSACTION (CONTINUED) 1996, 1995 and 1994, respectively, for management and other advisory services and reimbursed Mentmore for certain expenses incurred in connection with the rendering of such services. The Company paid the law firm of Richard C. Hoffman, P.C., whose principal is a director of the Company, approximately $5,000 and $257,500 in legal fees for the three months ended March 31, 1997 and for the year ended December 31, 1996. During this period, Mr. Hoffman served as Vice President and General Counsel of Mentmore. 16. SUBSEQUENT EVENT At March 31, 1997, the Company was not in compliance with certain financial covenants contained in the Existing Credit Agreement. The Company obtained waivers for such covenant violations as of March 31, 1997 through the next compliance measurement date, June 30, 1997. As a result of the escalating nature of these covenants, the Company does not expect to be in compliance with these provisions at any of the future quarterly measurement dates during 1997 and a waiver or an amendment would be required. However, the Company currently intends to complete an offering of senior subordinated notes, a portion of the proceeds of which is expected to be used to refinance the Existing Credit Agreement, and as such compliance with the existing debt provisions will no longer be required. F-20 REPORT OF INDEPENDENT ACCOUNTANTS To Mr. John R. Weeks, President & Chief Executive Officer of Precise Technology, Inc.: We have audited the accompanying consolidated balance sheets of Tredegar Molded Products Company and Subsidiary ('TMP') (a wholly-owned subsidiary of Tredegar Industries, Inc. ('Tredegar')) as of December 31, 1995 and 1994 and the related consolidated statements of operations and changes in accumulated deficit and cash flows for each of the two years in the period ended December 31, 1995 (adjusted for certain allocations and assets to be retained and liabilities to be assumed by Tredegar (Note 1)). These financial statements are the responsibility of TMP's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TMP as of December 31, 1995 and 1994 and the consolidated results of their operations and cash flows for each of the two years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Richmond, Virginia February 26, 1996 F-21 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND CHANGES IN ACCUMULATED DEFICIT (ADJUSTED FOR CERTAIN ALLOCATIONS (NOTE 1))
DECEMBER 31, ---------------------- 1995 1994 -------- -------- (IN THOUSANDS) Net sales: Plastics.............................................................................. $ 74,151 $ 66,931 Tooling............................................................................... 16,515 14,627 -------- -------- Total.............................................................................. 90,666 81,558 -------- -------- Costs and expenses: Cost of goods sold--Plastics.......................................................... 65,164 62,472 Cost of goods sold--Tooling........................................................... 14,709 13,065 Selling, general and administrative................................................... 5,612 6,577 Amortization of goodwill and other intangibles........................................ 237 584 Unusual charges, net.................................................................. 1,799 8,042 -------- -------- Total.............................................................................. 87,521 90,740 -------- -------- Income (loss) before income taxes....................................................... 3,145 (9,182) Income taxes............................................................................ 1,239 (3,345) -------- -------- Net income (loss)....................................................................... 1,906 (5,837) Accumulated deficit, beginning of year.................................................. (18,465) (12,628) -------- -------- Accumulated deficit, end of year........................................................ $(16,559) $(18,465) -------- -------- -------- --------
See accompanying notes F-22 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (ADJUSTED FOR CERTAIN ALLOCATIONS AND ASSETS TO BE RETAINED AND LIABILITIES TO BE ASSUMED BY TREDEGAR (NOTE 1)) (IN THOUSANDS EXCEPT PAR VALUE AND SHARE AMOUNTS)
DECEMBER 31, -------------------- 1995 1994 -------- -------- ASSETS Current assets: Accounts and notes receivable, net....................................................... $ 7,763 $ 7,516 Tooling contracts receivable............................................................. 1,590 3,264 Costs in excess of billings on uncompleted tooling contracts............................. 800 2,769 Inventories.............................................................................. 5,396 5,178 Deferred income taxes.................................................................... 1,315 1,640 Prepaid expenses and other............................................................... 56 128 -------- -------- Total current assets....................................................................... 16,920 20,495 Property, plant, and equipment, at cost.................................................... 64,643 62,701 Less accumulated depreciation.............................................................. 39,021 38,689 -------- -------- Net property, plant, and equipment......................................................... 25,622 24,012 Other assets and deferred charges.......................................................... - 18 Goodwill and other intangibles............................................................. 688 925 -------- -------- Total Assets........................................................................ $ 43,230 $ 45,450 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDER'S EQUITY AND INTERCOMPANY ACCOUNT Current liabilities: Accounts payable......................................................................... $ 2,547 $ 2,127 Accrued expenses......................................................................... 2,239 2,540 Billings in excess of costs on uncompleted tooling contracts............................. 458 3,074 Workers compensation, health care, and certain other employee benefit liabilities allocated from Tredegar Industries, Inc........................... 1,570 1,819 -------- -------- Total current liabilities.................................................................. 6,814 9,560 Deferred income taxes...................................................................... 1,724 1,874 Other noncurrent liabilities............................................................... 460 735 -------- -------- Total Liabilities................................................................... 8,998 12,169 Shareholder's equity and intercompany account: Due from Tredegar Industries, Inc. and affiliates........................................ (3,488) (2,533) Common stock ($1 par value, 2,000 shares authorized and 1,000 shares issued and outstanding............................................... 1 1 Additional paid-in capital............................................................... 54,278 54,278 Accumulated deficit...................................................................... (16,559) (18,465) -------- -------- Total shareholder's equity and intercompany account........................................ 34,232 33,281 -------- -------- Total liabilities and shareholder's equity and intercompany account........................ $ 43,230 $ 45,450 -------- -------- -------- --------
See accompanying notes F-23 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (ADJUSTED FOR CERTAIN ALLOCATIONS AND ASSETS TO BE RETAINED AND LIABILITIES TO BE ASSUMED BY TREDEGAR (NOTE 1))
DECEMBER 31, ------------------ 1995 1994 ------- ------- (IN THOUSANDS) Cash flows from operating activities: Net income (loss).......................................................................... $ 1,906 $(5,837) Depreciation............................................................................... 4,819 5,373 Amortization of goodwill and other intangibles............................................. 237 584 Write-off of intangibles................................................................... - 4,873 Deferred income taxes...................................................................... 175 (2,612) Loss on property, plant, and equipment: Disposals............................................................................... 170 88 Transfers to Tredegar Industries, Inc. and affiliates................................... - 700 (Increase) decrease in: Accounts and notes receivable, net...................................................... (247) (497) Tooling contracts receivable............................................................ 1,674 (38) Costs in excess of billings on uncompleted tooling contracts............................ 1,969 (1,317) Inventories............................................................................. (218) (1,177) Prepaid expenses and other.............................................................. 72 (59) Other assets and deferred charges....................................................... 18 8 Increase (decrease) in: Accounts payable........................................................................ 420 301 Accrued expenses........................................................................ (301) (18) Billings in excess of costs on uncompleted tooling contracts............................ (2,616) 1,717 Workers compensation, health care, and certain other employee benefit accruals allocated from Tredegar Industries, Inc.......................................................... (249) 274 Other noncurrent liabilities............................................................ (275) (536) ------- ------- Net cash provided by operating activities.................................................. 7,554 1,827 ------- ------- Cash flows from investing activities: Capital expenditures.................................................................... (6,553) (2,988) Disposal of assets used in ongoing operations........................................... 73 75 Transfer of Alsip, Illinois and Anvil St. (St. Petersburg, FL) property, plant, and equipment to Tredegar Industries, Inc. at estimated net realizable value............... - 1,022 Miscellaneous transfers of property, plant, and equipment with Tredegar Industries, Inc. and affiliates, net.................................................................... (119) - Other - 77 ------- ------- Net cash used in investing activities...................................................... (6,599) (1,814) ------- ------- Cash flows from financing activities: Increase in due from Tredegar Industries, Inc. and affiliates........................... (955) (13) ------- ------- Net cash used in financing activities...................................................... (955) (13) ------- ------- Increase (decrease) in cash................................................................ - - Cash at beginning of year.................................................................. - - ------- ------- Cash at end of year........................................................................ $ - $ - ------- ------- ------- -------
See accompanying notes F-24 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION, BASIS OF PRESENTATION, AND RELATIONSHIP WITH TREDEGAR INDUSTRIES, INC. Tredegar Molded Products Company and its wholly owned subsidiary, Polestar Plastics Manufacturing Company ('Polestar') (collectively referred to as 'TMP'), manufactures injection-molded parts for packaging, industrial, medical, and electronics products and produces injection molding tools for internal use and for sale to other custom and captive molders. TMP has six molding plants (including a new facility in Graham, North Carolina and excluding a plant in the process of being closed in Alsip, Illinois), one mold-making plant, and 735 employees, all located in the United States. TMP is an indirect, wholly owned subsidiary of Tredegar Industries, Inc. ('Tredegar'), a diversified manufacturer of plastics and metal products. Tredegar, which was spun off from Ethyl Corporation on July 10, 1989, is a public company listed on the New York Stock Exchange. The consolidated financial statements include the accounts and operations of TMP adjusted to reflect the immediate settlement of amounts due from or payable to Tredegar and its affiliates (the 'Intercompany Account'). The Intercompany Account has been adjusted to reflect: (i) the estimated realizable value of assets held for sale (net of associated deferred income taxes), (ii) cash and cash equivalents, (iii) net current income taxes payable or recoverable, and (iv) an allocation of estimated workers compensation, health care, and certain other employee benefit liabilities related to TMP's ongoing operations (net of associated deferred income taxes). Items (i), (ii), and (iii) are expected to be transferred to Tredegar, and the Intercompany Account is expected to be settled immediately prior to any sale of TMP. Item (iv) is management's allocation from Tredegar of estimated ongoing liabilities that TMP would have reflected in its balance sheet on a stand-alone basis. Charges related to the liabilities described in Item (iv) are included in TMP's results of operations in the year incurred, and Tredegar would expect to retain such liabilities to the extent they were incurred prior to the date of any sale. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Except for Polestar, most of TMP's salaried and nonunion hourly employees participate in Tredegar's Retirement Income Plan (the 'RIP'), and its salaried employees also participate in Tredegar's postretirement health care and life insurance plans. In addition, Tredegar sponsors a defined contribution plan (the 'Savings Plan') covering most employees at TMP except for Polestar, which sponsors a separate plan for its participating employees. Tredegar allocates the costs of the RIP and Tredegar's postretirement health care and life insurance plans to each of its divisions. The total costs, computed in accordance with Statement of Financial Accounting Standards ('SFAS') No. 87, Employers' Accounting for Pensions, and SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, which are allocable to TMP, are not considered material. Historically, separate pension plans provided defined benefits to TMP's union employees. As union facilities were shut down, these plans were merged (or will be merged in the case of the Alsip, Illinois defined benefit pension plan) into Tredegar's RIP. Net periodic pension cost for the Alsip plan (the only remaining union plan in 1995 and 1994), computed in accordance with SFAS No. 87, was approximately $81,000 in 1995 and $124,000 in 1994, and was included in TMP's results of operations up through the date of shut-down. The Savings Plan allows eligible employees to voluntarily contribute up to 10% of their compensation with Tredegar matching 50% of such contributions (25% for TMP's employees effective January 1, 1995) with shares of Tredegar's common stock. Effective January 1, 1995, the matching contributions associated with TMP's employees are limited to 1.5% of compensation. Matching contributions charged to TMP for its employees were approximately $180,000 in 1995 and $470,000 in 1994. Polestar has a 401(k) profit sharing plan that allows eligible employees to voluntarily contribute up to 15% of their compensation on a pretax basis. Polestar matches 25% of such contributions up to a maximum of 1.5% of F-25 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 1. ORGANIZATION, BASIS OF PRESENTATION, AND RELATIONSHIP WITH TREDEGAR INDUSTRIES, INC. (CONTINUED) compensation. Matching contributions by Polestar were approximately $12,000 in 1995 and $12,000 in 1994. Optional contributions by Polestar were approximately $94,000 in 1995 and $100,000 in 1994. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES TOOLING PROFIT RECOGNITION Profit from the sale of injection molding tools is generally recognized under the completed contract method whereby the contract is considered complete upon acceptance of the tool by the customer. INVENTORIES Inventories are stated at the lower of cost or market, with cost principally (approximately 84% and 93% at December 31, 1995 and 1994, respectively) determined on the last-in, first-out ('LIFO') basis. Cost elements included in work-in-process and finished goods inventories are raw materials, direct labor, and manufacturing overhead. PROPERTY, PLANT, AND EQUIPMENT Accounts include costs of assets constructed or purchased, related delivery and installation costs and interest incurred on significant capital projects during their construction periods. Expenditures for renewals and betterments also are capitalized, but expenditures for repairs and maintenance are expensed as incurred. The cost and accumulated depreciation applicable to assets retired or sold are removed from the respective accounts, and gains or losses thereon are included in income. Depreciation is computed primarily by the straight-line method based on the estimated useful lives of the assets. INCOME TAXES TMP joins with Tredegar in filing a consolidated federal income tax return. Income tax expense for TMP is calculated and recognized on a separate return basis consistent with SFAS No. 109, 'Accounting for Income Taxes.' Deferred income taxes arise from temporary differences between financial and income tax reporting of various items, principally depreciation, certain goodwill and other intangibles, inventories, and accruals for employee benefits. Because TMP is included in Tredegar's consolidated federal income tax return, its net operating losses were utilized by Tredegar; accordingly, TMP has no reportable net operating loss or tax credit carryforwards on a separate company basis. GOODWILL AND OTHER INTANGIBLES In connection with the Polestar acquisition, noncompetition intangibles of $1,150,000 and goodwill of $194,000 were recognized and are being amortized for accounting purposes over 5 years ($230,000 annually) and 15 years (approximately $7,000 annually), respectively (each deductible for income tax purposes on a straight-line basis over 15 years). In addition, incremental depreciation expense in 1995 and 1994 of $660,000 and $786,000, respectively, was recognized for the excess of the estimated fair value of property, plant, and equipment acquired over its predecessor basis. F-26 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 3. UNUSUAL ITEMS The following unusual items (events or transactions that are unusual in nature or occur infrequently and affect comparability of operating results between years) were recognized during 1995 and 1994:
1995 1994 ------- ------- (IN THOUSANDS) Start-up losses (negative gross profit) associated with new Graham, North Carolina facility......................................................................... $(1,971) $ - Inventory adjustment related to prior year......................................... 155 - Reversal of prior year accrued losses on equipment used in operations that was expected to be disposed of....................................................... 145 - Severance accrual.................................................................. (128) - Write-off of goodwill associated with operating losses in certain lines of business......................................................................... - (4,873) Accrued loss and divestiture costs for Alsip, Illinois plant shut-down............. - (2,213) Accrued losses on the expected disposal of equipment............................... - (656) Accrued loss on disposal of technical facility in St. Petersburg, Florida.......... - (300) ------- ------- Total unusual charges, net......................................................... $(1,799) $(8,042) ------- ------- ------- -------
4. ACCOUNTS RECEIVABLE Accounts and notes receivable consist of the following:
DECEMBER 31, ---------------- 1995 1994 ------ ------ (IN THOUSANDS) Accounts and notes receivable........................................................ $7,949 $7,727 Allowance for doubtful accounts...................................................... (186) (211) ------ ------ Accounts and notes receivable, net................................................... $7,763 $7,516 ------ ------ ------ ------
F-27 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. TOOLING CONTRACT RECEIVABLES AND COSTS AND BILLINGS ON UNCOMPLETED TOOLING CONTRACTS Tooling contract receivables and costs and billings on uncompleted contracts are as follows:
DECEMBER 31, ---------------- 1995 1994 ------ ------ (IN THOUSANDS) Tooling contracts receivable......................................................... $1,590 $3,264 ------ ------ ------ ------ Costs incurred on uncompleted contracts.............................................. $2,484 $5,114 Billings on uncompleted contracts.................................................... 2,142 5,419 ------ ------ Net.................................................................................. $ 342 $ (305) ------ ------ ------ ------ Costs and billings on uncompleted contracts included in the balance sheets: Cost in excess of billings on uncompleted contracts.................................. $ 800 $2,769 Billings in excess of costs on uncompleted contracts................................. 458 3,074 ------ ------ Net.................................................................................. $ 342 $ (305) ------ ------ ------ ------
6. INVENTORIES Inventories consist of the following:
DECEMBER 31, ---------------- 1995 1994 ------ ------ (IN THOUSANDS) Inventories at FIFO cost: Finished goods..................................................................... $2,229 $2,139 Work-in-process.................................................................... 626 596 Raw materials...................................................................... 3,563 3,404 Allowance for inventories carried on a LIFO basis.................................... (939) (906) Allowance for inventory obsolescence................................................. (83) (55) ------ ------ Inventories, net..................................................................... $5,396 $5,178 ------ ------ ------ ------
7. ACCRUED EXPENSES Accrued expenses consist of the following:
DECEMBER 31, ---------------- 1995 1994 ------ ------ (IN THOUSANDS) Payrolls, related taxes, vested vacation and other benefits.......................... $1,699 $1,730 Accrued losses for excess equipment and severance.................................... - 293 Current portion of noncompetition payable (see Note 2)............................... 230 230 Customer prepayments................................................................. 90 129 PPI acquisition contingent consideration (see Note 2)................................ - - Other................................................................................ 220 158 ------ ------ Total................................................................................ $2,239 $2,540 ------ ------ ------ ------
F-28 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. PROPERTY, PLANT AND EQUIPMENT Property, plant, and equipment cost components and accumulated depreciation at December 31, 1995 and 1994 are as follows:
DECEMBER 31, ------------------ 1995 1994 ------- ------- (IN THOUSANDS) Land and land improvements........................................................ $ 667 $ 667 Buildings......................................................................... 12,738 12,102 Machinery and equipment........................................................... 51,238 49,932 ------- ------- Total property, plant, and equipment, at cost..................................... 64,643 62,701 Less accumulated depreciation..................................................... 39,021 38,689 ------- ------- Net property, plant, and equipment................................................ $25,622 $24,012 ------- ------- ------- -------
9. GOODWILL AND OTHER INTANGIBLES Activity for goodwill and other intangibles for the two years ended December 31, 1995 is presented below:
TOTAL GOODWILL NON- AND COMPETITION OTHER GOODWILL INTANGIBLES INTANGIBLES -------- ----------- ----------- (IN THOUSANDS) Balance December 31, 1994.......................................... $ 101 $ 824 $ 925 Amortization....................................................... (7) (230) (237) -------- ----------- ----------- Balance December 31, 1995.......................................... $ 94 $ 594 $ 688 -------- ----------- ----------- -------- ----------- -----------
F-29 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. INCOME TAXES Income before income taxes and income taxes are as follows:
1995 1994 ------ ------- (IN THOUSANDS) Income (loss) before income taxes................................................... $3,145 $(9,182) ------ ------- ------ ------- Current income tax (benefit): Federal........................................................................... $ 896 $ (791) State............................................................................. 168 58 ------ ------- 1,064 (733) ------ ------- Deferred income tax (benefit): Federal........................................................................... 159 (2,179) State............................................................................. 16 (433) ------ ------- 175 (2,612) ------ ------- Total income tax (benefit)........................................................ $1,239 $(3,345) ------ ------- ------ -------
The provision for income taxes at the effective tax rate differed from the provision for income taxes at the statutory rate as follows:
1995 1994 ------ ------- (IN THOUSANDS) Income tax (benefit) at federal statutory rate...................................... $1,101 $(3,214) State income taxes, net of federal benefit.......................................... 120 (244) Write-off of nondeductible goodwill................................................. - 88 Other............................................................................... 18 25 ------ ------- Total income tax (benefit).......................................................... $1,239 $(3,345) ------ ------- ------ -------
Deferred tax liabilities and deferred tax assets as of December 31, 1995 and 1994 are as follows:
DECEMBER 31, ---------------- 1995 1994 ------ ------ (IN THOUSANDS) Deferred tax liabilities: Property, plant, and equipment cost and accumulated depreciation................... $1,868 $2,040 Goodwill........................................................................... - - Other.............................................................................. - 9 ------ ------ Total deferred tax liabilities..................................................... 1,868 2,049 ------ ------ ------ ------ Deferred tax assets: Vested vacation pay................................................................ 299 353 Inventories........................................................................ 227 200 Goodwill and other intangibles..................................................... 144 - Workers compensation, health care, and certain other employee benefit liabilities allocated from Tredegar......................................................... 601 709 Other.............................................................................. 188 553 ------ ------ Total deferred tax assets.......................................................... 1,459 1,815 ------ ------ Net deferred tax liability........................................................... $ 409 $ 234 ------ ------ ------ ------ Included in the balance sheet: Noncurrent deferred tax liabilities in excess of assets............................ $1,724 $1,874 Current deferred tax assets in excess of liabilities............................... 1,315 1,640 ------ ------ Net deferred tax liability $ 409 $ 234 ------ ------ ------ ------
F-30 TREDEGAR MOLDED PRODUCTS COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. RENTAL EXPENSE AND CONTRACTUAL COMMITMENTS Rental expense was $837,000 in 1995 and $648,000 in 1994. Rental commitments under all noncancelable operating leases as of December 31, 1995, are as follows:
(IN THOUSANDS) 1996.......................................................................... $ 819 1997.......................................................................... 703 1998.......................................................................... 491 1999.......................................................................... 479 2000.......................................................................... 484 Remainder..................................................................... 1,836 ------- $4,812 ------- -------
Contractual obligations for plant construction and purchases of real property and equipment amounted to approximately $1.1 million at December 31, 1995. 12. CONTINGENCIES Management is not aware of any potential unrecorded liabilities at December 31, 1995 and 1994 that would have a material adverse effect on TMP's operations or financial condition. F-31 [LOGO IS FOR INSIDE BACK COVER] PRECISE [ LOGO ] TECHNOLOGY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Available Information......................... 4 Prospectus Summary............................ 5 Risk Factors.................................. 16 Capitalization................................ 23 Selected Financial Data....................... 24 Pro Forma Financial Data...................... 26 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 31 Business...................................... 37 Management.................................... 49 Certain Transactions.......................... 52 Principal Stockholders........................ 54 Description of Certain Indebtedness........... 55 The Exchange Offer............................ 56 Description of Notes.......................... 64 Certain U.S. Federal Income Tax Considerations.............................. 89 Plan of Distribution.......................... 89 Legal Matters................................. 90 Experts....................................... 90 Index to Consolidated Financial Statements.... F-1
UNTIL , 1997 (90 DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REGISTERED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $75,000,000 [ LOGO ] PRECISE TECHNOLOGY, INC. OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS SERIES B 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007 THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: MARINE MIDLAND BANK BY FACSIMILE: (212) 658-2292 CONFIRMATION BY TELEPHONE: (212) 658-5931 BY MAIL, OVERNIGHT COURIER OR HAND DELIVERY: 140 BROADWAY--LEVEL A NEW YORK, NEW YORK 10005-1180 ATTENTION: CORPORATE TRUST SERVICES --------------------------------------------- PROSPECTUS --------------------------------------------- , 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Capitalized terms used but not defined in Part II have the meanings ascribed to them in the Prospectus contained in this Registration Statement. ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Precise Technology, Inc. and its subsidiaries, Precise Technology of Delaware, Inc. and Precise Technology of Illinois, Inc. (collectively, the 'Delaware Subsidiaries'), are Delaware corporations. Section 145 ('Section 145') of the General Corporation Law of the State of Delaware (the 'DGCL') provides that a Delaware corporation may indemnify any persons who were, are or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was illegal. A Delaware corporation may indemnify any persons who are, were or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reasons of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests, provided that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged to be liable to the corporation. Where an officer, director, employee or agent is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director has actually and reasonably incurred. The Certificate of Incorporation and/or Bylaws of each of Precise and the Delaware Subsidiaries provide for the indemnification of persons under the circumstances described in Section 145 of the DGCL. Precise TMP, Inc. and Precise Polestar, Inc. are Virginia corporations. Article 10 ('Article 10') of the Virginia Stock Corporation Act (Virginia Code sections 13.1-601 et seq.) (the 'VSCA') allows, in general, for indemnification, in certain circumstances, by a corporation of any person threatened with or made a party to any action, suit or proceeding by reason of the fact that he or she is, or was, a director, officer, employee or agent of such corporation. Indemnification is also authorized under Article 10 with respect to a criminal action or proceeding where the person had no reasonable cause to believe that his conduct was unlawful. Article 9 ('Article 9') of the VSCA provides limitations on damages payable by officers and directors, except in cases of willful misconduct or knowing violation of criminal law or any federal or state securities law. The Articles of Incorporation of each of Precise TMP, Inc. and Precise Polestar, Inc. provide for the indemnification of persons under the circumstances described in Article 10 of the VSCA. Massie Tool, Mold & Die, Inc. is a Florida corporation. Section 607.0831 ('Section 607.0831') of the Florida Business Corporation Act (the 'FBCA') provides that a corporation's articles of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for breach of duty of care or other duty as a director. Section 607.0831 also provides, however, that such a provision shall not eliminate or limit the liability of a director (i) for any appropriation, in violation of his duties, of any business opportunity of the corporation, (ii) for acts or omissions involving intentional misconduct or a knowing violation of law, (iii) for certain other types of liability set forth in the FBCA and (iv) for transactions from which the director derived an improper personal benefit. In addition, Section 607.0850 ('Section 607.0850') of the FBCA provides for indemnification of directors and officers of a corporation for liability and expenses reasonably incurred by them in connection with any civil, criminal, II-1 administrative or investigative action, suit or proceeding in which they may become involved by reason of being a director or officer of the corporation. Indemnification under Section 607.0850 is permitted if the director or officer acted in a manner which he believed in good faith to be in or not opposed to the best interests of the corporation and, with respect to any criminal actions, if he had no reasonable cause to believe his conduct to be unlawful. The Articles of Incorporation of Massie Tool, Mold & Die, Inc. provide for the indemnification of persons under the circumstances described in Section 607.0831 and Section 607.0850 of the FBCA. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits: 3.1 -- Amended and Restated Certificate of Incorporation of Precise Technology, Inc. 3.2 -- Bylaws of Precise Technology, Inc. 3.3 -- Certificate of Incorporation of Precise Technology of Delaware, Inc. 3.4 -- Bylaws of Precise Technology of Delaware, Inc. 3.5 -- Certificate of Incorporation of Precise Technology of Illinois, Inc. 3.6 -- Bylaws of Precise Technology of Illinois, Inc. 3.7 -- Articles of Incorporation of Precise TMP, Inc. 3.8 -- Amended and Restated Bylaws of Precise TMP, Inc. 3.9 -- Certificate of Incorporation of Precise Polestar, Inc. 3.10 -- Bylaws of Precise Polestar, Inc. 3.11 -- Articles of Incorporation of Massie Tool, Mold & Die, Inc. 3.12 -- Bylaws of Massie Tool, Mold & Die, Inc. 4.1 -- Indenture dated as of March 18, 1997 by and among Precise Technology, Inc., as Issuer, Precise Technology of Delaware, Inc., Precise Technology of Illinois, Inc., Precise TMP, Inc., Precise Polestar, Inc. and Massie Tool, Mold & Die, Inc., as Subsidiary Guarantors, and Marine Midland Bank, as trustee (including the form of 11 1/8% Senior Subordinated Note due 2007 and the form of Subsidiary Guarantee). 4.2 -- Registration Rights Agreement, dated as of June 13, 1997, by and among Precise Technology, Inc., Precise TMP, Inc., Massie Tool, Mold & Die, Inc., Precise Polestar, Inc., Precise Technology of Delaware, Inc., Precise Technology of Illinois, Inc., Bear, Stearns & Co. Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 4.3 -- Purchase Agreement dated June 10, 1997, by and among Precise Technology, Inc., Precise TMP, Inc., Massie Tool, Mold & Die, Inc., Precise Polestar, Inc., Precise Technology of Delaware, Inc., Precise Technology of Illinois, Inc., Bear, Stearns & Co. Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. *5.1 -- Opinion of Winston & Strawn. 10.1 -- Credit Agreement dated as of June 13, 1997, among Precise Holding Corporation, Precise Technology, Inc., the subsidiary guarantors party thereto, the lenders party thereto and Fleet National Bank, as Agent and Issuing Bank. 10.2 -- Consent Agreement dated as of June 9, 1997 among Precise Technology, Inc., Precise Holding Corporation, Sunderland Industrial Holdings Corporation, Hamilton Holdings Ltd. Corporation, John Hancock Mutual Life Insurance Company, Rice Partners II, L.P., Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc.
II-2 10.3 -- Securities Purchase Agreement dated March 29, 1996, among Precise Holding Corporation, Precise Technology, Inc., Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. 10.4 -- Note Purchase Agreement dated as of March 29, 1996, among Precise Technology, Inc., John Hancock Mutual Life Insurance Company and Rice Partners II, L.P. 10.5 -- Warrant Purchase Agreement dated as of March 29, 1996, among Precise Holding Corporation, Rice Partners II, L.P., John Hancock Mutual Life Insurance Company, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. 10.6 -- First Amendment to Warrant Purchase Agreement dated as of June 13, 1997, among Precise Holding Corporation, Rice Partners II, L.P., John Hancock Mutual Life Insurance Company, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. 10.7 -- Shareholder Agreement dated as of March 29, 1996 among Precise Holding Corporation, Sunderland Industrial Holdings Corporation, Hamilton Holdings Ltd. Corporation, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., John Hancock Mutual Life Insurance Company and Rice Partners II, L.P. 10.8 -- First Amendment to Shareholder Agreement dated as of June 13, 1997 among Precise Holding Corporation, Sunderland Industrial Holding Corporation, Hamilton Holdings Ltd. Corporation, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., Rice Partners II, L.P. and John Hancock Mutual Life Insurance Company. 10.9 -- Tax Allocation and Indemnity Agreement dated as of June 11, 1997 by and among Sunderland Industrial Holdings Corporation, Precise Holding Corporation, and Precise Technology, Inc. and its direct and indirect subsidiaries. 10.10 -- Amended and Restated Management Agreement, dated as of June 13, 1997 between Precise Technology, Inc. and Mentmore Holdings Corporation. 10.11 -- Sunderland Industrial Holdings Corporation 1997 Key Employee Nonqualified Stock Option Plan dated as of April 24, 1997. 10.12 -- Nonqualified Stock Option Agreement dated as of April 24, 1997 between Sunderland Industrial Holdings Corporation and John R. Weeks. 10.13 -- Nonqualified Stock Option Agreement dated as of April 24, 1997 between Sunderland Industrial Holdings Corporation and Michael M. Farrell. +10.14 -- Memorandum of Agreement dated August 8, 1995 between The Procter & Gamble Manufacturing Company and Tredegar Molded Products Company. 12.1 -- Statement Regarding Computation of Ratio of Earnings to Fixed Charges. 21.1 -- Subsidiaries of the Registrants. 23.1 -- Consent of Ernst & Young LLP. 23.2 -- Consent of Grant Thornton LLP. 23.3 -- Consent of Coopers & Lybrand L.L.P. 23.4 -- Consent of Winston & Strawn (included in Exhibit 5.1). 24.1 -- Powers of Attorney (included on signature pages hereto). 25.1 -- Statement of Eligibility of Trustee.
II-3 27.1 -- Financial Data Schedule. 99.1 -- Form of Letter of Transmittal. 99.2 -- Form of Notice of Guaranteed Delivery. 99.3 -- Form of Tender Instructions.
- ------------------ * To be filed by amendment. + Confidential treatment requested for a portion of this exhibit filed herewith. (b) Financial Statement Schedules: None. ITEM 22. UNDERTAKINGS. Each undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the 'Calculation of Registration Fee' table in the effective registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (4) Each undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the registrant undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form; (5) Each registrant undertakes that every prospectus: (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to II-4 the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the provisions described under Item 20 or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue; (7) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; (8) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (9) Each undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request; and (10) Each undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of North Versailles, State of Pennsylvania, as of July 25, 1997. PRECISE TECHNOLOGY, INC. By: /s/ JOHN R. WEEKS ---------------------------------- John R. Weeks President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William L. Remley and Richard C. Hoffman, and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this Registration Statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, 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 any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------------- -------------- /s/ RICHARD L. KRAMER Chairman of the Board of Directors July 25, 1997 - ------------------------------------------ Richard L. Kramer /s/ WILLIAM L. REMLEY Vice Chairman, Vice President and Treasurer July 25, 1997 - ------------------------------------------ William L. Remley /s/ RICHARD C. HOFFMAN Director July 25, 1997 - ------------------------------------------ Richard C. Hoffman /s/ JOHN R. WEEKS President and Chief Executive Officer July 25, 1997 - ------------------------------------------ John R. Weeks /s/ MICHAEL D. BORNAK Controller July 25, 1997 - ------------------------------------------ (principal financial and accounting officer) Michael D. Bornak
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of North Versailles, State of Pennsylvania, as of July 25, 1997. PRECISE TECHNOLOGY OF DELAWARE, INC. By: /s/ JOHN R. WEEKS ---------------------------------- John R. Weeks President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William L. Remley and Richard C. Hoffman, and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this Registration Statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, 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 any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------------- -------------- /s/ RICHARD L. KRAMER Chairman of the Board of Directors July 25, 1997 - ------------------------------------------ Richard L. Kramer /s/ WILLIAM L. REMLEY Vice Chairman, Vice President and Treasurer July 25, 1997 - ------------------------------------------ William L. Remley /s/ RICHARD C. HOFFMAN Director July 25, 1997 - ------------------------------------------ Richard C. Hoffman /s/ JOHN R. WEEKS President and Chief Executive Officer July 25, 1997 - ------------------------------------------ John R. Weeks /s/ MICHAEL D. BORNAK Controller July 25, 1997 - ------------------------------------------ (principal financial and accounting officer) Michael D. Bornak
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of North Versailles, State of Pennsylvania, as of July 25, 1997. PRECISE TECHNOLOGY OF ILLINOIS, INC. By: /s/ JOHN R. WEEKS ---------------------------------- John R. Weeks President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William L. Remley and Richard C. Hoffman, and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this Registration Statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, 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 any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------------- -------------- /s/ RICHARD L. KRAMER Chairman of the Board of Directors July 25, 1997 - ------------------------------------------ Richard L. Kramer /s/ WILLIAM L. REMLEY Vice Chairman, Vice President and Treasurer July 25, 1997 - ------------------------------------------ William L. Remley /s/ RICHARD C. HOFFMAN Director July 25, 1997 - ------------------------------------------ Richard C. Hoffman /s/ JOHN R. WEEKS President and Chief Executive Officer July 25, 1997 - ------------------------------------------ John R. Weeks /s/ MICHAEL D. BORNAK Controller July 25, 1997 - ------------------------------------------ (principal financial and accounting officer) Michael D. Bornak
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of North Versailles, State of Pennsylvania, as of July 25, 1997. PRECISE TMP, INC. By: /s/ JOHN R. WEEKS ----------------------------------- John R. Weeks President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William L. Remley and Richard C. Hoffman, and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this Registration Statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, 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 any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------------- -------------- /s/ RICHARD L. KRAMER Chairman of the Board of Directors July 25, 1997 - ------------------------------------------ Richard L. Kramer /s/ WILLIAM L. REMLEY Vice Chairman, Vice President and Treasurer July 25, 1997 - ------------------------------------------ William L. Remley /s/ RICHARD C. HOFFMAN Director July 25, 1997 - ------------------------------------------ Richard C. Hoffman /s/ JOHN R. WEEKS President and Chief Executive Officer July 25, 1997 - ------------------------------------------ John R. Weeks /s/ MICHAEL D. BORNAK Controller July 25, 1997 - ------------------------------------------ (principal financial and accounting officer) Michael D. Bornak
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of North Versailles, State of Pennsylvania, as of July 25, 1997. PRECISE POLESTAR, INC. By: /s/ JOHN R. WEEKS ---------------------------------- John R. Weeks President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William L. Remley and Richard C. Hoffman, and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this Registration Statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, 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 any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------------- -------------- /s/ RICHARD L. KRAMER Chairman of the Board of Directors July 25, 1997 - ------------------------------------------ Richard L. Kramer /s/ WILLIAM L. REMLEY Vice Chairman, Vice President and Treasurer July 25, 1997 - ------------------------------------------ William L. Remley /s/ RICHARD C. HOFFMAN Director July 25, 1997 - ------------------------------------------ Richard C. Hoffman /s/ JOHN R. WEEKS President and Chief Executive Officer July 25, 1997 - ------------------------------------------ John R. Weeks /s/ MICHAEL D. BORNAK Controller July 25, 1997 - ------------------------------------------ (principal financial and accounting officer) Michael D. Bornak
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of North Versailles, State of Pennsylvania, as of July 25, 1997. MASSIE TOOL, MOLD & DIE, INC. By: /s/ JOHN R. WEEKS ----------------------------------- John R. Weeks President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William L. Remley and Richard C. Hoffman, and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this Registration Statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, 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 any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------------- -------------- /s/ RICHARD L. KRAMER Chairman of the Board of Directors July 25, 1997 - ------------------------------------------ Richard L. Kramer /s/ WILLIAM L. REMLEY Vice Chairman, Vice President and Treasurer July 25, 1997 - ------------------------------------------ William L. Remley /s/ RICHARD C. HOFFMAN Director July 25, 1997 - ------------------------------------------ Richard C. Hoffman /s/ JOHN R. WEEKS President and Chief Executive Officer July 25, 1997 - ------------------------------------------ John R. Weeks /s/ MICHAEL D. BORNAK Controller July 25, 1997 - ------------------------------------------ (principal financial and accounting officer) Michael D. Bornak
EX-3.1 2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PRECISE TECHNOLOGY, INC. (Originally incorporated under the name KDI Auto-Trol Corporation) Precise Technology, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on August 14, 1969. Certificates of Amendment of the Certificate of Incorporation of the Corporation were filed with the Secretary of State of the State of Delaware on April 10, 1970, June 22, 1987, February 16, 1988, November 5, 1992 and July 25, 1994. Certificates of Ownership & Merger were filed with the Secretary of State of the State of Delaware on April 19, 1983, January 24, 1986 and April 19, 1990. 2. Immediately prior to this amendment of the Certificate of Incorporation of the Corporation, as hereinbelow set forth, the Corporation had authority to issue an aggregate of one thousand five hundred (1,500) shares, of which one thousand (1,000) shares, without par value, were designated "Common Stock," and five hundred (500) shares, without par value, were designated "9-1/2% Preferred Stock," having a stated value of Ten Thousand Dollars ($10,000) per share. 3. This Amended and Restated Certificate of Incorporation restates and integrates and further amends the Certificate of Incorporation of this Corporation by: a. Authorizing the issuance and designating the terms of an aggregate of 2,000 shares, of which 1,000 shares, with no par value, shall be designated "Common Stock" and 1,000 shares, with no par value but with a stated value of Ten Thousand Dollars ($10,000) per share shall be designated "Serial Preferred Stock," in Article FOURTH; b. Changing the address of the registered agent in Article SECOND; c. Deleting Article FIFTH, which contained the name of the sole incorporator, and conforming the remaining Articles accordingly; and d. Adding Article TENTH pertaining to the action required on matters on which stockholders are entitled to vote. 4. The text of the Certificate of Incorporation is amended and restated hereby to read as herein set forth in full: FIRST.The name of the Corporation is PRECISE TECHNOLOGY, INC. SECOND. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD.The nature of the business or purposes to be conducted or promoted is: To manufacture, compound, produce, purchase or otherwise acquire; to own, hold, use, develop and otherwise deal in and with; to sell at wholesale and retail, mortgage, pledge, lease, license the use of and otherwise dispose of metals, alloys, and by-products, materials commonly known as plastics, including but without limitation thereto, bitumens, casein, cellulose and natural and synthetic resins, and all other similar materials, products and by-products, and all articles composed in whole or in part of plastic or natural materials and the machinery, equipment, supplies, molds and appliances used or useful in the manufacture, processing, production, packaging and marketing of any of the foregoing. To engage in the business of advisors, consultants, and managers in all branches of business, and to contract for, acquire, plan, maintain, manage, cooperate with, and assist in the maintenance and operation of business enterprises of any and every kind, and to own, manage, assist, finance, supervise and otherwise deal with corporations, associations, businesses, financial and other enterprises of all kinds. To buy, sell, mind, manage, operate, hold and deal in and with real and personal property of every kind and description. To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. -2- To manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description. To acquire, and pay for in cash, stock or bonds of this Corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation. To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trademarks and trade names, relating to or useful in connection with any business of this Corporation. To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interests issued or created by any corporations, joint stock companies, syndicates, associations, firms, trusts or persons, public or private, or by the government of the United States of America, or by any foreign government, or by any state, territory, province, municipality or other political subdivision or by any governmental agency, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof. To borrow or raise moneys for any of the purposes of the Corporation and, from time to time without limit as to amount, to draw, make, accept, enforce, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the Corporation, whether at the time owned or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds or other obligations of the Corporation for its corporate purposes. To purchase, receive, take by grant, gift, devise, bequest or otherwise, lease, or otherwise acquire, own, hold, improve, employ, use and otherwise deal in and with real or personal property, or any interest therein, wherever situated, and to sell, convey, lease, exchange, transfer or otherwise dispose of, or mortgage or pledge, all or any of the Corporation's property and assets, or any interest therein, wherever situated. In general, to possess and exercise all the powers and privileges granted by the General Corporation Law of Delaware or by any other law of Delaware or by this Certificate of -3- Incorporation together with any powers incidental thereto, so far as such powers and privileges are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation. The business and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in no way limited or restricted by reference to, or inference from the terms of any other clause in this Certificate of Incorporation, but the business and purposes specified in each of the foregoing clauses of this article shall be regarded as independent business and purposes. FOURTH. The Corporation shall have authority to issue 1,000 shares of Common Stock, without par value, and 1,000 shares of Serial Preferred Stock, without par value but with a stated value of Ten Thousand Dollars ($10,000) per share. A. Serial Preferred Stock The Board of Directors is hereby empowered to cause the Serial Preferred Stock of the Corporation to be issued in series with such of the variations permitted by clauses (1)-(8) of this paragraph A as shall have been fixed and determined by the Board of Directors with respect to any series prior to the issue of any shares of such series. The shares of the Serial Preferred Stock of different series may vary as to: (1) the number of shares constituting such series and the designation of such series, which shall be such as to distinguish the shares thereof from the shares of all other series and classes; (2) the rate of dividend, the time of payment and, if cumulative, the dates from which dividends shall be cumulative, the extent of participation rights, if any, and the priority in payment of dividends; (3) any right to vote with holders of shares of any other series or class and any right to vote as a class, either generally or as a condition to specified corporate acts; (4) the price at and the terms and conditions on which shares may be redeemed; -4- (5) the amount payable upon shares and the priority of payment in event of involuntary liquidation; (6) the amount payable upon shares and the priority of payment in event of voluntary liquidation; (7) any sinking fund provisions for the redemption or purchase of shares; and (8) the terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion. The shares of all series of Serial Preferred Stock shall be identical except as, within the limitations set forth above in this Section A, shall have been fixed and determined by the Board of Directors prior to the issuance thereof. Except as specifically set forth in any Certificate of Serial Designation filed with the Secretary of State of the State of Delaware or as required by the Delaware General Corporation Law, none of the shares of any series of Serial Preferred Stock shall have any right to vote on any matters. B. Common Stock. (1) Dividends. The holders of the Common Stock shall be entitled to receive, out of funds legally available therefor, cash dividends and dividends payable in property other than securities of the Corporation only at such time as all dividends on the Serial Preferred Stock through the record date of any such Common Stock dividend have been paid in full. (2) Liquidation. In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Corporation, after distribution in full to the holders of Serial Preferred Stock of their preferred liquidation payments, the holders of Common Stock shall be entitled to receive the remaining assets of the Corporation. -5- (3) Voting Rights. Except as may be otherwise required by law or the Certificate of Incorporation of the Corporation, as amended, each share of Common Stock shall have one (1) vote on all matters voted upon by the stockholders. FIFTH.The Corporation is to have perpetual existence. SIXTH.In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: To make, alter or repeal the by-laws of the Corporation. To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation. To set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. By a majority of the whole Board, to designate one or more committees, each committee to consist of two or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution or in the by-laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, the by-laws may provide that in the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. -6- When and as authorized by the affirmative vote of the holders of a majority of stock issued and outstanding having voting power given at a stockholders' meeting duly called upon such notice as is required by statute, or when authorized by the written consent of the holders of a majority of the voting stock issued and outstanding, to sell, lease or exchange all or substantially all of the property and assets of the Corporation, including its goodwill and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property including shares of stock in, and/or other securities of, any other corporation or corporations, as its Board of Directors shall deem expedient and for the best interests of the Corporation. SEVENTH. Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of section 279 of Title 8 of the Delaware Code to order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the -7- creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. EIGHTH. Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the Corporation may be kept (subject to any provisions contained in the sutures) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the Corporation. Elections of Directors need not be by written ballot unless the by-laws of the Corporation shall so provide. NINTH. The Corporation reserves the right to amend, alter, change or repeal any provisions contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all fights conferred upon stockholders herein are granted subject to this reservation. TENTH. Notwithstanding any provision of the General Corporation Law of the State of Delaware now or later in force that requires for any purpose the affirmative vote or consent of more than a majority of the holders of shares of the Corporation or of any class, such action, unless otherwise expressly required by statute, may be taken by the vote or consent of the holders of the shares that entitle them to exercise the majority of the voting power of the Corporation or, if required by law, any class. 5. This Amended and Restated Certificate of Incorporation was duly adopted by unanimous written consent of the stockholder in accordance with the applicable provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware. -8- IN WITNESS WHEREOF, said Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by John R. Weeks, its President, and Richard C. Hoffman, its Assistant Secretary, this 29th day of March, 1996. /s/ John R. Weeks --------------------------------------- John R. Weeks, President /s/ Richard C. Hoffman --------------------------------------- Richard C. Hoffman, Assistant Secretary -9- EX-3.2 3 BYLAWS PRECISE PLASTIC PRODUCTS, INC. ------------------------------ (a Delaware corporation) ------- BYLAWS ------- As adopted by the Board of Directors on July 31, 1991. TABLE OF CONTENTS ----------------- Page OFFICES......................................................................1 Section 1. Registered Office..........................................1 Section 2. Additional Offices.........................................1 MEETINGS OF STOCKHOLDERS.....................................................1 Section 1. Time and Place.............................................1 Section 2. Annual Meeting.............................................1 Section 3. Notice of Annual Meeting...................................1 Section 4. Special Meetings...........................................1 Section 5. Notice of Special Meeting..................................2 Section 6. List of Stockholders.......................................2 Section 7. Presiding Officer; Order of Business.......................2 Section 8. Quorum; Adjournments.......................................3 Section 9. Voting.....................................................4 Section 10. Action by Consent..........................................4 DIRECTORS....................................................................4 Section 1. General Powers; Number; Tenure.............................4 Section 2. Vacancies..................................................5 Section 3. Removal; Resignation.......................................5 Section 4. Place of Meetings..........................................5 Section 5. Annual Meeting.............................................5 Section 6. Regular Meetings...........................................5 Section 7. Special Meetings...........................................5 Section 8. Quorum; Adjournments.......................................6 Section 9. Compensation...............................................6 Section 10. Action by Consent..........................................6 Section 11. Meetings by Telephone or Similar Communications............6 COMMITTEES...................................................................6 Section 1. Executive Committee........................................6 Section 2. Powers.....................................................7 Section 3. Procedure; Meetings........................................7 Section 4. Quorum.....................................................7 Section 5. Other Committees...........................................7 Section 6. Vacancies; Changes; Discharge..............................7 Section 7. Compensation...............................................7 Section 8. Action by Consent..........................................8 Section 9. Meetings by Telephone or Similar Communications............8 NOTICES......................................................................8 Section 1. Form; Delivery.............................................8 Section 2. Waiver.....................................................8 OFFICERS.....................................................................9 Section 1. Designations...............................................9 Section 2. Term of Office; Removal....................................9 Section 3. Compensation...............................................9 Section 4. The Chairman of the Board..................................9 Section 5. The Vice Chairman of the Board.............................9 Section 6. The President.............................................10 Section 7. The Vice Presidents.......................................10 Section 8. The Secretary.............................................10 Section 9. The Assistant Secretary...................................11 Section 10. The Treasurer.............................................11 Section 11. The Assistant Treasurer...................................11 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS..................................................................11 AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS............................12 Section 1. Affiliated Transactions...................................12 Section 2. Determining Quorum........................................13 STOCK CERTIFICATES..........................................................13 Section 1. Form; Signatures..........................................13 Section 2. Registration of Transfer..................................13 Section 3. Registered Stockholders...................................14 Section 4. Record Date...............................................14 Section 5. Lost, Stolen or Destroyed Certificates....................14 GENERAL PROVISIONS..........................................................15 Section 1. Dividends.................................................15 Section 2. Reserves..................................................15 Section 3. Fiscal Year...............................................15 Section 4. Seal......................................................15 AMENDMENTS..................................................................15 SECRETARY'S CERTIFICATE.....................................................16 -ii- BYLAWS ------ ---------- ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation shall be at 32 Loockerman Square, in the City of Dover, County of Kent, State of Delaware. Section 2. Additional Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Time and Place. A meeting of stockholders for any purpose may be held at such time and place, within or without the State of Delaware, as the Board of Directors may fix from time to time and as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meeting. Annual meetings of stockholders, commencing with the year 1993, shall be held on January 15, if not a legal holiday, or, if a legal holiday, then on the next secular day following, at 2 P.M., or at such other date and time as shall, from time to time, be designated by the Board of Directors and stated in the notice of the meeting. At such annual meeting, the stockholders shall elect a Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. Notice of Annual Meeting. Written notice of the annual meeting, stating the place, date ind time thereof, shall be given to each stockholder entitled to vote at such meeting not less than 10 (unless a longer period is required by law) nor more than 60 days prior to the meeting. Section 4. Special Meetings. special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Chairman of the Board, if any, or the President and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request 1649MB37.2H in writing of the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 5. Notice of Special Meeting. Written notice of a special meeting, stating the place, date and time thereof and the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than 10 (unless a longer period is required by law) nor more than 60 days prior to the meeting. Section 6. List of Stockholders. The officer in charge of the stock ledger of the Corporation or the transfer agent shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, at a place within the city where the meeting is to be held, which place, if other than the place of the meeting, shall be specified in the notice of the meeting. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present in person thereat. Section 7. Presiding Officer; Order of Business. (a) Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or, if he is not present (or, if there is none), by the President, or, if he is not present, by a Vice President, or, if he is not present, by such person who may have been chosen by the Board of Directors, or, if none of such persons is present, by a chairman to be chosen by the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at the meeting and who are present in person or represented by proxy. The Secretary of the Corporation, or, if he is not present, an Assistant Secretary, or, if he is not present, such person as may be chosen by the Board of Directors, shall act as secretary of meetings of stockholders, or, if none of such persons is present, the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at the meeting and who are present in person or represented by proxy shall choose any person present to act as secretary of the meeting. (b) The following order of business, unless otherwise ordered at the meeting, shall be observed as far as practicable and consistent with the purposes of the meeting: 1649MB37.2H -2- 1. Call of the meeting to order. 2. Presentation of proof of mailing of the notice of the meeting and, if the meeting is a special meeting, the call thereof. 3. Presentation of proxies. 4. Announcement that a quorum is present. 5. Reading and approval of the minutes of the previous meeting. 6. Reports, if any, of officers. 7. Election of directors, if the meeting is an annual meeting or a meeting called for that purpose. 8. Consideration of the specific purpose or purposes for which the meeting has been called (other than the election of directors), if the meeting is a special meeting. 9. Transaction of such other business as may properly come before the meeting. 10. Adjournment. Section 8. Quorum; Adjournments. The holders of a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be necessary to, and shall constitute a quorum for, the transaction of business at all meetings of the stockholders, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, until a quorum shall be present or represented. Even if a quorum shall be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time for good cause, without notice of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, until a date which is not more than 30 days after the date of the original meeting. At any such adjourned meeting, -3- 1649MB37.2H at which a quorum shall be present in person or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote thereat. Section 9. Voting. (a) At any meeting of stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy. Except as otherwise provided by law or the Certificate of Incorporation, each stockholder of record shall be entitled to one vote for each share of capital stock registered in his name on the books of the Corporation. (b) All elections shall be determined by a plurality vote, and, except as otherwise provided by law or the Certificate of Incorporation, all other matters shall be determined by a vote of a majority of the shares present in person or represented by proxy and voting on such other matters. Section 10. Action by Consent. Any action required or permitted by law or the Certificate of Incorporation to be taken at any meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a written consent, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present or represented by proxy and voted. Such written consent shall be filed with the minutes of meetings of stockholders. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not so consented in writing thereto. ARTICLE III DIRECTORS Section 1. General Powers; Number; Tenure. The business of the Corporation shall be managed by its Board of Directors, which may exercise all powers of the Corporation and perform all lawful acts and things which are not by law, the Certificate of Incorporation or these Bylaws directed or required to be exercised or performed by the stockholders. Within the limits specified in this Section 1, the number of directors shall be 2. The directors shall be elected at the annual meeting of the stockholders, -4- 1649MB37.2H except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and shall qualify. Directors need not be stockholders. Section 2. Vacancies. If any vacancies occur in the Board of Directors, or if any new directorships are created, they may be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Each director so chosen shall hold office until the next annual meeting of stockholders and until his successor is duly elected and shall qualify. If there are no directors in office, any officer or stockholder may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these Bylaws, at which meeting such vacancies shall be filled. Section 3. Removal; Resignation. (a) Except as otherwise provided by law or the Certificate of Incorporation, any director, directors or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. (b) Any director may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board, the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, a resignation shall take effect upon delivery thereof to the Board of Directors or the designated officer. It shall not be necessary for a resignation to be accepted before it becomes effective. Section 4. Place of Meetings. The Board of Directors may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. Annual Meeting. The annual meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of stockholders, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. Section 6. Regular Meetings. Additional regular meetings of the Board of Directors may be held without notice, at such time and place as may from time to time be determined by the Board of Directors. Section 7. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or by 2 or more directors on at least 2 days' notice to -5- 1649MB37.2H each director, if such notice is delivered personally or sent by telegram, or on at least 3 days' notice if sent by mail. Special meetings shall be called by the Chairman of the Board, President, Secretary or 2 or more directors in like manner and on like notice on the written request of one-half or more of the number of directors then in office. Any such notice need not state the purpose or purposes of such meeting except as provided in Article XI. Section 8. Quorum; Adjournments. At all meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law or the Certificate of Incorporation. If a quorum is not present at any meeting of the Board of Directors, the directors present may adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Compensation. Directors shall be entitled to such compensation for their services as directors and to such reimbursement for any reasonable expenses incurred in attending directors' meetings as may from time to time be fixed by the Board of Directors. The compensation of directors may be on such basis as is determined by the Board of Directors. Any director may waive compensation for any meeting. Any director receiving compensation under these provisions shall not be barred from serving the Corporation in any other capacity and receiving compensation and reimbursement for reasonable expenses for such other services. Section 10. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if a written consent to such action is signed by all members of the Board of Directors and such written consent is filed with the minutes of its proceedings. Section 11. Meetings by Telephone or Similar Communications. The Board of Directors may participate in a meeting by means of conference telephone or similar communications equipment by means of which all directors participating in the meeting can hear each other, and participation in such meeting shall constitute presence in person by such director at such meeting. -6- 1649MB37.2H ARTICLE IV COMMITTEES Section 1. Executive Committee. The Board of Directors, by resolution adopted by a majority of the whole Board, may appoint an Executive Committee consisting of not more than 5 directors, one of whom shall be designated as Chairman of the Executive Committee. Each member of the Executive Committee shall continue as a member thereof until the expiration of his term as a director, or his earlier resignation, unless sooner removed as a member or as a director. Section 2. Powers. Unless circumscribed by resolution of the Board appointing the Executive Committee or except as otherwise provided by law, the Executive Committee shall have and may exercise all of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation including, without limitation, the power and authority to declare a dividend in cash, property or its own shares and to authorize the issuance of any shares of capital stock of the Corporation of any class now or hereafter authorized, and any options or warrants for, and rights to subscribe to, such shares, and any securities convertible into or exchangeable for such shares; and may authorize the seal of the Corporation to be affixed to all papers which may require it. Section 3. Procedure; Meetings. The Executive Committee shall fix its own rules of procedure and shall meet at such times and at such place or places as may be provided by such rules or as the members of the Executive Committee shall provide. The Executive Committee shall keep regular minutes of its meetings and deliver such minutes to the Board of Directors. The Chairman of the Executive Committee, or, in his absence, a member of the Executive Committee chosen by a majority of the members present, shall preside at meetings of the Executive Committee, and another member thereof chosen by the Executive Committee shall act as Secretary of the Executive Committee. Section 4. Quorum. A majority of the Executive Committee shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the members of the Executive Committee shall be required for any action of the Executive Committee; provided, however, that when an Executive Committee of one member is authorized under the provisions of Section 1 of this Article, such one member shall constitute a quorum. Section 5. Other Committees. The Board of Directors, by resolutions adopted by a majority of the whole Board, may appoint -7- 1649MB37.2H such other committee or committees as it shall deem advisable and with such functions and duties as the Board of Directors shall prescribe. Section 6. Vacancies; Changes; Discharge. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee. Section 7. Compensation. Members of any committee shall be entitled to such compensation for their services as members of any such committee and to such reimbursement for any reasonable expenses incurred in attending committee meetings as may from time to time be fixed by the Board of Directors. Any member may waive compensation for any meeting. Any committee member receiving compensation under these provisions shall not be barred from serving the Corporation in any other capacity and from receiving compensation and reimbursement of reasonable expenses for such other services. Section 8. Action by Consent. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if a written consent to such action is signed by all members of the committee and such written consent is filed with the minutes of its proceedings. Section 9. Meetings by Telephone or Similar Communications. The members of any committee designated by the Board of Directors may participate in a meeting of such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other and participation in such meeting shall constitute presence in person at such meeting. ARTICLE V NOTICES Section 1. Form; Delivery. Whenever, under the provisions of law, the Certificate of Incorporation or these Bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice unless otherwise specifically provided, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid. Such notices shall be deemed to be given at the time they are deposited in the United States mail. Notice to a director may also be given personally or by telegraph sent to his address as it appears on the records of the Corporation. Section 2. Waiver. Whenever any notice is required to be given under the provisions of law, the Certificate of Incorporation -8- 1649MB37.2H or these Bylaws, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed to be equivalent to such notice. In addition, any stockholder who attends a meeting of stockholders in person, or is represented at such meeting by proxy, without protesting at the commencement of the meeting the lack of notice thereof to him, or any director who attends a meeting of the Board of Directors without protesting, at the commencement of the meeting, such lack of notice, shall be conclusively deemed to have waived notice of such meeting. ARTICLE VI OFFICERS Section 1. Designations. The officers of the Corporation shall be chosen by the Board of Directors. The Board of Directors may choose a Chairman of the Board, a Vice Chairman of the Board or Vice Chairmen, a President, a Vice President or Vice Presidents, a Secretary, a Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers and other officers and agents as it shall deem necessary or appropriate. All officers of the Corporation shall exercise such powers and perform such duties as shall from time to time be determined by the Board of Directors. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide. Section 2. Term of Office; Removal. The Board of Directors at its annual meeting after each annual meeting of stockholders shall choose a President, a Secretary and a Treasurer. The Board of Directors may also choose a Chairman of the Board, a Vice President or Vice Presidents, one or more Assistant Secretaries and/or Assistant Treasurers, and such other officers and agents as it shall deem necessary or appropriate. Each officer of the Corporation shall hold office until his successor is chosen and shall qualify. Any officer elected or appointed by the Board of Directors may be removed, with or without cause, at any time by the affirmative vote of a majority of the directors then in office. Such removal shall not prejudice the contract rights, if any, of the person so removed. Any vacancy occurring in any office of the Corporation may be filled for the unexpired portion of the term by the Board of Directors. Section 3. Compensation. The salaries of all officers of the Corporation shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. -9- 1649MB37.2H Section 4. The Chairman of the Board. The Chairman of the Board, if any, shall be an officer of the Corporation and, subject to the direction of the Board of Directors, shall perform such executive, supervisory and management functions and duties as may be assigned to him from time to time by the Board of Directors. He shall, if present, preside at all meetings of stockholders and of the Board of Directors. Section 5. The Vice Chairman of the Board. The Vice Chairman of the Board, if any (or in the event there be more than one, the Vice Chairmen in the order designated, or in the absence of any designation, in the order of their election), shall, in the absence of the Chairman of the Board or in the event of his disability, perform the duties and exercise the powers of the Chairman of the Board and shall generally assist the Chairman of the Board and perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. Section 6. The President. (a) The President shall be the chief executive officer of the Corporation and, subject to the direction of the Board of Directors, shall have general charge of the business, affairs and property of the Corporation and general supervision over its other officers and agents. In general, he shall perform all duties incident to the office of President and shall see that all orders and resolutions of the Board of Directors are carried into effect. In addition to and not in limitation of the foregoing, the President shall be empowered to authorize any change of the registered office or registered agent (or both) of the Corporation in the State of Delaware. (b) Unless otherwise prescribed by the Board of Directors, the President shall have full power and authority on behalf of the Corporation to attend, act and vote at any meeting of security holders of other corporations in which the Corporation may hold securities. At such meeting the President shall possess and may exercise any and all rights and powers incident to the ownership of such securities which the Corporation might have possessed and exercised if it had been present. The Board of Directors may from time to time confer like powers upon any other person or persons. Section 7. The Vice Presidents. The Vice President, if any (or in the event there be more than one, the Vice Presidents in the order designated, or in the absence of any designation, in the order of their election), shall, in the absence of the President or in the event of his disability, perform the duties and exercise the powers of the President and shall generally assist the President and perform such other duties and have such other -10- 1649MB37.2H powers as may from time to time be prescribed by the Board of Directors. Section 8. The Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all votes and the proceedings of the meetings in a book to be kept for that purpose and shall perform like duties for the Executive Committee or other committees, if required. He shall give, or cause to be given, notice of all meetings of stockholders and special meetings of the Board of Directors, and shall perform such other duties as may from time to time be prescribed by the Board of Directors, the Chairman of the Board or the President, under whose supervision he shall act. He shall have custody of the seal of the Corporation, and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and, when so affixed, the seal may be attested by his signature or by the signature of such Assist4nt Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his signature. Section 9. The Assistant Secretary. The Assistant Secretary, if any (or in the event there be more than one, the Assistant Secretaries in the order designated, or in the absence of any designation, in the order of their election), shall, in the absence of the Secretary or in the event of his disability, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. Section 10. The Treasurer. The Treasurer shall have the custody of the corporate funds and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may from time to time be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President and the Board of Directors, at regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 11. The Assistant Treasurer. The Assistant Treasurer, if any (or in the event there shall be more than one, the Assistant Treasurers in the order designated, or in the absence of any designation, in the order of their election), shall, in the absence of the Treasurer or in the event of his disability, perform the duties and exercise the powers of the Treasurer and -11- 1649MB37.2H shall perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS Reference is made to Section 145 (and any other relevant provisions) of the General Corporation Law of the State of Delaware. Particular reference is made to the class of persons (hereinafter called "Indemnitees") who may be indemnified by a Delaware corporation pursuant to the provisions of such section 145, namely, any person (or the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The Corporation shall (and is hereby obligated to) indemnify the Indemnitees, and each of them, in each and every situation where the Corporation is obligated to make such indemnification pursuant to the aforesaid statutory provisions. The Corporation shall indemnify the Indemnitees, and each of them, in each and every situation where, under the aforesaid statutory provisions, the Corporation is not obligated, but is nevertheless permitted or empowered, to make such indemnification, it being understood, that, before making such indemnification with respect to any situation covered under this sentence, the Corporation shall promptly make or cause to be made, by any of the methods referred to in subsection (d) of such Section 145, a determination as to whether each Indemnitee acted in good faith and in a manner such Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, in the case of any criminal action or proceeding, had no reasonable cause to believe that such Indemnitee's conduct was unlawful. No such indemnification shall be made (where not required by statute) unless it is determined that such Indemnitee acted in good faith and in a manner such Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation', and, in the case of any criminal action or proceeding, had no reasonable cause to believe that such Indemnitee's conduct was unlawful. -12- 1649MB37.2H ARTICLE VIII AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS Section 1. Affiliated Transactions. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction or solely because his or their votes are counted for such purpose, if: (a) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof, or the stockholders. Section 2. Determining Quorum. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee thereof which authorizes the contract or transaction. ARTICLE IX STOCK CERTIFICATES Section 1. Form; Signatures. (a) Every holder of stock in the Corporation shall be entitled to have a certificate, signed by the Chairman of the Board or the President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation, exhibiting the number and class (and series, if any) of -13- 1649MB37.2H shares owned by him, and bearing the seal of the Corporation. Such signatures and seal may be facsimile. A certificate may be manually signed by a transfer agent or registrar other than the corporation or its employee but may be a facsimile. In case any officer who has signed, or whose facsimile signature was placed on, a certificate shall have ceased to be such officer before such certificate is issued, it may nevertheless be issued by the Corporation with the same effect as if he were such officer at the date of its issue. (b) All stock certificates representing shares of capital stock which are subject to restrictions on transfer or to other restrictions may have imprinted thereon such notation to such effect as may be determined by the Board of Directors. Section 2. Registration of Transfer. Upon surrender to the Corporation or any transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation or its transfer agent to issue a new certificate to the person entitled thereto, to cancel the old certificate and to record the transaction upon its books. Section 3. Registered Stockholders. (a) Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person who is registered on its books as the owner of shares of its capital stock to receive dividends or other distributions, to vote as such owner, and to hold liable for calls and assessments any person who is registered on its books as the owner of shares of its capital stock. The Corporation shall not be bound to recognize any equitable or legal claim to or interest in such shares on the part of any other person. (b) If a stockholder desires that notices and/or dividends shall be sent to a name or address other than the name or address appearing on the stock ledger maintained by the Corporation (or by the transfer agent or registrar, if any), such stockholder shall have the duty to notify the Corporation (or the transfer agent or registrar, if any) in writing, of such desire. Such written notice shall specify the alternate name or address to be used. Section 4. Record Date. In order that the Corporation may determine the stockholders of record who are entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution, or to make a determination of the stockholders of record for any other proper purpose, the Board of Directors may, in advance, fix a date as the record date for any such determination. Such date shall not be more than 60 nor less than 10 days -14- 1649MB37.2H before the date of such meeting, nor more than 60 days prior to the date of any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting taken pursuant to Section 8 of Article II; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5. Lost, Stolen or Destroyed Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation which is claimed to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum, or other security in such form, as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate claimed to have been lost, stolen or destroyed. ARTICLE X GENERAL PROVISIONS Section 1. Dividends. Subject to the provisions of the Certificate of Incorporation, dividends upon the outstanding capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law, and may be paid in cash, in property or in shares of the Corporation's capital stock. Section 2. Reserves. The Board of Directors shall have full power, subject to the provisions of law and the Certificate of Incorporation, to determine whether any, and, if so, what part, of the funds legally available for the payment of dividends shall be declared as dividends and paid to the stockholders of the Corporation. The Board of Directors, in its sole discretion, may fix a sum which may be set aside or reserved over and above the paid-in capital of the Corporation for working capital or as a reserve for any proper purpose, and may, from time to time, increase, diminish or vary such fund or funds. Section 3. Fiscal Year. The fiscal year of the Corporation shall be as determined from time to time by the Board of Directors. -15- 1649MB37.2H Section 4. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its incorporation and the words "Corporate Seal" and "Delaware". ARTICLE XI AMENDMENTS The Board of Directors shall have the power to make, alter and repeal these Bylaws, and to adopt new bylaws, by an affirmative vote of a majority of the whole Board, provided that notice of the proposal to make, alter or repeal these Bylaws, or to adopt new bylaws, must be included in the notice of the meeting of the Board of Directors at which such action takes place. -16- 1649MB37.2H SECRETARY'S CERTIFICATE I, RICHARD L. KRAMER, Secretary of PRECISE PLASTIC PRODUCTS, INC. (the "Corporation"), a Delaware corporation, DO HEREBY CERTIFY that the foregoing is a true and correct copy of the Corporation's Bylaws as adopted by the Board of Directors of the Corporation on July 31, 1991. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Corporate Seal of the Corporation as of the 31st day of July, 1991. /s/ Richard L. Kramer --------------------------------------- Richard L. Kramer, Secretary [Corporate Seal] -17- 1649MB37.2H EX-3.3 4 CERTIFICATE OF INCORPORATION CERTIFICATE OF INCORPORATION OF Precise Technology of Delaware, Inc. FIRST: The name of the corporation is: Precise Technology of Delaware, Inc. SECOND: The registered office of the corporation is to be located at The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, in the County of New Castle, in the State of Delaware. The name of its registered agent at that address is The Corporation Trust Company, 1209 Orange Street, Wilmington, DE 19801. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: The corporation shall be authorized to issue 3,000 shares of common stock with a par value of $.01 per share. FIFTH: Elections of directors need not be by written ballot. SIXTH: The original by-laws of the corporation shall be adopted by the initial incorporator named herein. Thereafter the board of directors shall have the power, in addition to the stockholders, to make, alter or repeal the by-laws of the corporation. SEVENTH: A director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. No amendment or repeal of this Article SEVENTH, or subsequently adopted inconsistent provision of this Certificate of Incorporation shall decrease the protection afforded to a director by this Article with respect to any act or omission of the director occurring prior to such amendment, repeal or adoption of an inconsistent provision. EIGHTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under ss. 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or any receiver or receivers appointed for the corporation under ss. 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or an all the stockholders or class of stockholders, of this corporation, as the case may be, and also on the corporation. NINTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner prescribed at the time by statute, and all rights conferred upon stockholders in this Certificate of Incorporation are granted subject to this reservation. TENTH: The name and mailing address of the incorporator are as follows: Patricia A. Junker KLETT LIEBER ROONEY & SCHORLING 40th Floor, One Oxford Centre Pittsburgh, PA 15219 I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this Certificate, hereby declaring and certifying that this is my act and deed and that the facts herein stated are true, and accordingly have executed this Certificate on October 20, 1993. /s/ Patricia A. Junker ------------------------- Patricia A. Junker Incorporator EX-3.4 5 B Y - L A W S B Y - L A W S OF Precise Technology of Delaware, Inc. (a Delaware Corporation) ...oo0oo... ADOPTED: October 21, 1993 ARTICLE I Offices and Fiscal Year SECTION 1.01. Registered Office. The registered office of the corporation shall be in The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, in the County of New Castle, in the State of Delaware until otherwise established by a vote of a majority of the board of directors in office, and a statement of such change is filed in the manner provided by statute. SECTION 1.02. Other Offices. The corporation may also have offices at such other places within or without the State of Delaware as the board of directors may from time to time determine or the business of the corporation requires. SECTION 1.03. Fiscal Year. The fiscal year of the corporation shall end on the 31st day of December in each year. ARTICLE II Meetings of Stockholders SECTION 2.01. Place of Meeting. All meetings of the stockholders of the corporation shall be held at the registered office of the corporation, or at such other place within or without the State of Delaware as shall be designated by the board of directors in the notice of such meeting. SECTION 2.02. Annual Meeting. The board of directors may fix the date and time of the annual meeting of the stockholders, but if no such date and time is fixed by the board, the meeting for any calendar year shall be held on the first Monday of May in such year, if not a legal holiday, and if a legal holiday then on the next succeeding business day at 10:00 o'clock A.M., and at the meeting the stockholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. SECTION 2.03. Special Meetings. Special meetings of the stockholders of the corporation for any purpose or purposes for which meetings may lawfully be called, may be called at any time by the chairman of the board, a majority of the board of directors, the president, or at the request, in writing, of stockholders owning a majority of the amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. At any time, upon written request of any person or persons who have duly called a special meeting, which written request shall state the purpose or purposes of the meeting, it shall be the duty of the secretary to fix the date of the meeting to be held at such date and time as the secretary may fix, not less than ten nor more than sixty days after the receipt of the request, and to give due notice thereof. If the secretary shall neglect or refuse to fix the time and date of such meeting and give notice thereof, the person or persons calling the meeting may do so. SECTION 2.04. Notice of Meetings. Written notice of the place, date and hour of every meeting of the stockholders, whether annual or special, shall be given to each stockholder of record entitled to vote at the meeting not less than ten nor more than sixty days before the date of the meeting. Every notice of a special meeting shall state the purpose or purposes thereof. SECTION 2.05. Quorum, Manner of Acting and Adjournment. The holders of a majority of the stock issued and outstanding (not including treasury stock) and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, by the certificate of incorporation or by these by-laws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At any such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. When a quorum is present at any meeting, the vote of the holders of the majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one 2 upon which, by express provision of the applicable statute, the certificate of incorporation or these by-laws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Except upon those questions governed by the aforesaid express provisions, the stockholders present in person or by proxy at a duly organized meeting can continue to do business until adjournment, notwithstanding withdrawal of enough stockholders to leave less than a quorum. SECTION 2.06. Organization. At every meeting of the stockholders, the chairman of the board, if there be one, or in the case of a vacancy in the office or absence of the chairman of the board, one of the following persons present in the order stated: the vice chairman, if one has been appointed, the president, the vice presidents in their order of rank and seniority, a chairman designated by the board of directors or a chairman chosen by the stockholders entitled to cast a majority of the votes that all stockholders present in person or by proxy are entitled to cast, shall act as chairman, and the secretary, or, in his absence, an assistant secretary, or in the absence of the secretary and the assistant secretaries, a person appointed by the chairman, shall act as secretary. SECTION 2.07. Voting. Each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of capital stock having voting power held by such stockholder. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Every proxy shall be executed in writing by the stockholder or by his duly authorized attorney-in-fact and filed with the secretary of the corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until notice thereof has been given to the secretary of the corporation. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the secretary of the corporation. SECTION 2.08. Consent of Stockholders in Lieu of Meeting. Any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such 3 stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required above to the corporation, written consents signed by a sufficient number of holders to take action are delivered to the corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 2.09. Voting Lists. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting. The list shall be arranged in alphabetical order and shall show the address of each stockholder and the number of shares registered in the name of each stockholder. The list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 2.10. Voting by Ballot. All elections of directors shall be by written ballot, unless otherwise provided in the certificate of incorporation; the vote upon any other matter need not be by ballot. SECTION 2.11. Inspectors of Election. In advance of any meeting of stockholders the board of directors may appoint inspectors of election, who need not be stockholders, to act at such meeting or any adjournment thereof. If inspectors of election are not so appointed, the chairman of any such meeting may, and upon the demand of any stockholder or his proxy at the 4 meeting and before voting begins shall, appoint inspectors of election. The number of inspectors shall be either one or three, as determined, in the case of judges appointed upon demand of a stockholder, by stockholders present entitled to cast a majority of the votes which all stockholders present are entitled to cast thereon. No person who is a candidate for office shall act as an inspector. In case any person appointed as an inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the board of directors in advance of the convening of the meeting, or at the meeting by the chairman of the meeting. If inspectors of election are appointed as aforesaid, they shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes, determine the result, and do such acts as may be proper to conduct the election or vote with fairness to all stockholders. If there be three inspectors of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. On request of the chairman of the meeting or of any stockholder or his proxy, the inspectors shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. ARTICLE III Board of Directors SECTION 3.01. Powers. The board of directors shall have full power to manage the business and affairs of the corporation; and all powers of the corporation, except those specifically reserved or granted to the stockholders by statute, the certificate of incorporation or these by-laws, are hereby granted to and vested in the board of directors. SECTION 3.02. Number and Term of Office. The board of directors shall consist of such number of directors, not less than 2 nor more than 7, as may be determined from time to time by resolution of the board of directors. Each director shall serve until the next annual meeting of the stockholders and until his successor shall have been elected and qualified, except in the event of his death, resignation or removal. All directors of the corporation shall be natural persons, but need not be residents of Delaware or stockholders of the corporation. 5 SECTION 3.03. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. SECTION 3.04. Resignations. Any director of the corporation may resign at any time by giving written notice to the president or the secretary of the corporation. Such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3.05. Organization. At every meeting of the board of directors, the chairman of the board, if there be one, or, in the case of a vacancy in the office or absence of the chairman of the board, one of the following officers present in the order stated: the vice chairman of the board, if there be one, the president, the vice presidents in their order of rank and seniority, or a chairman chosen by a majority of the directors present, shall preside, and the secretary, or, in his absence, an assistant secretary, or in the absence of the secretary and the assistant secretaries, any person appointed by the chairman of the meeting, shall act as secretary. SECTION 3.06. Place of Meeting. The board of directors may hold its meetings, both regular and special, at such place or places within or without the State of Delaware as the board of directors may from time to time appoint, or as may be designated in the notice calling the meeting. 6 SECTION 3.07. Organization Meeting. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. SECTION 3.08. Regular Meetings. Regular meetings of the board of directors may be held without notice at such time and place as shall be designated from time to time by resolution of the board of directors. If the date fixed for any such regular meeting be a legal holiday under the laws of the State where such meeting is to be held, then the same shall be held on the next succeeding business day, not a Saturday, or at such other time as may be determined by resolution of the board of directors. At such meetings, the directors shall transact such business as may properly be brought before the meeting. SECTION 3.09. Special Meetings. Special meetings of the board of directors shall be held whenever called by the president or by two or more of the directors. Notice of each such meeting shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone) or 48 hours (in the case of notice by telegram) or five days (in the case of notice by mail) before the time at which the meeting is to be held. Each such notice shall state the time and place of the meeting to be so held. SECTION 3.10. Quorum, Manner of Acting and Adjournment. At all meetings of the board a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any 7 committee thereof may be taken without a meeting, if all members of the board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board. SECTION 3.11. Executive and Other Committees. The board of directors may, by resolution adopted by a majority of the whole board, designate an executive committee and one or more other committees, each committee to consist of one or more directors. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member, and the alternate or alternates, if any, designated for such member, of any committee the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. Any such committee to the extent provided in the resolution establishing such committee shall have and may exercise all the power and authority of the board of directors in the management of the business and affairs of the corporation, including the power or authority to declare a dividend or to authorize the issuance of stock, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the Delaware General Corporation Law ("DGCL"), fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation), adopting an agreement of merger or consolidation under Section 251 or 252 of the DGCL, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger pursuant to Section 253 of the DGCL. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee so formed shall keep regular minutes of its meetings and report the same to the board of directors when required. 8 SECTION 3.12. Compensation of Directors. Unless otherwise restricted by the certificate of incorporation, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. ARTICLE IV Notice - Waivers - Meetings SECTION 4.01. Notice, What Constitutes. Whenever, under the provisions of the statutes of Delaware or the certificate of incorporation or these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given in accordance with Section 3.09 of Article III hereof. SECTION 4.02. Waivers of Notice. Whenever any written notice is required to be given under the provisions of the certificate of incorporation, these by-laws, or by statute, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice of such meeting. Attendance of a person, either in person or by proxy, at any meeting, shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened. SECTION 4.03. Exception to Requirements of Notice. Whenever notice is required to be given, under any provision of the DGCL or of the certificate of incorporation or these by-laws, to any person with whom communication is unlawful, the giving of 9 such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any section of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. Whenever notice is required to be given, under any provision of the DGCL or the certificate of incorporation or these by-laws, to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a 12 month period, have been mailed addressed to such person at his address as shown on the records of the corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the corporation a written notice setting forth his then current address, the requirement that notice be given to such person shall be reinstated. In the event that the action taken by the corporation is such as to require the filing of a certificate under any section of the DGCL, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to this section. SECTION 4.04. Conference Telephone Meetings. One or more directors may participate in a meeting of the board, or of a committee of the board, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at such meeting. ARTICLE V Officers SECTION 5.01. Number, Qualifications and Designation. The officers of the corporation shall be chosen by the board of 10 directors and shall be a president, one or more vice presidents, a secretary, a treasurer, and such other officers as may be elected in accordance with the provisions of Section 5.03 of this Article. One person may hold more than one office. Officers may be, but need not be, directors or stockholders of the corporation. The board of directors may elect from among the members of the board a chairman of the board and a vice chairman of the board who shall be officers of the corporation. SECTION 5.02. Election and Term of Office. The officers of the corporation, except those elected by delegated authority pursuant to Section 5.03 of this Article, shall be elected annually by the board of directors, and each such officer shall hold his office until his successor shall have been elected and qualified, or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the corporation. SECTION 5.03. Subordinate Officers, Committees and Agents. The board of directors may from time to time elect such other officers and appoint such committees, employees or other agents as it deems necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as are provided in these by-laws, or as the board of directors may from time to time determine. The board of directors may delegate to any officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. SECTION 5.04. The Chairman and Vice Chairman of the Board. The chairman of the board or in his absence, the vice chairman of the board, shall preside at all meetings of the stockholders and of the board of directors, and shall perform such other duties as may from time to time be assigned to them by the board of directors. SECTION 5.05. The President. The president shall be the chief executive officer of the corporation and shall have general supervision over the business and operations of the corporation, subject, however, to the control of the board of directors. He shall sign, execute, and acknowledge, in the name of the corporation, deeds, mortgages, bonds, contracts or other instruments, authorized by the board of directors, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors, or by these by-laws, to some other officer or agent of the corporation; and, in general, shall perform all duties incident to the office of president, and such other duties as from time to time may be assigned to him by the board of directors. 11 SECTION 5.06. The Vice Presidents. The vice presidents shall perform the duties of the president in his absence and such other duties as may from time to time be assigned to them by the board of directors or by the president. SECTION 5.07. The Secretary. The secretary, or an assistant secretary, shall attend all meetings of the stockholders and of the board of directors and shall record the proceedings of the stockholders and of the directors and of committees of the board in a book or books to be kept for that purpose; see that notices are given and records and reports properly kept and filed by the corporation as required by law; be the custodian of the seal of the corporation and see that it is affixed to all documents to be executed on behalf of the corporation under its seal; and, in general, perform all duties incident to the office of secretary, and such other duties as may from time to time be assigned to him by the board of directors or the president. SECTION 5.08. The Treasurer. The treasurer or an assistant treasurer shall have or provide for the custody of the funds or other property of the corporation and shall keep a separate book account of the same to his credit as treasurer; collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the corporation; deposit all funds in his custody as treasurer in such banks or other places of deposit as the board of directors may from time to time designate; whenever so required by the board of directors, render an account showing his transactions as treasurer and the financial condition of the corporation; and, in general, discharge such other duties as may from time to time be assigned to him by the board of directors or the president. SECTION 5.09. Officers' Bonds. No officer of the corporation need provide a bond to guarantee the faithful discharge of his duties unless the board of directors shall by resolution so require a bond in which event such officer shall give the corporation a bond (which shall be renewed if and as required) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office. SECTION 5.10. Salaries. The salaries of the officers and agents of the corporation elected by the board of directors shall be fixed from time to time by the board of directors. SECTION 5.11. Authority. The discharge by the corporation of its functions as a trustee of any business trust for which it is appointed, and agrees to serve, as trustee shall be deemed to be part of the ordinary business of the corporation and any action taken on behalf of the corporation in its capacity 12 as trustee of a business trust shall be deemed to have been taken in the regular course of business of the corporation. Approval by the board of directors shall not be required for the taking of any action by the corporation as a trustee of a business trust and any such action may be taken by the officers of the corporation under their own authority. ARTICLE VI Certificates of Stock, Transfer, Etc. SECTION 6.01. Issuance. Each stockholder shall be entitled to a certificate or certificates for shares of stock of the corporation owned by him upon his request therefor. The stock certificates of the corporation shall be numbered and registered in the stock ledger and transfer books of the corporation as they are issued. They shall be signed by the president or a vice president and by the secretary or an assistant secretary or the treasurer or an assistant treasurer, and shall bear the corporate seal, which may be a facsimile, engraved or printed. Any of or all the signatures upon such certificate may be a facsimile, engraved or printed. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer, transfer agent or registrar before the certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent or registrar at the date of its issue. SECTION 6.02. Transfer. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. No transfer shall be made which would be inconsistent with the provisions of Article 8, Title 6 of the Delaware Uniform Commercial Code-Investment Securities. SECTION 6.03. Stock Certificates. Stock certificates of the corporation shall be in such form as provided by statute and approved by the board of directors. The stock record books and the blank stock certificates books shall be kept by the secretary or by any agency designated by the board of directors for that purpose. SECTION 6.04. Lost, Stolen, Destroyed or Mutilated Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation 13 alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. SECTION 6.05. Record Holder of Shares. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. SECTION 6.06. Determination of Stockholders of Record. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record has been fixed by the board of directors, the record date for determining 14 stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors, is required by the DGCL, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by the DGCL, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights of the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. ARTICLE VII Indemnification of Directors, Officers and Other Authorized Representatives SECTION 7.01. Indemnification of Authorized Representatives in Third Party Proceedings. The corporation shall indemnify any person who was or is an authorized representative of the corporation, and who was or is a party, or is threatened to be made a party to any third party proceeding, by reason of the fact that such person was or is an authorized representative of the corporation, against expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such third party proceeding if such person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal third party proceeding, had no reasonable cause to 15 believe such conduct was unlawful. The termination of any third party proceeding by judgment, order, settlement, indictment, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the authorized representative did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to, the best interests of the corporation, and, with respect to any criminal third party proceeding, had reasonable cause to believe that such conduct was unlawful. SECTION 7.02. Indemnification of Authorized Representatives in Corporate Proceedings. The corporation shall indemnify any person who was or is an authorized representative of the corporation and who was or is a party or is threatened to be made a party to any corporate proceeding, by reason of the fact that such person was or is an authorized representative of the corporation, against expenses actually and reasonably incurred by such person in connection with the defense or settlement of such corporate action if such person acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such corporate proceeding was pending shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such authorized representative is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 7.03. Mandatory Indemnification of Authorized Representatives. To the extent that an authorized representative of the corporation has been successful on the merits or otherwise in defense of any third party or corporate proceeding or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses actually and reasonably incurred by such person in connection therewith. SECTION 7.04. Determination of Entitlement to Indemnification. Any indemnification under Section 7.01, 7.02 or 7.03 of this Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the authorized representative is proper in the circumstances because such person has either met the applicable standard of conduct set forth in Section 7.01 or 7.02 or has been successful on the merits or otherwise as set forth in Section 7.03 and that the amount requested has been actually and reasonably incurred. Such determination shall be made: 16 (1) By the board of directors by a majority of a quorum consisting of directors who were not parties to such third party or corporate proceeding, or (2) If such a quorum is not obtainable, or, even if obtainable, a majority vote of such a quorum so directs, by independent legal counsel in a written opinion, or (3) By the stockholders. SECTION 7.05. Advancing Expenses. Expenses actually and reasonably incurred in defending a third party or corporate proceeding may be paid on behalf of an authorized representative by the corporation in advance of the final disposition of such third party or corporate proceeding upon receipt of an undertaking by or on behalf of such authorized representative to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this Article. The financial ability of such authorized representative to make such repayment shall not be a prerequisite to the making of an advance. SECTION 7.06. Definitions. For purposes of this Article: (1) "authorized representative" shall mean a director or officer of the corporation, or a person serving at the request of the corporation as a director, officer, or trustee, of another corporation, partnership, joint venture, trust or other enterprise; (2) "corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. (3) "corporate proceeding" shall mean any threatened, pending or completed action or suit by or in the 17 right of the corporation to procure a judgment in its favor or investigative proceeding by the corporation; (4) "criminal third party proceeding" shall include any action or investigation which could or does lead to a criminal third party proceeding; (5) "expenses" shall include attorneys' fees and disbursements; (6) "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; (7) "not opposed to the best interest of the corporation" shall include actions taken in good faith and in a manner the authorized representative reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan; (8) "other enterprises" shall include employee benefit plans; (9) "party" shall include the giving of testimony or similar involvement; (10) "serving at the request of the corporation" shall include any service as a director, officer or employee of the corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants, or beneficiaries; and (11) "third party proceeding" shall mean any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative, other than an action by or in the right of the corporation. SECTION 7.07. Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article. SECTION 7.08. Scope of Article. The indemnification of authorized representatives and advancement of expenses, as 18 authorized by the preceding provisions of this Article, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity. The indemnification and advancement of expenses provided by or granted pursuant to this Article shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be an authorized representative and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 7.09. Reliance on Provisions. Each person who shall act as an authorized representative of the corporation shall be deemed to be doing so in reliance upon the rights of indemnification provided by this Article. ARTICLE VIII General Provisions SECTION 8.01. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the corporation, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. SECTION 8.02. Annual Statements. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. SECTION 8.03. Contracts. Except as otherwise provided in these by-laws, the board of directors may authorize any officer or officers including the chairman and vice chairman of the board of directors, or any agent or agents, to enter into any contract or to execute or deliver any instrument on behalf of the 19 corporation and such authority may be general or confined to specific instances. SECTION 8.04. Checks. All checks, notes, bills of exchange or other orders in writing shall be signed by such person or persons as the board of directors may from time to time designate. SECTION 8.05. Corporate Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its incorporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. SECTION 8.06. Deposits. All funds of the corporation shall be deposited from time to time to the credit of the corporation in such banks, trust companies, or other depositories as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees as the board of directors shall from time to time determine. SECTION 8.07. Corporate Records. Every stockholder shall, upon written demand under oath stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business, for any proper purpose, the stock ledger, books or records of account, and records of the proceedings of the stockholders and directors, and make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. Where the stockholder seeks to inspect the books and records of the corporation, other than its stock ledger or list of stockholders, the stockholder shall first establish (1) compliance with the provisions of this section respecting the form and manner of making demand for inspection of such documents; and (2) that the inspection sought is for a proper purpose. Where the stockholder seeks to inspect the stock ledger or list of stockholders of the corporation and has complied with the provisions of this section respecting the form and manner of making demand for inspection of such documents, the burden of proof shall be upon the corporation to establish that the inspection sought is for an improper purpose. Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders and its 20 other books and records for a purpose reasonably related to his position as a director. SECTION 8.08. Amendment of By-Laws. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation, at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting. 21 EX-3.5 6 CERTIFICATE OF INCORPORATION CERTIFICATE OF INCORPORATION OF PRECISE TECHNOLOGY OF ILLINOIS, INC. 1. The name of the corporation is Precise Technology of Illinois, Inc. 2. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock which the corporation shall have the authority to issue is One Thousand Five Hundred (1,500); all of such shares shall be without par value. 5. The name and mailing address of the sole incorporator is as follows: Michael D. Schenker 35th Floor, BP America Building 200 Public Square Cleveland, Ohio 44114-2302 The name and mailing address of each person who is to serve as a director until the first annual meeting of the stockholders or until a successor is elected and qualified, is as follows: Richard L. Kramer 1430 Broadway Avenue 13th Floor New York, New York 10018 William L. Remley 1430 Broadway Avenue 13th Floor New York, New York 10018 6. The corporation is to have perpetual existence. 7. Election of directors need not be by written ballot unless the by-laws of the corporation shall so provide. 8. The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. 9. A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this Certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 29th day of September, 1995. /s/ Michael D. Schenker - ------------------------- Michael D. Schenker EX-3.6 7 BY-LAWS BY-LAWS PRECISE TECHNOLOGY OF ILLINOIS, INC. ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation shall be at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Additional Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Time and Place. A meeting of stockholders for any purpose may be held at such time and place, within or without the State of Delaware, as the Board of Directors may fix from time to time and as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meeting. Annual meetings of stockholders shall be held on September 15, if not a legal holiday, or, if a legal holiday, then on the next secular day following, at 2 P.M., or at such other date and time as shall, from time to time, be designated by the Board of Directors and stated in the notice of the meeting. At such annual meeting, the stockholders shall elect a Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. Notice of Annual Meeting. Written notice of the annual meeting, stating the place, date and time thereof, shall be given to each stockholder entitled to vote at such meeting not less than 10 (unless a longer period is required by law) nor more than 60 days prior to the meeting. Section 4. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Chairman of the Board or Vice Chairman of the Board, if any, and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 5. Notice of Special Meeting. Written notice of a special meeting, stating the place, date and time thereof and the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than 10 (unless a longer period is required by law) nor more than 60 days prior to the meeting. Section 6. List of Stockholders. The officer in charge of the stock ledger of the Corporation or the transfer agent shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, at a place within the city where the meeting is to be held, which place, if other than the place of the meeting, shall be specified in the notice of the meeting. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present in person thereat. Section 7. Presiding Officer; Order of Business. (a) Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or, if he is not present (or, if there is none), by the Vice Chairman of the Board, if any, or, if he is not present, by the President, or, if he is not present, by such person who may have been chosen by the Board of Directors, or, if none of such persons is present, by a chairman to be chosen by the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at the meeting and who are present in person or represented by proxy. The Secretary of the Corporation, or, if he is not present, an Assistant Secretary, or if he is not present, such person as may be chosen by the Board of Directors, shall act as secretary of meetings of stockholders, or, if none of such persons is present, the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at the meeting and who are present in person or represented by proxy shall choose any person present to act as secretary of the meeting. (b) The following order of business, unless otherwise ordered at the meeting, shall be observed as far as practicable and consistent with the purposes of the meeting: -2- 1. Call of the meeting to order. 2. Presentation of proof of mailing of the notice of the meeting and, if the meeting is a special meeting, the call thereof. 3. Presentation of proxies. 4. Announcement that a quorum is present. 5. Reading and approval of the minutes of the previous meeting. 6. Reports, if any, of officers. 7. Election of directors, if the meeting is an annual meeting or a meeting called for that purpose. 8. Consideration of the specific purpose or purposes for which the meeting has been called (other than the election of directors), if the meeting is a special meeting. 9. Transaction of such other business as may properly come before the meeting. 10. Adjournment. Section 8. Quorum; Adjournments. The holders of a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be necessary to, and shall constitute a quorum for, the transaction of business at all meetings of the stockholders, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, until a quorum shall be present or represented. Even if a quorum shall be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time for good cause, without notice of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, until a date which is not more than 30 days after the date of the original meeting. At any such adjourned meeting, at which a quorum shall be present in person or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than 30 days, or if after the adjournment a new record -3- date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote thereat. Section 9. Voting. (a) At any meeting of stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy. Except as otherwise provided by law or the Certificate of Incorporation, each stockholder of record shall be entitled to one vote for each share of capital stock registered in his name on the books of the Corporation. (b) All elections shall be determined by a plurality vote, and, except as otherwise provided by law or the Certificate of Incorporation, all other matters shall be determined by a vote of a majority of the shares present in person or represented by proxy and voting on such other matters. Section 10. Action by Consent. Any action required or permitted by law or the Certificate of Incorporation to be taken at any meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a written consent, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present or represented by proxy and voted. Such written consent shall be filed with the minutes of meetings of stockholders. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not so consented in writing thereto. ARTICLE III DIRECTORS Section 1. General Powers; Number; Tenure. The business of the Corporation shall be managed by its Board of Directors, which may exercise all powers of the Corporation and perform all lawful acts and things which are not by law, the Certificate of Incorporation or these Bylaws directed or required to be exercised or performed by the stockholders. Within the limits specified in this Section 1, the number of directors shall be no fewer than three nor more than five, which specific number shall be determined by the Board of Directors, except that if no such determination is made, the number of directors shall be three. Except as otherwise provided in any valid stockholder agreement or voting trust agreement by and among the stockholders of the Corporation, the directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and shall qualify. -4- Except as otherwise provided in any valid stockholder agreement or voting trust agreement by and among the stockholders of the Corporation or any other agreement applicable to or binding upon the stockholders of the Corporation, directors need not be stockholders. Section 2. Vacancies. Except as otherwise provided in any valid stockholder agreement or voting trust agreement by and among the stockholders of the Corporation or any other agreement applicable to or binding upon the stockholders of the Corporation, if any vacancies occur in the Board of Directors, or if any new directorships are created, they may be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Each director so chosen shall hold office until the next annual meeting of stockholders and until his successor is duly elected and shall qualify. If there are no directors in office, any officer or stockholder may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these Bylaws, at which meeting such vacancies shall be filled. Section 3. Removal; Resignation. (a) Except as otherwise provided by law or the Certificate of Incorporation or in any valid stockholder agreement or voting trust agreement by and among the stockholders of the Corporation or any other agreement applicable to or binding upon stockholders of the Corporation, any director, directors or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. (b) Any director may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board, the Vice Chairman or the Board or the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, a resignation shall take effect upon delivery thereof to the Board of Directors or the designated officer. It shall not be necessary for a resignation to be accepted before it becomes effective. Section 4. Place of Meetings. The Board of Directors may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. Annual Meeting. The annual meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of stockholders, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. Section 6. Regular Meetings. Additional regular meetings of the Board of Directors may be held without notice, at such time and place as may from time to time be determined by the Board of Directors. -5- Section 7. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the Vice Chairman of the Board or by 2 or more directors on at least 2 days' notice to each director, if such notice is delivered personally or sent by telegram, or on at least 3 days' notice if sent by mail. Special meetings shall be called by the Chairman of the Board, Vice Chairman of the Board or 2 or more directors in like manner and on like notice on the written request of one-half or more of the number of directors then in office. Any such notice need not state the purpose or purposes of such meeting except as provided in Article XI. Section 8. Quorum; Adjournments. At all meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law or the Certificate of Incorporation. If a quorum is not present at any meeting of the Board of Directors, the directors present may adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Compensation. Directors shall be entitled to such compensation for their services as directors and to such reimbursement for any reasonable expenses incurred in attending directors' meetings as may from time to time be fixed by the Board of Directors. The compensation of directors may be on such basis as is determined by the Board of Directors. Any director receiving compensation under these provisions shall not be barred from serving the Corporation in any other capacity and receiving compensation and reimbursement for reasonable expenses for such other services. Section 10. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if a written consent to such action is signed by all members of the Board of Directors and such written consent is filed with the minutes of its proceedings. Section 11. Meetings by Telephone or Similar Communications. The Board of Directors may participate in a meeting by means of conference telephone or similar communications equipment by means of which all directors participating in the meeting can hear each other, and participation in such meeting shall constitute presence in person by such director at such meeting. -6- ARTICLE IV COMMITTEES Section 1. Executive Committee. The Board of Directors, by resolution adopted by a majority of the whole Board, may appoint an Executive Committee consisting of not more than three directors, one of whom shall be designated as Chairman of the Executive Committee. Each member of the Executive Committee shall continue as a member thereof until the expiration of his term as a director, or his earlier resignation, unless sooner removed as a member or as a director. Section 2. Powers. Unless circumscribed by resolution of the Board appointing the Executive Committee or except as otherwise provided by law, the Executive Committee shall have and may exercise all of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation including, without limitation, the power and authority to declare a dividend in cash, property or its own shares and to authorize the issuance of any shares of capital stock of the Corporation of any class now or hereafter authorized, and any options or warrants for, and right to subscribe to, such shares, and any securities convertible into or exchangeable for such shares; and may authorize the seal of the Corporation to be affixed to all papers which may require it. Section 3. Procedure; Meetings. The Executive Committee shall fix its own rules of procedure and shall meet at such times and at such place or places as may be provided by such rules or as the members of the Executive Committee shall provide. The Executive Committee shall keep regular minutes of its meetings and deliver such minutes to the Board of Directors. The Chairman of the Executive Committee, or, in his absence, a member of the Executive Committee chosen by a majority of the members present, shall preside at meetings of the Executive Committee, and another member thereof chosen by the Executive Committee shall act as Secretary of the Executive Committee. Section 4. Quorum. A majority of the Executive Committee shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the members of the Executive Committee; provided, however, that when an Executive Committee of one member is authorized under the provisions of Section 1 of this Article, such one member shall constitute a quorum. Section 5. Other Committees. The Board of Directors, by resolutions adopted by a majority of the whole Board, may appoint such other committee or committees as it shall deem advisable and with such functions and duties as the Board of Directors shall prescribe. -7- Section 6. Vacancies; Changes; Discharge. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee. Section 7. Compensation. Members of any committee shall be entitled to such compensation for their services as members of any such committee and to such reimbursement for any reasonable expenses incurred in attending committee meetings as may from time to time be fixed by the Board of Directors. Any member may waive compensation for any meeting. Any committee member receiving compensation under these provisions shall not be barred from serving the Corporation in any other capacity and from receiving compensation and reimbursement of reasonable expenses for such other services. Section 8. Action by Consent. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if a written consent to such action is signed by all members of the committee and such written consent if filed with the minutes of its proceedings. Section 9. Meetings by Telephone or Similar Communications. The members of any committee designated by the Board of Directors may participate in a meeting of such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other and participation in such meeting shall constitute presence in person at such meeting. ARTICLE V NOTICES Section 1. Form; Delivery. Whenever, under the provisions of law, the Certificate of Incorporation or these Bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice unless otherwise specifically provided, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid. Such notices shall be deemed to be given at the time they are deposited in the United States mail. Notice to a director may also be given personally or by telegram sent to his address as it appears on the records of the Corporation. Section 2. Waiver. Whenever any notice is required to be given under the provisions of law, the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person or person entitled to said notice, whether before or after the time stated therein, shall be deemed to be equivalent to such notice. In addition, -8- any stockholder who attends a meeting of stockholders in person, or is represented at such meeting by proxy, without protesting at the commencement of the meeting the lack of notice thereof to him, or any director who attends a meeting of the Board of Directors without protesting, at the commencement of the meeting, such lack of notice, shall be conclusively deemed to have waived notice of such meeting. ARTICLE VI OFFICERS Section 1. Designations. The officers of the Corporation shall be chosen by the Board of Directors. The Board of Directors may choose a Chairman of the Board, a Vice Chairman of the Board, a President, a Vice President or Vice Presidents, a Secretary and a Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers and other officers and agents as it shall deem necessary or appropriate. All officers of the Corporation shall exercise such powers and perform such duties as shall from time to time be determined by the Board of Directors. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide. Section 2. Term of Office; Removal. The Board of Directors at its annual meeting after each annual meeting of stockholders shall choose a President, a Secretary and a Treasurer. The Board of Directors may also choose a Chairman of the Board, a Vice Chairman of the Board, a Vice President or Vice Presidents, one or more Assistant Secretaries and/or Assistant Treasurers, and such other officers and agents as it shall deem necessary or appropriate. Each officer of the Corporation shall hold office until his successor is chosen and shall qualify. Any officer elected or appointed by the Board of Directors may be removed, with or without cause, at any time by the affirmative vote of a majority of the directors then in office. Such removal shall not prejudice the contract rights, if any, of the person so removed. Any vacancy occurring in any office of the Corporation may be filled for the unexpired portion of the term by the Board of Directors. Section 3. Compensation. The salaries of all officers of the Corporation shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. Section 4. The Chairman of the Board. (a) The Chairman of the Board, if any, shall be the chief executive officer of the Corporation and, subject to the direction of the Board of Directors, shall have general charge of the business, affairs and property of the Corporation and general -9- supervision over its other officers. In general, he shall perform the duties incident to the office of Chairman of the Board and chief executive officer and shall see that all orders and resolutions of the Board of Directors are carried into effect. In addition to and not in limitation of the foregoing, the Chairman of the Board shall be empowered to authorize any change of the registered office or registered agent (or both) of the Corporation in the State of Delaware. He shall, if present, preside at all meetings of stockholders and of the Board of Directors. (b) Unless otherwise prescribed by the Board of Directors, the Chairman of the Board shall have full power and authority on behalf of the Corporation to attend, act and vote at any meeting of security holders of other corporations in which the Corporation may hold securities. At such meeting the Chairman of the Board shall possess and may exercise any and all rights and powers incident to the ownership of such securities which the Corporation might have possessed and exercised if it had been present. The Board of Directors may from time to time confer like powers upon any other person or persons. (c) Unless otherwise prescribed by the Board of Directors, the Chairman of the Board may delegate some or all of his duties to the Vice Chairman of the Board, if any, or the President. Section 5. The Vice Chairman of the Board. The Vice Chairman of the Board, if any, shall, in the absence of the Chairman of the Board or in the event of his disability, perform the duties and exercise the powers of the Chairman of the Board and shall generally assist the Chairman of the Board and perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. Unless otherwise prescribed by the Board of Directors, the Vice Chairman of the Board may delegate some or all of his duties to the President. Section 6. The President. The President of the Corporation shall, subject to the direction of the Board of Directors, perform such executive, supervisory and management functions and duties as may be assigned to him from time to time by the Board of Directors or delegated to him by the Chairman of the Board or the Vice Chairman of the Board. Section 7. The Vice Presidents. The Vice President, if any (or in the event there be more than one, the Vice Presidents in the order designated, or in the absence of any designation, in the order of their election), shall, in the absence of the President or in the event of his disability, perform the duties and exercise the powers of the President and shall generally assist the President and perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. -10- Section 8. The Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all votes and the proceedings of the meetings in a book to be kept for that purpose and shall perform like duties for the Executive Committee or other committees, if required. He shall give, or cause to be given, notice of all meetings of the Board of Directors, and shall perform such other duties as may from time to time be prescribed by the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board or the President, under whose supervision he shall act. He shall have custody of the seal of the Corporation, and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and, when so affixed, the seal may be attested by his signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his signature. Section 8. The Assistant Secretary. The Assistant Secretary, if any (or in the event there be more than one, the Assistant Secretaries in the order designated, or in the absence of any designation, in the order of their election), shall, in the absence of the Secretary or in the event of his disability, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. Section 9. The Treasurer. The Treasurer shall have the custody of the corporate funds and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may from time to time be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the Vice Chairman of the Board, the President and the Board of Directors, at regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 10. The Assistant Treasurer. The Assistant Treasurer, if any (or in the event there shall be more than one, the Assistant Treasurers in the order designated, or in the absence of any designation, in the order of their election), shall, in the absence of the Treasurer or in the event of his disability, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. -11- ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS Reference is made to Section 145 (and any other relevant provisions) of the General Corporation Law of the State of Delaware. Particular reference is made to the class of persons (hereinafter called "Indemnitees") who may be indemnified by a Delaware corporation pursuant to the provisions of such Section 145, namely, any person (or the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The Corporation shall (and is hereby obligated to) indemnify the Indemnitees, and each of them, in each and every situation where the Corporation is obligated to make such indemnification pursuant to the aforesaid statutory provisions. The Corporation shall indemnify the Indemnitees, and each of them, and shall advance expenses, in each and every situation where, under the aforesaid statutory provisions, the Corporation is not obligated, but is nevertheless permitted or empowered, to make such indemnification pursuant to the aforesaid statutory provisions. With respect to any situation covered under this Article VII, the Corporation shall promptly make or cause to be made, by any of the methods referred to in subsection (d) of such Section 145, a determination as to whether each Indemnitee acted in good faith and in a manner such Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, in the case of any criminal action or proceeding, had no reasonable cause to believe that such Indemnitee's conduct was unlawful. No such indemnification shall be made (where not required by statute) unless it is determined that such Indemnitee acted in good faith and in a manner such Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, in the case of any criminal action or proceeding, had no reasonable cause to believe that such Indemnitee's conduct was unlawful. ARTICLE VIII AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS Section 1. Affiliated Transactions (Directors and Officers). No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, -12- or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction or solely because his or their votes are counted for such purpose, if: (a) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof, or the stockholders. Section 2. Determining Quorum. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee thereof which authorizes the contract or transaction. Section 3. Affiliated Transactions (Stockholders). No contract or transaction between the Corporation and one or more of its stockholders, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its stockholders are directors, officers, stockholders or otherwise affiliated, shall be void or voidable solely for this reason, or solely because the stockholder and the Corporation have directors and/or officers in common and such directors or officers are present at or participate in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction between the Corporation and the stockholder or solely because his or their votes are counted for such purpose. ARTICLE IX STOCK CERTIFICATES Section 1. Form; Signatures. (a) Every holder of stock in the Corporation shall be entitled to have a certificate, signed by the Chairman of the Board, the Vice Chairman of the Board or -13- the President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation exhibiting the number and class (and series, if any) of shares owned by him, and bearing the seal of the Corporation. Such signatures and seal may be facsimile. A certificate may be manually signed by a transfer agent or registrar other than the Corporation or its employee but may be a facsimile. In case any officer who has signed, or whose facsimile signature was placed on, a certificate shall have ceased to be such officer before such certificate is issued, it may nevertheless be issued by the Corporation with the same effect as if he were such officer at the date of its issue. (b) All stock certificates representing shares of capital stock which are subject to restrictions on transfer or to other restrictions may have imprinted thereon such notation to such effect as may be determined by the Board of Directors. Section 2. Registration of Transfer. Upon surrender to the Corporation or any transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, including, if necessary, any legal opinion required by the Corporation pursuant to any valid subscription or stockholders' agreement, it shall be the duty of the Corporation or its transfer agent to issue a new certificate to the person entitled thereto, to cancel the old certificate and to record the transaction upon its books. Section 3. Registered Stockholders. (a) Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person who is registered on its books as the owner of shares of its capital stock to receive dividends or other distributions, to vote as such owner, and to hold liable for calls and assessments any person who is registered on its books as the owner of shares of its capital stock. The Corporation shall not be bound to recognize any equitable or legal claim to or interest in such shares on the part of any other person. (b) If a stockholder desires that notices and/or dividends shall be sent to a name or address other than the name or address appearing on the stock ledger maintained by the Corporation (or by the transfer agent or registrar, if any), such stockholder shall have the duty to notify the Corporation (or the transfer agent or registrar, if any) in writing, of such desire. Such written notice shall specify the alternate name or address to be used. Section 4. Record Date. In order that the Corporation may determine the stockholders of record who are entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution, or to make a determination of the stockholders of record for any other proper purpose, the Board of Directors may, in advance, fix a date as -14- the record date for any such determination. Such date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to the date of any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting taken pursuant to Section 8 of Article II; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5. Lost, Stolen or Destroyed Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation which is claimed to have been lost, stolen or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum, or other security in such form, as it may direct as indemnity against any claim that may be against the Corporation with respect to the certificate claimed to have been lost, stolen or destroyed. ARTICLE X GENERAL PROVISIONS Section 1. Dividends. Subject to the provisions of the Certificate of Incorporation, dividends upon the outstanding capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law, and may be paid in cash, in property or in shares of the Corporation's capital stock. Section 2. Reserves. The Board of Directors shall have full power, subject to the provisions of law and the Certificate of Incorporation, to determine whether any, and, if so, what part, of the funds legally available for the payment of dividends shall be declared as dividends and paid to the stockholders of the Corporation. The Board of Directors, in its sole discretion, may fix a sum which may be set aside or reserved over and above the paid-in capital of the Corporation for working capital or as a reserve for any proper purpose, and may, from time to time, increase, diminish or vary such fund or funds. Section 3. Fiscal Year. The fiscal year of the Corporation shall be as determined from time to time by the Board of Directors. -15- Section 4. Seal. The corporate seal, if any, shall have inscribed thereon the name of the Corporation, the year of its incorporation and the words "Corporate Seal" and "Delaware". ARTICLE XI AMENDMENTS The Board of Directors shall have the power to make, alter and repeal these Bylaws, and to adopt new bylaws, by an affirmative vote of a majority of the whole Board, provided that notice of the proposal to make, alter or repeal these Bylaws, or to adopt new bylaws, must be included in the notice of the meeting of the Board of Directors at which such action takes place. -16- EX-3.7 8 ARTICLES OF INCORPORATION TREDEGAR MOLDED PRODUCTS COMPANY ARTICLES OF AMENDMENT I The name of the Corporation is Tredegar Molded Products Company (the "Corporation"). II Article I of the Corporation's Articles of Incorporation is hereby amended to read in its entirety as follows: "The name of the Corporation is Precise TMP, Inc." III The foregoing amendment was adopted by written consent of the Corporation's sole shareholder on April 14, 1996. Dated: April 4, 1996 TREDEGAR MOLDED PRODUCTS COMPANY By: /s/ John R. Weeks ------------------------- John R. Weeks, President ETHYL MOLDED PRODUCTS COMPANY ARTICLES OF AMENDMENT I The name of the Corporation is Ethyl Molded Products Company (the "Corporation"). II Article I of the Corporation's Articles of incorporation is hereby amended to read in its entirety as follows: "The name of the Corporation is Tredegar Molded Products Company." III The foregoing amendment was adopted by written consent of the Corporation's sole shareholder on June 30, 1989. Dated: June 30, 1989 ETHYL MOLDED PRODUCTS COMPANY By: /s/ John D. Gottwald ---------------------- John D. Gottwald President ARTICLES OF SERIAL DESIGNATION OF ETHYL MOLDED PRODUCTS COMPANY FIRST: The name of the corporation is Ethyl Molded Products Company. SECOND: The following resolution, establishing and designating a series of shares and fixing and determining the relative rights and preferences thereof, was duly adopted by the Board of Directors of the Corporation on December 16, 1983: SERIAL PREFERRED STOCK, SERIES A RESOLVED, that the Board of Directors hereby establishes a series of the Serial Preferred Stock of the Corporation to consist of 1,700 shares, and the Board of Directors hereby fixes and determines the relative rights and preferences of the shares of such series as follows: (1) Designation. The designation of the series of Serial Preferred Stock established by this resolution shall be "$120.00 Cumulative Preferred Stock, Series A (without par value)" (hereinafter called the "Series A Stock"). (2) Dividends. The holders of shares of the Series A Stock shall be entitled to receive, when and as declared by the Board of Directors, a cumulative dividend in cash at the rate of One Hundred Twenty Dollars per share per year, payable annually on the 2. last business day of December in each year (being hereinafter called a "dividend period") beginning on the last business day of December, 1984. Dividends on shares of the Series A Stock shall be cumulative commencing with the first day of the first dividend period for which a dividend is payable in accordance with the first sentence of this subdivision (whether or not there shall be net profits or net assets of the Corporation legally available for the payment of such dividends). All dividends declared upon the shares of the Series A Stock shall be declared pro rata. Holders of shares of the Series A Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of the dividends provided for herein. (3) Redemption. The shares of the Series A Stock shall be subject to redemption as follows: Optional Redemption Right. At any time after the tenth anniversary of the initial issuance of the Series A Stock, the Corporation may call for redemption all or any part of the outstanding Series A Stock at a price of $1,000 a share. Redemption Procedure. Notice of redemption of shares of the Series A Stock shall be given by a notice mailed by first class mail not less than 30 nor more than 60 days prior to the date fixed for redemption to the registered holders of the Series A Stock at their addresses as shown on the 3. books of the Corporation. On or at any time before the redemption date specified in any notice of redemption (the "Redemption Date") the Corporation may deposit in trust, for the account of the holders of the shares redeemed, funds necessary for such redemption with a bank or trust company in Richmond, Virginia or New York, New York, having capital and surplus aggregating at least $50,000,000. Upon the mailing as hereinabove provided of the notice of such redemption, provided such notice specifies the office of such bank or trust company where such deposit in trust has been made (or the date on which it will be made) and states that deposit is (or shall be) immediately available to the holders of the shares to be redeemed, and upon the making of such deposit in trust together with irrevocable instructions and authority to pay the amounts due upon redemption, then all shares with respect to the redemption of which such deposit and instructions shall have been made and such notice therefor given shall, whether or not the certificates therefor shall have been surrendered for cancellation, be deemed no longer to be outstanding for any purpose, and all rights with respect to such shares shall thereupon cease and terminate, except only the right of the holders of the certificates for such shares to receive, out 4. of the funds so deposited in trust, from and after the date of such deposit, the amount payable upon the redemption thereof (including all accumulated dividends), without interest. Payment of Dividends at Redemption. Before redeeming any shares of the Series A Stock, all accumulated dividends on the Series A Stock, including the dividend payable on the Redemption Date, shall be declared and paid on the Redemption Date. (4) Rights on Liquidation, Dissolution, Winding Up. In the event of any involuntary or voluntary liquidation, dissolution or winding up of the Corporation, the holders of the Series A Stock then outstanding shall be entitled to be paid out of assets of the Corporation available for distribution to its stockholders an amount equal to $1,000 per share, plus an amount equal to accumulated and unpaid dividends to and including the date on which such payment is made, but the holders of Series A Stock shall be entitled to no further participation in such distribution. (5) Voting. The holders of the Series A Stock shall have no voting rights except in the event that at any time or from time to time, while any shares of the Series A Stock are outstanding, six or more annual dividends, whether consecutive or not, on any shares of the Series A Stock shall be in arrears and unpaid, whether 5. or not declared, then the holders of all of the outstanding shares of the Series A Stock together with the holders of any other series of Serial Preferred Stock then entitled to such a vote under the terms of the Articles of Incorporation of the Corporation, voting as a single class, shall be entitled to elect two members of the Board of Directors of the Corporation. Immediately after the occurrence of such event, the number of directors of the Corporation shall be increased by two and (unless a regular meeting of stockholders of the Corporation is to be held within 60 days for the purpose of electing directors) the Corporation shall give prompt notice to the holders of all of the outstanding shares of the Serial Preferred Stock then so entitled to such a vote of a special meeting of such holders to take place within 60 days after the occurrence of such event. If such meeting shall not have been called as so provided, such meeting may be called at the expense of the Corporation by the holders of not less than five percent of such Serial Preferred Stock at the time outstanding, on written notice specifying the time and place of the meeting given by mail not less than ten days or more than 30 days before the date of such meeting specified in such notice. At such meeting the holders of all of such Serial Preferred Stock at the time outstanding, voting as a single class, shall have 6. the right to elect the two additional members of the Board of Directors of the Corporation. If a regular meeting of the stockholders of the Corporation for the purpose of electing directors is to be held within 60 days after the occurrence of such event, then at such meeting, and, in any event, at each subsequent meeting of the stockholders of the Corporation called for the purpose of electing directors, the holders of such Serial Preferred Stock at the time outstanding, voting as a single class, shall have the right to elect two members of the Board of Directors on the same conditions as stated above. At any special or regular meeting provided for in the next two preceding paragraphs, each outstanding share of such Serial Preferred Stock shall be entitled to one vote for the election of the directors provided for herein; the holders of a majority of the shares of such Serial Preferred Stock at the time outstanding shall constitute a quorum; and a plurality vote of such quorum shall govern. The directors elected by the holders of such Serial Preferred Stock shall hold office until their successors shall be elected. The right of holders of the Serial Preferred Stock to elect such two additional directors shall continue until such time as all accumulated dividends on such shares have been paid in full. The right shall be terminated for the time being and 7. the terms of the directors so elected shall automatically expire at such time as all dividends on all outstanding shares of such Serial Preferred Stock in arrears shall have been paid in full. (6) Retirement of Redeemed Shares, etc. Shares of the Series A Stock which have been acquired by the Corporation shall not be reissued as Series A Stock but shall be retired and canceled in the manner provided by law and shall become authorized as Serial Preferred Stock undesignated as to Series. Shares of Series A Stock which are held by the Corporation shall not be deemed outstanding for any purpose. Dated: December 16, 1983 ETHYL MOLDED PRODUCTS COMPANY By: /s/ F.D. Gottwald, Jr. ------------------------ F.D. Gottwald, Jr., Chairman of the Board And by: /s/ E.W. Elmore ------------------------ E.W. Elmore, Secretary ARTICLES OF INCORPORATION OF ETHYL MOLDED PRODUCTS COMPANY --------------- ARTICLE I The name of the Corporation is Ethyl Molded Products Company. ARTICLE II The purpose for which the Corporation is organized is to engage in and conduct any or all lawful business, not required to be specifically stated in these Articles. ARTICLE III The Corporation shall have authority to issue 2,000 shares of Common Stock, par value $1.00 per share, and 2,500 shares of Serial Preferred Stock, without par value. A. Serial Preferred Stock 1. Issuance in Series. The Board of Directors is hereby empowered to cause the Serial Preferred Stock of the Corporation to be issued in series with such of the variations permitted by clauses (a)-(h), both inclusive, of this section 1 as shall have been fixed and determined by the Board of Directors with respect to any series prior to the issue of any shares of such series. 2. The shares of the Serial Preferred Stock of different series may vary as to: (a) the number of shares constituting such series and the designation of such series, which shall be such as to distinguish the shares thereof from the shares of all other series and classes; (b) the rate of dividend, the time of payment and, if cumulative, the dates from which dividends shall be cumulative, and the extent of participation rights, if any; (c) any right to vote with holders of shares of any other series or class and any right to vote as a class, either generally or as a condition to specified corporate act; (d) the price at and the terms and conditions on which shares may be redeemed; (e) the amount payable upon shares in event of involuntary liquidation; (f) the amount payable upon shares in event of voluntary liquidation; (g) any sinking fund provisions for the redemption or purchase of shares; and (h) the terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion. The shares of all series of Serial Preferred Stock shall be identical except as, within the limitations set forth above in this section 1, shall have been fixed and determined by the Board of Directors prior to the issuance thereof. 3. 2. Dividends. The holders of the Serial Preferred stock of each series shall be entitled to receive, if and when declared payable by the Board of Directors, dividends in lawful money of the United States of America, at the dividend rate for such series, and not exceeding such rate except to the extent of any participation right. Such dividends shall be payable on such dates as shall be fixed for such series. Dividends, if cumulative and in arrears, shall not bear interest. No dividends shall be declared or paid upon or set apart for the Common Stock or for stock of any other class hereafter created ranking junior to the Serial Preferred Stock in respect of dividends or assets (hereinafter called Junior Stock), and no shares of Serial Preferred Stock, Common Stock or Junior Stock shall be purchased, redeemed or otherwise reacquired for a consideration, nor shall any funds be set aside for or paid to any sinking funds therefor, unless and until (i) full dividends on the outstanding Serial Preferred Stock at the dividend rate or rates therefor, together with the full additional amount required by any participation right, shall have been paid or declared and set apart for payment with respect to all past dividend periods, to the extent that the holders of the Serial Preferred Stock are entitled to dividends with respect to any past dividend period, and the current dividend period, and (ii) all mandatory sinking fund payments that shall have become due in respect of any series of the Serial Preferred Stock shall have been made. Unless full dividends with respect to all past dividend periods on the outstanding Serial Preferred Stock at 4. the dividend rate or rates therefor, to the extent that holders of the Serial Preferred Stock are entitled to dividends with respect to any particular past dividend period, together with the full additional amount required by any participation right, shall have been paid or declared and set apart for payment and all mandatory sinking fund payments that shall have become due in respect of any series of the Serial Preferred Stock shall have been made, no distributions shall be made to the holders of the Serial Preferred Stock of any series unless distributions are made to the holders of the Serial Preferred Stock of all series then outstanding in proportion to the aggregate amounts of the deficiencies in payments due to the respective series, and all payments shall be applied, first, to dividends accrued and in arrears, next, to any amount required by any participation right, and, finally, to mandatory sinking fund payments. The terms "current dividend period" and "past dividend period" mean, if two or more series of Serial Preferred Stock having different dividend periods are at the time outstanding, the current dividend period or any past dividend period, as the case may be, with respect to each such series. 3. Preference on Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, the holders of the Serial Preferred Stock of each series shall be entitled to receive, for each share thereof, the fixed liquidation price for such series, plus, in case such liquidation, dissolution or winding up shall have been voluntary, the fixed liquidation premium for such series, if any, together in all 5. cases with a sum equal to all dividends accrued or in arrears thereon and the full additional amount required by any participation right, before any distribution of the assets shall be made to holders of the Common Stock or Junior Stock; but the holders of the Serial Preferred Stock shall be entitled to no further participation in such distribution. If, upon any such liquidation, dissolution or winding up, the assets distributable among the holders of the Serial Preferred Stock shall be insufficient to permit the payment of the full preferential amounts aforesaid, then such assets shall be distributed among the holders of the Serial Preferred Stock then outstanding ratably in proportion to the full preferential amounts to which they are respectively entitled. For the purposes of this section 3, the expression "dividends accrued or in arrears" means, in respect of each share of the Serial Preferred Stock of any series at a particular time, an amount equal to the product of the rate of dividend per annum applicable to the shares of such series multiplied by the number of years and any fractional part of a year that shall have elapsed from the date when dividends on such shares became cumulative to the particular time in question less the total amount of dividends actually paid on the shares of such series or declared and set apart for payment thereon; provided, however, that, if the dividends on such shares shall not be fully cumulative, such expression shall mean the dividends, if any, cumulative in respect of such shares for the period stated in the articles of serial designation 6. creating such shares less all dividends paid in or with respect to such period. B. Common Stock 1. Subject to the provisions of law and the rights of holders of shares at the time outstanding of all classes of stock having prior rights as to dividends, the holders of Common Stock at the time outstanding shall be entitled to receive such dividends at such times and in such amounts as the Board of Directors may deem advisable. 2. In the event of any liquidation, dissolution or winding up (whether voluntary or involuntary) of the Corporation, after the payment or provision for payment in full of all debts and other liabilities of the Corporation and all preferential amounts to which the holders of shares at the time outstanding of all classes of stock having prior rights thereto shall be entitled, the remaining net assets of the Corporation shall be distributed ratably among the holders of the shares at the time outstanding of Common Stock. 3. The holders of Common Stock shall be entitled to one vote per share on all matters. C. Preemptive Rights No holder of Serial Preferred Stock shall as such holder have any preemptive or preferential right to purchase or subscribe to (a) any shares of any class of stock of the Corporation, whether now or hereafter authorized, or (b) any warrants, 7. rights or options to purchase any such stock, or (c) any securities or obligations convertible into any such stock or into any warrants, rights or options to purchase any such stock. The holders of Common Stock shall have no preemptive rights to purchase or subscribe to any shares of Serial Preferred Stock or to any shares of any class of stock of the Corporation that may be issued on conversion of any shares of Serial Preferred Stock. ARTICLE IV The initial registered office shall be located at P. O. Box 2189, 330 South Fourth Street in the City of Richmond, Virginia, and the initial registered agent shall be E. Whitehead Elmore, who is a resident of Virginia and a member of the Virginia State Bar, and whose business address is the same as the address of the initial registered office. ARTICLE V The number of Directors constituting the initial Board of Directors shall be three and the names and addresses of the persons who are to serve as the initial directors are as follows: Name Residence Address ---- ----------------- L.E. Blanchard, Jr. 4101 Sulgrave Road Richmond, Virginia 23221 B.C. Gottwald 4203 Sulgrave Road Richmond, Virginia 23221 F.D. Gottwald, Jr. 300 Herndon Road Richmond, Virginia 23229 8. ARTICLE VI 1. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative (including an action or suit by or in the right of the Corporation to procure a judgment in its favor) by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other entity against judgments, fines, amounts paid in settlement, and expenses (including attorneys' fees) actually and reasonably incurred by him in connection with such action, suit or proceeding if the person acted in good faith or in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. No termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall of itself create a presumption that the person did not act in good faith or did not act in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, no such termination shall create a presumption that the person had reasonable cause to believe that his conduct was unlawful. 9. 2. In addition, the Corporation shall indemnify any person referred to in section 1 of this Article who was or is a party or is threatened to be made a party to any action, suit or proceeding referred to in section 1 of this Article against all judgments, fines, amounts paid in settlement and expenses (including attorneys' fees) actually and reasonably incurred by him in connection with any such action, suit or proceeding where indemnification is not authorized by the provisions of section 1 of this Article so long as (a) such person shall not have been finally adjudged to be liable for gross negligence or willful misconduct in the performance of his duty to the Corporation, or (b) in the case of such adjudication the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person if fairly and reasonably entitled to indemnification. 3. Any indemnification under section 1 or 2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of any such person is proper in the circumstances because he has met the applicable standard of conduct set forth in such section 1 or 2. Such determination shall be made (a) by the Corporation's Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding; or (b) if such a quorum is not obtainable, or even if obtainable, a majority of disinterested Directors so directs, by independent legal counsel 10. in a written opinion; or (c) by the shareholders. If the determination is to be made by the Directors, they may rely, as to all questions of law, on the advice of independent counsel. 4. Expenses (including attorneys' fees) incurred in defending an action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided in section 3 of this Article, upon receipt of an undertaking by or on behalf of such person to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article. 5. The Board of Directors is hereby empowered, by majority vote of a quorum of disinterested Directors, to cause the Corporation to indemnify or contract in advance to indemnify any person not specified in sections 1 and 2 of this Article who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, by reason of the fact that he is or was an employee, agent or consultant of the Corporation, or is or was serving at the request of the Corporation as an employee, agent or consultant of another corporation, partnership, joint venture, trust or other entity, to the same extent as if such person were specified as one to whom indemnification is granted in section 1 or 2 of this Article. The provisions of sections 3 and 4 of 11. this Article shall be applicable to any indemnification provided hereafter pursuant to this section 5. 6. The Corporation may purchase and maintain insurance to indemnify it against the whole or any portion of the liability assumed by it in accordance with this Article and may also procure insurance, in such amounts as the Board of Directors may determine, on behalf of any person who is or was a director, officer, employee, agent or consultant of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent or consultant of another corporation, partnership, joint venture, trust or other entity, against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article. 7. Every reference herein to director, officer, employee, agent or consultant shall include former directors, officers, employees, agents and consultants and their respective heirs, executors and administrators. The indemnification hereby provided (and provided hereafter pursuant to the power hereby conferred on the Board of Directors) shall not be exclusive of any other rights to which any person may be entitled, including any right under policies of insurance that may be purchased and maintained by the Corporation or others, with respect to claims, issues or matters in relation to which the 12. Corporation would not have the power to indemnify such person under the provisions of this Article. Dated: December 8, 1983 /s/ Sandra L. Kramer -------------------------------- Sandra L. Kramer, Incorporator EX-3.8 9 AMENDED AND RESTATED BY-LAWS TREDEGAR MOLDED PRODUCTS COMPANY AMENDED AND RESTATED BY-LAWS ARTICLE I Meetings of Shareholders 1.1 Places of Meetings. All meetings of the shareholders shall be held at such place, either within or without the Commonwealth of Virginia, as may, from time to time, be fixed by the Board of Directors. 1.2 Annual Meetings. The annual meeting of the shareholders, for the election of Directors and transaction of such other business as may come before the meeting, shall be held in each year on or before April 30, or on such other date as the Board of Directors of the Corporation may designate from time to time. 1.3 Special Meetings. Special meetings of shareholders for any purpose or purposes may be called at any time by the President of the Corporation, by a majority of the Board of Directors or by a vote of the shareholders together holding at least a majority of the authorizing shares of voting capital stock. At a special meeting no business shall be transacted and no corporate action shall be taken other than that stated in the notice of the meeting. 1.4 Notice of Meetings. Except as otherwise required by law, written or printed notice stating the place, day and hour of every meeting of the shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be mailed not less than ten nor more than sixty days before the date of the meeting to each shareholder of record entitled to vote at such meeting at his address that appears in the share transfer books of the Corporation. Meetings may be held without notice if all the shareholders entitled to vote at the meeting are present in person or by proxy or if notice is waived in writing by those not present, either before or after the meeting. 1.5 Quorum. Except as otherwise required by the Articles of Incorporation, any number of shareholders together holding at least a majority of the outstanding shares of capital stock entitled to vote with respect to the business to be transacted, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business. If less than a quorum shall be in attendance at the time for which a meeting shall have been called, the meeting may be adjourned from time to time by a majority of the shareholders present or represented by proxy without notice other than by announcement at the meeting. 1.6 Voting. At any meeting of the shareholders, each shareholder of a class entitled to vote on the matters coming before the meeting shall have one vote, in person or by proxy, for each share of capital stock standing in his or her name on -2- the books of the Corporation at the time of such meeting or on any date fixed by the Board of Directors not more than seventy days prior to the meeting. Every proxy shall be in writing, dated and signed by the shareholder entitled to vote or his duly authorized attorney-in-fact. 1.7 Action Without Meeting. Any action required or permitted to be taken at a shareholders' meeting may be taken without a meeting and without action by the Board of Directors if the action is taken by all of the shareholders entitled to vote on the action. The action shall be evidenced by one or more written consents describing the action taken, signed by all of the shareholders entitled to vote on the action, and delivered to the secretary of the Corporation for inclusion in the minutes for filing with the corporate records. ARTICLE II Directors 2.1 General Powers. The property, affairs and business of the Corporation shall be managed under the direction of the Board of Directors, and except as otherwise expressly provided by law, the Articles of Incorporation or these By-laws, all of the powers of the Corporation shall be vested in such Board. 2.2 Number of Directors. The number of Directors shall be three (3) in number. -3- 2.3 Election of Directors. (a) Directors shall be elected at the annual meeting of shareholders to succeed those Directors whose terms have expired and to fill any vacancies thus existing. (b) Directors shall hold their offices for terms of one year and until their successors are elected. Any Director may be removed from office at a meeting called expressly for that purpose by the vote of shareholders holding not less than a majority of the shares entitled to vote at an election of Directors. (c) Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of the majority of the remaining Directors though less than a quorum of the Board of Directors. (d) A majority of the number of Directors fixed by these By-laws shall constitute a quorum for the transaction of business. The act of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. 2.4 Meetings of Directors. Meetings of the Board of Directors shall be held at places within or without the Commonwealth of Virginia and at times fixed by resolution of the -4- Board, or upon call of the President, and the Secretary or officer performing the Secretary's duties shall give not less than twenty-four hours' notice by letter, telegraph or telephone (or in person) of all meetings of the Directors, provided that notice need not be given of regular meetings held at times and places fixed by resolution of the Board. An annual meeting of the Board of Directors shall be held as soon as practicable after the adjournment of the annual meeting of shareholders. Meetings may be held at any time without notice if all of the Directors are present, or if those not present waive notice in writing either before or after the meeting. Directors may be allowed, by resolution of the Board, a reasonable fee and expenses for attendance at meetings. 2.5 Action Without Meeting. Any action required or permitted to be taken at a Board of Directors meeting may be taken without a meeting if the action is taken by all of the members of the Board of Directors. The action shall be evidenced by one or more written consents stating the action taken, signed by each Director either before or after the action taken, and included in the minutes or filed with the corporate records reflecting the action taken. Any such consent has the effect of a meeting vote and may be described as such in any document of the Corporation. -5- ARTICLE III Committees 3.1 Committees. The Board of Directors, by resolution duly adopted, may establish such committees of the Board having limited authority in the management of the affairs of the Corporation as it may deem advisable and the members, terms and authority of such committees shall be as set forth in the resolutions establishing the same. 3.2 Meetings. Regular and special meetings of any Committee established pursuant to this Article may be called and held subject to the same requirements with respect to time, place and notice as are specified in these By-laws for regular and special meetings of the Board of Directors. 3.3 Quorum and Manner of Acting. A majority of the members of any Committee serving at the time of any meeting thereof shall constitute a quorum for the transaction of business at such meeting. The action of a majority of those members present at a Committee meeting at which a quorum is present shall constitute the act of the Committee. 3.4 Term of Office. Members of any Committee shall be elected as provided above and shall hold office until their successors are elected by the Board of Directors or until such Committee is dissolved by the Board of Directors. -6- 3.5 Resignation and Removal. Any member of a Committee may resign at any time by giving written notice of his intention to do so to the President or the Secretary of the Corporation, or may be removed, with or without cause, at any time by such vote of the Board of Directors as would suffice for his election. 3.6 Vacancies. Any vacancy occurring in a Committee resulting from any cause whatsoever may be filled by a majority of the number of Directors fixed by these By-laws. ARTICLE IV Officers 4.1 Election. The officers of the Corporation shall consist of a President, one or more Vice Presidents (any one or more of whom may be designated as Executive Vice Presidents or Senior Vice Presidents), a Secretary and a Treasurer. In addition, such other officers as are provided in Section 4.3 of this Article may from time to time be elected by the Board of Directors. All officers shall hold office until the next annual meeting of the Board of Directors or until their successors are elected. Any two officers may be combined in the same person as the Board of Directors may determine, except that the President and Secretary may not be the same person. 4.2 Removal of Officers; Vacancies. Any officer of the Corporation may be removed summarily with or without cause, at -7- any time by a resolution passed at any meeting by affirmative vote of a majority of the number of Directors fixed by these By-laws. Vacancies may be filled at any meeting of the Board of Directors. 4.3 Other Officers. Other officers may from time to time be elected by the Board, including, without limitations, one or more Assistant Secretaries and Assistant Treasurers. 4.4 Duties. The officers of the Corporation shall have such duties as generally pertain to their offices, respectively, as well as such powers and duties as are hereinafter provided and as from time to time shall be conferred by the Board of Directors. The Board of Directors may require any officer to give such bond for the faithful performance of his duties as the Board may see fit. 4.5 Duties of the President. The President shall be the chief executive and administrative officer of the Corporation and shall have direct supervision over the business of the Corporation and its several officers, subject to the Board of Directors. The President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases where the signing and the execution thereof shall be expressly delegated by the Board of Directors or by these By-laws to some other officer or agent of the -8- Corporation or shall be required by law otherwise to be signed or executed. He may appoint advisory committees as provided in Section 6 of Article III. In addition, he shall perform all duties incident to the office of the President and such other duties as from time to time may be assigned to him by the Board of Directors. 4.6 Duties of the Vice Presidents. Each Vice President of the Corporation (including any Executive Vice President and Senior Vice President) shall have powers and duties as may from time to time be assigned to him by the Board of Directors or the President. When there shall be more than one Vice President of the Corporation, the Board of Directors may from time to time designate one of them to perform the duties of the President in the absence of the President. Any Vice President of the Corporation may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-laws to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed. 4.7 Duties of the Treasurer. The Treasurer shall have charge and custody of and be responsible for all funds and securities of the Corporation, and shall cause all such funds and securities to be deposited in such banks and depositories as the -9- Board of Directors from time to time may direct. He shall maintain adequate accounts and records of all assets, liabilities and transactions of the Corporation in accordance with generally accepted accounting practices; shall exhibit his accounts and records to any of the Directors of the Corporation at any time upon request at the office of the Corporation; shall render such statements of his accounts and records and such other statements to the Board of Directors and officers as often and in such manner as they shall require; and shall make and file (or supervise the making and filing of) all tax returns required by law. He shall in general perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors or the President. 4.8 Duties of the Secretary. The Secretary shall act as a secretary of all meetings of the Board of Directors and all other Committees of the Board, and the shareholders of the Corporation, and shall keep the minutes thereof in the proper book or books to be provided for that purpose. He shall see that all notices required to be given by the Corporation are duly given and served; shall have custody of the seal of the Corporation and shall affix the seal or cause it to be affixed to all certificates for stock of the Corporation and to all documents the execution of which on behalf of the Corporation under its corporate seal is duly authorized in accordance with the -10- provisions of these By-laws; shall have custody of all deeds, leases, contracts and other important corporate documents; shall have charge of the books, records and papers of the Corporation relating to its organization and management as a Corporation; shall see that the reports, statements and other documents required by law (except tax returns) are properly filed; and shall, in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors or the President. 4.9 Other Duties of Officers. Any officer of the Corporation shall have, in addition to the duties prescribed herein or by law, such other duties as from time to time shall be prescribed by the Board of Directors or the President. ARTICLE V Capital Stock 5.1 Certificates. The shares of capital stock of the Corporation shall be evidenced by certificates in forms prescribed by the Board of Directors and executed in any manner permitted by law and stating thereon the information required by law. Transfer agents and/or registrars for one or more classes of shares of the Corporation may be appointed by the Board of Directors and may be required to countersign certificates representing shares of such class or classes. If any officer whose signature or facsimile thereof shall have been used on a -11- share certificate shall for any reason cease to be an officer of the Corporation and such certificate shall not then have been delivered by the Corporation, the Board of Directors may nevertheless adopt such certificate and it may then be issued and delivered as though such person had not ceased to be an officer of the Corporation. 5.2 Lost, Destroyed and Mutilated Certificates. Holders of the shares of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor, and the Board of Directors, may, in its discretion, cause one or more new certificates for the same number of shares in the aggregate to be issued to such shareholder upon the surrender of the mutilated certificate or upon satisfactory proof of such loss or destruction, and the deposit of a bond in such form and amount and with such surety as the Board of Directors may require. 5.3 Transfer of Shares. The shares of the Corporation shall be transferable or assignable only on the books of the Corporation by the holders in person or by attorney on surrender of the certificate for such shares duly endorsed and, if sought to be transferred by attorney, accompanied by a written power of attorney to have the same transferred on the books of the Corporation. The Corporation will recognize the exclusive right -12- of the person registered on its books as the owner of shares to receive dividends and to vote as such owner. 5.4 Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof, or entitled to receive payment for any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. -13- ARTICLE VI Miscellaneous Provisions 6.1 Seal. The seal of the Corporation shall consist of a flat-face circular die, of which there may be any number of counterparts, with the name of the Corporation cut or engraved thereon. 6.2 Fiscal Year. The fiscal year of the Corporation shall end on December 31st of each year, and shall consist of such accounting periods as may be recommended by the Treasurer and approved by the Board of Directors. 6.3 Books and Records. The Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders and Board of Directors; and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar a record of its shareholders, giving the names and addresses of all shareholders, and the number, class and series of the shares being held. 6.4 Checks, Notes and Drafts. Checks, notes, drafts and other orders for the payment of money shall be signed by such persons as the Board of Directors from time to time may authorize. When the Board of Directors so authorizes, however, the signature of any such person may be a facsimile. -14- 6.5 Amendment of By-laws. These By-laws may be amended or altered at any meeting of the Board of Directors by affirmative vote of a majority of the number of Directors fixed by these By-laws. The shareholders entitled to vote in respect of the election of Directors, however, shall have the power, by majority vote of the outstanding shares of the Corporation, to rescind, alter, amend or repeal any By-laws and to enact By-laws which, if expressly so provided, may not be amended, altered or repealed by the Board of Directors. 6.6 Voting of Shares Held. Unless otherwise provided by resolution of the Board of Directors, the President shall from time to time appoint an attorney or attorneys or agent or agents of this Corporation, in the name and on behalf of this Corporation, to cast the vote which this Corporation may be entitled to cast as a shareholder or otherwise in any other corporation, any of whose stock or securities may be held in this Corporation, at meetings of the holders of the shares or other securities of such other corporation, or to consent in writing to any action by any such other corporation, and shall instruct the person or persons so appointed as to the manner of casting such votes or giving such consent and may execute or cause to be executed on behalf of this Corporation and under its corporate seal or otherwise, such written proxies, consents, waivers or other instruments as may be necessary or proper in the premises; or, in lieu of such appointment, the President may attend in -15- person any meetings of the holders of shares or other securities of any such other corporation and there vote or exercise any or all power of this Corporation as the holder of such shares or other securities of such other corporation. -16- EX-3.9 10 ARTICLES OF INCORPORATION POLESTAR PLASTICS MANUFACTURING COMPANY ARTICLES OF AMENDMENT I The name of the Corporation is Polestar Plastics Manufacturing Company (the "Corporation"). II Article I of the Corporation's Articles of Incorporation is hereby amended to read in its entirety as follows: "The name of the Corporation is Precise Polestar, Inc." III The foregoing amendment was adopted by written consent of the Corporation's sole shareholder on April 24, 1996. Dated: May 7, 1996 PRECISE POLESTAR, INC. By:/s/ John R. Weeks ----------------------------------- John R. Weeks, President ARTICLES OF INCORPORATION OF POLESTAR PLASTICS MANUFACTURING COMPANY I. The name of the Corporation is Polestar Plastics Manufacturing Company. II. The purpose for which the Corporation is formed is to transact any or all lawful business, not required to be specifically stated in these Articles, for which corporations may be incorporated under the Virginia Stock Corporation Act, as amended from time to time. III. The number of shares which the Corporation shall have authority to issue shall be 100 shares of Common Stock, no par value. IV. The initial registered office shall be located in the City of Richmond, Virginia, at Riverfront Plaza - East Tower, 951 East Byrd Street, and the initial registered agent shall be W. Jeffery Edwards, who is a resident of Virginia and a member of the Virginia State Bar, and whose business address is the same as the address of the initial registered office. V. The number of Directors constituting the initial Board of Directors shall be three (3), and the names and addresses of the persons who are to serve as the initial Directors are as follows: Name Residence Address - ---- ----------------- Richard W. Goodrum 12830 River Hills Drive Midlothian, Virginia 23113 Steven M. Johnson 412 Kilmarnock Road Richmond, Virginia 23229 Norman A. Scher 5 Cedaridge Road Richmond, Virginia 23229 VI. (1) In this Article: "applicant" means the person seeking indemnification pursuant to this Article. "expenses" includes counsel fees. "liability" means the obligation to pay a judgment, settlement, penalty, fine, including any excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding. "party" includes an individual who was, is or is threatened to be made a named defendant or respondent in a proceeding. "proceeding" means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal. -2- (2) In any proceeding brought by or in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, no director or officer of the Corporation shall be liable to the Corporation or its shareholders for monetary damages with respect to any transaction, occurrence or course of conduct, whether prior or subsequent to the effective date of this Article, except for liability resulting from such person's having engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law. (3) The Corporation shall indemnify (a) any person who was or is a party to any proceeding, including a proceeding brought by a shareholder in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, by reason of the fact that he is or was a director or officer of the Corporation, or (b) any director or officer who is or was serving at the request of the Corporation a director, trustee, partner or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability incurred by him in connection with such proceeding unless he engaged in willful misconduct or a knowing violation of the criminal law. A person is considered to be serving an employee benefit plan at the Corporation's request if his duties to the Corporation also impose duties on, or otherwise involve services by, him to the plan or to participants in or beneficiaries of the plan. The Board of Directors is hereby empowered, by a majority vote of a quorum of disinterested -3- Directors, to enter into a contract to indemnify any Director or officer in respect of any proceedings arising from any act or omission, whether occurring before or after the execution of such contract. (4) The provisions of this Article shall be applicable to all proceedings commenced after the adoption hereof by the shareholders of the Corporation, arising from any act or omission, whether occurring before or after such adoption. No amendment or repeal of this Article shall have any effect on the rights provided under this Article with respect to any act or omission occurring prior to such amendment or repeal. The Corporation shall promptly take all such actions, and make all such determinations, as shall be necessary or appropriate to comply with its obligation to make any indemnity under this Article and shall promptly pay or reimburse all reasonable expenses, including attorneys' fees, incurred by any such director, officer, employee or agent in connection with such actions and determinations or proceedings of any kind arising therefrom. (5) The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the applicant did not meet the standard of conduct described in Section (2) or (3) of this Article. (6) Any indemnification under Section (3) of this Article (unless ordered by a court) shall be made by the Corporation only -4- as authorized in the specific case upon a determination that indemnification of the applicant is proper in the circumstances because he has met the applicable standard of conduct set forth in Section (3). The determination shall be made: (a) By the Board of Directors by a majority vote of a quorum consisting of directors not at the time parties to the proceeding; (b) If a quorum cannot be obtained under subsection (a) of this section, by majority vote of a committee duly designated by the Board of Directors (in which designation Directors who are parties may participate), consisting solely of two or more Directors not at the time parties to the proceeding; (c) By special legal counsel: (i) Selected by the Board of Directors or its committee in the manner prescribed in subsection (a) or (b) of this section; or (ii) If a quorum of the Board of Directors cannot be obtained under subsection (a) of this section and a committee cannot be designated under subsection (b) of this section, selected by majority vote of the full Board of Directors, in which selection directors who are parties may participate; or (d) By the shareholders, but shares owned by or voted under the control of Directors who are at the time parties to the proceeding may not be voted on the determination. -5- Any evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is appropriate, except that if the determination is made by special legal counsel, such evaluation as to reasonableness of expenses shall be made by those entitled under subsection (c) of this section (6) to select counsel. Notwithstanding the foregoing, in the event there has been a change in the composition of a majority of the Board of Directors after the date of the alleged act or omission with respect to which indemnification is claimed, any determination as to indemnification and advancement of expenses with respect to any claim for indemnification made pursuant to this Article shall be made by special legal counsel agreed upon by the Board of Directors and the applicant. If the Board of Directors and the applicant are unable to agree upon such special legal counsel, the Board of Directors and the applicant each shall select a nominee, and the nominees shall select such special legal counsel. (7) (a) The Corporation shall pay for or reimburse the reasonable expenses incurred by any applicant who is a party to a proceeding in advance of final disposition of the proceeding or the making of any determination under section (6) if the applicant furnishes the Corporation: (i) a written statement of his good faith belief that he has met the standard of conduct described in section (3); and -6- (ii) a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet such standard of conduct. (b) The undertaking required by paragraph (ii) of subsection (a) of this section shall be an unlimited general obligation of the applicant but need not be secured and may be accepted without reference to financial ability to make repayment. (c) Authorizations of payments under this section shall be made by the persons specified in section (6). (8) The Board of Directors is hereby empowered, by majority vote of a quorum consisting of disinterested Directors, to cause the Corporation to indemnify or contract to indemnify any person not specified in section (2) or (3) of this Article who was, is or may become a party to any proceeding, by reason of the fact that he is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as director, officer, employee or agent in another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the same extent as if such person were specified as one to whom indemnification is granted in section (3). The provisions of section (4) through (7) of this Article shall be applicable to any indemnification provided thereafter pursuant to this section (8). (9) The Corporation may purchase and maintain insurance to indemnify it against the whole or any portion of the liability -7- assumed by it in accordance with this Article and may also procure insurance, in such amounts as the Board of Directors may determine, on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by him in any such capacity or arising from his status as such, whether or not the Corporation would have power to indemnify him against such liability under the provisions of this Article. (10) Every reference herein to directors, officers, employees or agents shall include former directors, officers, employees and agents and their respective heirs, executors and administrators. The indemnification hereby provided and provided hereafter pursuant to the power conferred by this Article on the Board of Directors shall not be exclusive of any other rights to which any person may be entitled, including any right under policies of insurance that may be purchased and maintained by the Corporation or others, with respect to claims, issues or matters in relation to which the Corporation would not have the power to indemnify such person under the provisions of this Article. Such rights shall not prevent or restrict the power of the Corporation to make or provide for any further indemnity, or provisions for determining entitlement to indemnity, pursuant to one or more indemnification agreements, by-laws, or other arrangements -8- (including, without limitation, creation of trust funds or security interests funded by letters of credit or other means) approved by the Board of Directors (whether or not any of the Directors of the Corporation shall be a party to or beneficiary of any such agreements, by-laws or arrangements); provided, however, that any provisions of such agreements, by-laws or other arrangements shall not be effective if and to the extent that it is determined to be contrary to this Article or applicable laws of the Commonwealth of Virginia. (11) Each provision of this Article shall be severable, and an adverse determination as to any such provision shall in no way affect the validity of any other provisions. Date: July 19, 1993 /s/ Nancy M. Taylor ----------------------------------- Nancy M. Taylor, Incorporator -9- EX-3.10 11 POLESTAR PLASTICS BY-LAWS POLESTAR PLASTICS MANUFACTURING COMPANY BY-LAWS ARTICLE I Meetings of Shareholders 1.1 Places of Meetings. All meetings of the shareholders shall be held at such place, either within or without the Commonwealth of Virginia, as may, from time to time, be fixed by the Board of Directors. 1.2 Annual Meetings. The annual meeting of the shareholders, for the election of Directors and transaction of such other business as may come before the meeting, shall be held in each year on or before April 30, or on such other date as the Board of Directors of the Corporation may designate from time to time. 1.3 Special Meetings. Special meetings of shareholders for any purpose or purposes may be called at any time by the President of the Corporation, by a majority of the Board of Directors or by a vote of the shareholders together holding at least a majority of the authorizing shares of voting capital stock. At a special meeting no business shall be transacted and no corporate action shall be taken other than that stated in the notice of the meeting. 1.4 Notice of Meetings. Except as otherwise required by law, written or printed notice stating the place, day and hour of every meeting of the shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be mailed not less than ten nor more than sixty days before the date of the meeting to each shareholder of record entitled to vote at such meeting at his address that appears in the share transfer books of the Corporation. Meetings may be held without notice if all the shareholders entitled to vote at the meeting are present in person or by proxy or if notice is waived in writing by those not present, either before or after the meeting. 1.5 Quorum. Except as otherwise required by the Articles of Incorporation, any number of shareholders together holding at least a majority of the outstanding shares of capital stock entitled to vote with respect to the business to be transacted, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business. If less than a quorum shall be in attendance at the time for which a meeting shall have been called, the meeting may be adjourned from time to time by a majority of the shareholders present or represented by proxy without notice other than by announcement at the meeting. 1.6 Voting. At any meeting of the shareholders, each shareholder of a class entitled to vote on the matters coming before the meeting shall have one vote, in person or by proxy, for each share of capital stock standing in his or her name on - 2 - the books of the Corporation at the time of such meeting or on any date fixed by the Board of Directors not more than seventy days prior to the meeting. Every proxy shall be in writing, dated and signed by the shareholder entitled to vote or his duly authorized attorney-in-fact. 1.7 Action Without Meeting. Any action required or permitted to be taken at a shareholders' meeting may be taken without a meeting and without action by the Board of Directors if the action is taken by all of the shareholders entitled to vote on the action. The action shall be evidenced by one or more written consents describing the action taken, signed by all of the shareholders entitled to vote on the action, and delivered to the secretary of the corporation for inclusion in the minutes for filing with the corporate records. ARTICLE II Directors 2.1 General Powers. The property, affairs and business of the Corporation shall be managed under the direction of the Board of Directors, and except as otherwise expressly provided by law, the Articles of Incorporation or these By-laws, all of the powers of the Corporation shall be vested in such Board. 2.2 Number of Directors. The number of Directors shall be three (3) in number. - 3 - 2.3 Election of Directors. (a) Directors shall be elected at the annual meeting of shareholders to succeed those Directors whose terms have expired and to fill any vacancies thus existing. (b) Directors shall hold their offices for terms of one year and until their successors are elected. Any Director may be removed from office at a meeting called expressly for that purpose by the vote of shareholders holding not less than a majority of the shares entitled to vote at an election of Directors. (c) Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of the majority of the remaining Directors though less than a quorum of the Board of Directors. (d) A majority of the number of Directors fixed by these By-laws shall constitute a quorum for the transaction of business. The act of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. 2.4 Meetings of Directors. Meetings of the Board of Directors shall be held at places within or without the Commonwealth of Virginia and at times fixed by resolution of the - 4 - Board, or upon call of the President, and the Secretary or officer performing the Secretary's duties shall give not less than twenty-four hours' notice by letter, telegraph or telephone (or in person) of all meetings of the Directors, provided that notice need not be given of regular meetings held at times and places fixed by resolution of the Board. An annual meeting of the Board of Directors shall be held as soon as practicable after the adjournment of the annual meeting of shareholders. Meetings may be held at any time without notice if all of the Directors are present, or if those not present waive notice in writing either before or after the meeting. Directors may be allowed, by resolution of the Board, a reasonable fee and expenses for attendance at meetings. 2.5 Action Without Meeting. Any action required or permitted to be taken at a Board of Directors meeting may be taken without a meeting if the action is taken by all of the members of the Board of Directors. The action shall be evidenced by one or more written consents stating the action taken, signed by each Director either before or after the action taken, and included in the minutes or filed with the corporate records reflecting the action taken. Any such consent has the effect of a meeting vote and may be described as such in any document of the Corporation. - 5 - ARTICLE III Committees 3.1 Committees. The Board of Directors, by resolution duly adopted, may establish such committees of the Board having limited authority in the management of the affairs of the corporation as it may deem advisable and the members, terms and authority of such committees shall be as set forth in the resolutions establishing the same. 3.2 Meetings. Regular and special meetings of any Committee established pursuant to this Article may be called and held subject to the same requirements with respect to time, place and notice as are specified in these By-laws for regular and special meetings of the Board of Directors. 3.3 Quorum and Manner of Acting. A majority of the members of any Committee serving at the time of any meeting thereof shall constitute a quorum for the transaction of business at such meeting. The action of a majority of those members present at a Committee meeting at which a quorum is present shall constitute the act of the Committee. 3.4 Term of Office. Members of any Committee shall be elected as provided above and shall hold office until their successors are elected by the Board of Directors or until such Committee is dissolved by the Board of Directors. - 6 - 3.5 Resignation and Removal. Any member of a Committee may resign at any time by giving written notice of his intention to do so to the President or the Secretary of the Corporation, or may be removed, with or without cause, at any time by such vote of the Board of Directors as would suffice for his election. 3.6 Vacancies. Any vacancy occurring in a Committee resulting from any cause whatsoever may be filled by a majority of the number of Directors fixed by these By-laws. ARTICLE IV Officers 4.1 Election. The officers of the Corporation shall consist of a President, one or more Vice Presidents (any one or more of whom may be designated as Executive Vice Presidents or Senior Vice Presidents), a Secretary and a Treasurer. In addition, such other officers as are provided in Section 4.3 of this Article may from time to time be elected by the Board of Directors. All officers shall hold office until the next annual meeting of the Board of Directors or until their successors are elected. Any two officers may be combined in the same person as the Board of Directors may determine, except that the President and Secretary may not be the same person. 4.2 Removal of Officers; Vacancies. Any officer of the Corporation may be removed summarily with or without cause, at - 7 - any time by a resolution passed at any meeting by affirmative vote of a majority of the number of Directors fixed by these By-laws. Vacancies may be filled at any meeting of the Board of Directors. 4.3 Other Officers. Other officers may from time to time be elected by the Board, including, without limitations, one or more Assistant Secretaries and Assistant Treasurers. 4.4 Duties. The officers of the Corporation shall have such duties as generally pertain to their offices, respectively, as well as such powers and duties as are hereinafter provided and as from time to time shall be conferred by the Board of Directors. The Board of Directors may require any officer to give such bond for the faithful performance of his duties as the Board may see fit. 4.5 Duties of the President. The President shall be the chief executive and administrative officer of the Corporation and shall have direct supervision over the business of the Corporation and its several officers, subject to the Board of Directors. The President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases where the signing and the execution thereof shall be expressly delegated by the Board of Directors or by these By-laws to some other officer or agent of the - 8 - Corporation or shall be required by law otherwise to be signed or executed. He may appoint advisory committees as provided in Section 6 of Article III. In addition, he shall perform all duties incident to the office of the President and such other duties as from time to time may be assigned to him by the Board of Directors. 4.6 Duties of the Vice Presidents. Each Vice President of the Corporation (including any Executive Vice President and Senior Vice President) shall have powers and duties as may from time to time be assigned to him by the Board of Directors or the President. When there shall be more than one Vice President of the Corporation, the Board of Directors may from time to time designate one of them to perform the duties of the President in the absence of the President. Any Vice President of the corporation may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-laws to some other officer or agent of the corporation or shall be required by law otherwise to be signed or executed. 4.7 Duties of the Treasurer. The Treasurer shall have charge and custody of and be responsible for all funds and securities of the Corporation, and shall cause all such funds and securities to be deposited in such banks and depositories as the - 9 - Board of Directors from time to time may direct. He shall maintain adequate accounts and records of all assets, liabilities and transactions of the Corporation in accordance with generally accepted accounting practices; shall exhibit his accounts and records to any of the Directors of the Corporation at any time upon request at the office of the Corporation; shall render such statements of his accounts and records and such other statements to the Board of Directors and officers as often and in such manner as they shall require; and shall make and file (or supervise the making and filing of) all tax returns required by law. He shall in general perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors or the President. 4.8 Duties of the Secretary. The Secretary shall act as a secretary of all meetings of the Board of Directors and all other Committees of the Board, and the shareholders of the Corporation, and shall keep the minutes thereof in the proper book or books to be provided for that purpose. He shall see that all notices required to be given by the Corporation are duly given and served; shall have custody of the seal of the Corporation and shall affix the seal or cause it to be affixed to all certificates for stock of the Corporation and to all documents the execution of which on behalf of the Corporation under its corporate seal is duly authorized in accordance with the - 10 - provisions of these By-laws; shall have custody of all deeds, leases, contracts and other important corporate documents; shall have charge of the books, records and papers of the Corporation relating to its organization and management as a Corporation; shall see that the reports, statements and other documents required by law (except tax returns) are properly filed; and shall, in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors or the President. 4.9 Other Duties of Officers. Any officer of the Corporation shall have, in addition to the duties prescribed herein or by law, such other duties as from time to time shall be prescribed by the Board of Directors or the President. ARTICLE V Capital Stock 5.1 Certificates. The shares of capital stock of the Corporation shall be evidenced by certificates in forms prescribed by the Board of Directors and executed in any manner permitted by law and stating thereon the information required by law. Transfer agents and/or registrars for one or more classes of shares of the Corporation may be appointed by the Board of Directors and may be required to countersign certificates representing shares of such class or classes. If any officer whose signature or facsimile thereof shall have been used on a - 11 - share certificate shall for any reason cease to be an officer cf the Corporation and such certificate shall not then have been delivered by the Corporation, the Board of Directors may nevertheless adopt such certificate and it may then be issued and delivered as though such person had not ceased to be an officer of the Corporation. 5.2 Lost, Destroyed and Mutilated Certificates. Holders of the shares of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor, and the Board of Directors may, in its discretion, cause one or more new certificates for the same number of shares in the aggregate to be issued to such shareholder upon the surrender of the mutilated certificate or upon satisfactory proof of such loss or destruction, and the deposit of a bond in such form and amount and with such surety as the Board of Directors may require. 5.3 Transfer of Shares. The shares of the Corporation shall be transferable or assignable only on the books of the Corporation by the holders in person or by attorney on surrender of the certificate for such shares duly endorsed and, if sought to be transferred by attorney, accompanied by a written power of attorney to have the same transferred on the books of the Corporation. The Corporation will recognize the exclusive right - 12 - of the person registered on its books as the owner of shares to receive dividends and to vote as such owner. 5.4 Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof, or entitled to receive payment for any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. - 13 - ARTICLE VI Miscellaneous Provisions 6.1 Seal. The seal of the Corporation shall consist of a flat-face circular die, of which there may be any number of counterparts, with the name Of the Corporation cut or engraved thereon. 6.2 Fiscal Year. The fiscal year of the Corporation shall end on December 31st of each year, and shall consist of such accounting periods as may be recommended by the Treasurer and approved by the Board of Directors. 6.3 Books and Records. The Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders and Board of Directors; and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar a record of its shareholders, giving the names and addresses of all shareholders, and the number, class and series of the shares being held. 6.4 Checks, Notes and Drafts. Checks, notes, drafts and other orders for the payment of money shall be signed by such persons as the Board of Directors from time to time may authorize. When the Board of Directors so authorizes, however, the signature of any such person may be a facsimile. - 14 - 6.5 Amendment of By-laws. These By-laws may be amended or altered at any meeting of the Board of Directors by affirmative vote of a majority of the number of Directors fixed by these By-laws. The shareholders entitled to vote in respect of the election of Directors, however, shall have the power, by majority vote of the outstanding shares of the Corporation, to rescind, alter, amend or repeal any By-laws and to enact By-laws which, if expressly so provided, may not be amended, altered or repealed by the Board of Directors. 6.6 Voting of Shares Held. Unless otherwise provided by resolution of the Board of Directors, the President shall from time to time appoint an attorney or attorneys or agent or agents of this Corporation, in the name and on behalf of this Corporation, to cast the vote which this Corporation may be entitled to cast as a shareholder or otherwise in any other corporation, any of whose stock or securities may be held in this Corporation, at meetings of the holders of the shares or other securities of such other corporation, or to consent in writing to any action by any such other corporation, and shall instruct the person or persons so appointed as to the manner of casting such votes or giving such consent and may execute or cause to be executed on behalf of this Corporation and under its corporate seal or otherwise, such written proxies, consents, waivers or other instruments as may be necessary or proper in the premises; or, in lieu of such appointment, the President may attend in - 15 - person any meetings of the holders of shares or other securities of any such other corporation and there vote or exercise any or all power of this Corporation as the holder of such shares or other securities of such other corporation. -16- EX-3.11 12 ARTICLES OF INCORPORATION ARTICLES OF INCORPORATION OF MASSIE TOOL, MOLD & DIE, INC. I. The name of the Corporation is Massie Tool, Mold & Die, Inc. II. The street address of the principal office of the Corporation is 1100 Boulders Parkway, Richmond, Virginia, 23225. The mailing address of the principal office of the Corporation is the same as the street address. III. The number of shares which the Corporation shall have authority to issue shall be 100 shares of Common Stock, no par value, all of which are of the same class. IV. The street address of the initial registered office of the Corporation in the State of Florida is c/o The Prentice-Hall Corporation System, Inc., 110 North Magnolia Street, Tallahassee, Florida, 32301. The name of the initial registered agent of the Corporation is The Prentice-Hall Corporation System, Inc., whose business address is the same as the address of the initial registered office. The written acceptance of the initial registered agent, as required by the provisions of Section 607.0501(3) of the Florida Business Corporation Act, is set forth following the signature of the incorporator and is made a part of these Articles of Incorporation. V. The name and address of the incorporator are: Name Address ---- ------- Nancy M. Taylor 1100 Boulders Parkway Richmond, Virginia 23225 VI. The purpose for which the Corporation is formed is to transact any or all lawful business, not required to be specifically stated in these Articles, for which corporations may be incorporated under the Florida Business Corporation Act, as amended from time to time, and to have all of the general powers granted to corporations organized under the Florida Business Corporation Act, whether granted by specific statutory authority or by construction of law. VII. The number of Directors constituting the initial Board of Directors shall be three (3), and the names and addresses of the persons who are to serve as the initial Directors are as follows: Name Residence Address ---- ----------------- Richard W. Goodrum 12830 River Hills Drive Midlothian, Virginia 23113 Steven M. Johnson 412 Kilmarnock Road Richmond, Virginia 23229 Norman A. Scher 5 Cedaridge Road Richmond, Virginia 23229 -2- VIII. The duration of the Corporation shall be perpetual. IX. (1) In this Article: "applicant" means the person seeking indemnification pursuant to this Article. "expenses" includes counsel fees. "liability" means the obligation to pay a judgment, settlement, penalty, fine, including any excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding. "party" includes an individual who was, is or is threatened to be made a named defendant or respondent in a proceeding. "proceeding" means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal. (2) In any proceeding brought by or in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, no director or officer of the Corporation shall be liable to the Corporation or its shareholders for monetary damages with respect to any transaction, occurrence or course of conduct, whether prior or subsequent to the effective date of this Article, except for liability resulting from such person's having engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law. -3- (3) The Corporation shall indemnify (a) any person who was or is a party to any proceeding, including a proceeding brought by a shareholder in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, by reason of the fact that he is or was a director or officer of the Corporation, or (b) any director or officer who is or was serving at the request of the Corporation a director, trustee, partner or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability incurred by him in connection with such proceeding unless he engaged in willful misconduct or a knowing violation of the criminal law. A person is considered to be serving an employee benefit plan at the Corporation's request if his duties to the Corporation also impose duties on, or otherwise involve services by, him to the plan or to participants in or beneficiaries of the plan. The Board of Directors is hereby empowered, by a majority vote of a quorum of disinterested Directors, to enter into a contract to indemnify any Director or officer in respect of any proceedings arising from any act or omission, whether occurring before or after the execution of such contract. (4) The provisions of this Article shall be applicable to all proceedings commenced after the adoption hereof by the shareholders of the Corporation, arising from any act or omission, whether occurring before or after such adoption. No amendment or repeal of this Article shall have any effect on the -4- rights provided under this Article with respect to any act or omission occurring prior to such amendment or repeal. The Corporation shall promptly take all such actions, and make all such determinations, as shall be necessary or appropriate to comply with its obligation to make any indemnity under this Article and shall promptly pay or reimburse all reasonable expenses, including attorneys' fees, incurred by any such director, officer, employee or agent in connection with such actions and determinations or proceedings of any kind arising therefrom. (5) The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the applicant did not meet the standard of conduct described in Section (2) or (3) of this Article. (6) Any indemnification under Section (3) of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the applicant is proper in the circumstances because he has met the applicable standard of conduct set forth in Section (3). The determination shall be made: (a) By the Board of Directors by a majority vote of a quorum consisting of directors not at the time parties to the proceeding; -5- (b) If a quorum cannot be obtained under subsection (a) of this section, by majority vote of a committee duly designated by the Board of Directors (in which designation Directors who are parties may participate), consisting solely of two or more Directors not at the time parties to the proceeding; (c) By special legal counsel; (i) Selected by the Board of Directors or its committee in the manner prescribed in subsection (a) or (b) of this section; or (ii) If a quorum of the Board of Directors cannot be obtained under subsection (a) of this section and a committee cannot be designated under subsection (b) of this section, selected by majority vote of the full Board of Directors, in which selection directors who are parties may participate; or (d) By the shareholders, but shares owned by or voted under the control of Directors who are at the time parties to the proceeding may not be voted on the determination. Any evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is appropriate, except that if the determination is made by special legal counsel, such evaluation as to reasonableness of expenses shall be made by those entitled under subsection (c) of this section (6) to select counsel. Notwithstanding the foregoing, in the event there has been a change in the composition of a majority of the Board of Directors after the date of the alleged act or omission with respect to -6- which indemnification is claimed, any determination as to indemnification and advancement of expenses with respect to any claim for indemnification made pursuant to this Article shall be made by special legal counsel agreed upon by the Board of Directors and the applicant. If the Board of Directors and the applicant are unable to agree upon such special legal counsel, the Board of Directors and the applicant each shall select a nominee, and the nominees shall select such special legal counsel. (7) (a) The Corporation shall pay for or reimburse the reasonable expenses incurred by any applicant who is a party to a proceeding in advance of final disposition of the proceeding or the making of any determination under section (6) if the applicant furnishes the Corporation: (i) a written statement of his good faith belief that he has met the standard of conduct described in section (3); and (ii) a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet such standard of conduct. (b) The undertaking required by paragraph (ii) of subsection (a) of this section shall be an unlimited general obligation of the applicant but need not be secured and may be accepted without reference to financial ability to make repayment. -7- (c) Authorizations of payments under this section shall be made by the persons specified in section (6). (8) The Board of Directors is hereby empowered, by majority vote of a quorum consisting of disinterested Directors, to cause the Corporation to indemnify or contract to indemnify any person not specified in section (2) or (3) of this Article who was, is or may become a party to any proceeding, by reason of the fact that he is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as director, officer, employee or agent in another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the same extent as if such person were specified as one to whom indemnification is granted in section (3). The provisions of section (4) through (7) of this Article shall be applicable to any indemnification provided thereafter pursuant to this section (8). (9) The Corporation may purchase and maintain insurance to indemnify it against the whole or any portion of the liability assumed by it in accordance with this Article and may also procure insurance, in such amounts as the Board of Directors may determine, on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by him in any -8- such capacity or arising from his status as such, whether or not the Corporation would have power to indemnify him against such liability under the provisions of this Article. (10) Every reference herein to directors, officers, employees or agents shall include former directors, officers, employees and agents and their respective heirs, executors and administrators. The indemnification hereby provided and provided hereafter pursuant to the power conferred by this Article on the Board of Directors shall not be exclusive of any other rights to which any person may be entitled, including any right under policies of insurance that may be purchased and maintained by the Corporation or others, with respect to claims, issues or matters in relation to which the Corporation would not have the power to indemnify such person under the provisions of this Article. Such rights shall not prevent or restrict the power of the Corporation to make or provide for any further indemnity, or provisions for determining entitlement to indemnity, pursuant to one or more indemnification agreements, by-laws, or other arrangements (including, without limitation, creation of trust funds or security interests funded by letters of credit or other means) approved by the Board of Directors (whether or not any of the Directors of the Corporation shall be a party to or beneficiary of any such agreements, by-laws or arrangements); provided, however, that any provisions of such agreements, by-laws or other arrangements shall not be effective if and to the extent that it -9- is determined to be contrary to this Article or applicable laws of the State of Florida. (11) Each provision of this Article shall be severable, and an adverse determination as to any such provision shall in no way affect the validity of any other provisions. Date: September 10, 1993 /s/ Nancy M. Taylor ----------------------------- Nancy M. Taylor, Incorporator Having been named as registered agent and to accept service of process for the above-named Corporation at the place designated in these Articles of Incorporation, I hereby accept the appointment as registered agent and agree to act in this capacity. I further agree to comply with the provisions of all statutes relating to the proper and complete performance of my duties, and I am familiar with and accept the obligations of my position as registered agent. Date: September 14, 1993 THE PRENTICE-HALL CORPORATION SYSTEM, INC. By: /s/ Barbara A. Buckley ------------------------- Name: Barbara A. Buckley Title: Assistant Vice President -10- EX-3.12 13 MASSIE TOOL, MOLD & DIE INC. BY-LAWS MASSIE TOOL, MOLD & DIE, INC. BY-LAWS ARTICLE I Meetings of Shareholders 1.1 Places of Meetings. All meetings of the shareholders shall be held at such place, either within or without the State of Florida, as may, from time to time, be fixed by the Board of Directors. 1.2 Annual Meetings. The annual meeting of the shareholders, for the election of Directors and transaction of such other business as may come before the meeting, shall be held in each year on or before April 30, or on such other date as the Board of Directors of the Corporation may designate from time to time. 1.3 Special Meetings. Special meetings of shareholders for any purpose or purposes may be called at any time by the President of the Corporation, by a majority of the Board of Directors or by a vote of the shareholders together holding at least a majority of the authorizing shares of voting capital stock. At a special meeting no business shall be transacted and no corporate action shall be taken other than that stated in the notice of the meeting. 1.4 Notice of Meetings. Except as otherwise required by law, written or printed notice stating the place, day and hour of every meeting of the shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be mailed not less than ten nor more than sixty days before the date of the meeting to each shareholder of record entitled to vote at such meeting at his address that appears in the share transfer books of the Corporation. Meetings may be held without notice if all the shareholders entitled to vote at the meeting are present in person or by proxy or if notice is waived in writing by those not present, either before or after the meeting. 1.5 Quorum. Except as otherwise required by the Articles of Incorporation, any number of shareholders together holding at least a majority of the outstanding shares of capital stock entitled to vote with respect to the business to be transacted, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business. If less than a quorum shall be in attendance at the time for which a meeting shall have been called, the meeting may be adjourned from time to time by a majority of the shareholders present or represented by proxy without notice other than by announcement at the meeting. 1.6 Voting. At any meeting of the shareholders, each shareholder of a class entitled to vote on the matters coming before the meeting shall have one vote, in person or by proxy, for each share of capital stock standing in his or her name on the books of the Corporation at the time of such meeting or on any date fixed by the Board of Directors not more than seventy days prior to the meeting. Every proxy shall be in writing, dated and signed by the shareholder entitled to vote or his duly authorized attorney-in-fact. 1.7 Action Without Meeting. Any action required or permitted to be taken at a shareholders' meeting may be taken without a meeting and without action by the Board of Directors if the action is taken by all of the shareholders entitled to vote on the action. The action shall be evidenced by one or more written consents describing the action taken, signed by all of the shareholders entitled to vote on the action, and delivered to the secretary of the Corporation for inclusion in the minutes for filing with the corporate records. ARTICLE II Directors 2.1 General Powers. The property, affairs and business of the Corporation shall be managed under the direction of the Board of Directors, and except as otherwise expressly provided by law, the Articles of Incorporation or these By-laws, all of the powers of the Corporation shall be vested in such Board. - 3 - 2.2 Number of Directors. The number of Directors shall be three (3) in number. 2.3 Election of Directors. (a) Directors shall be elected at the annual meeting of shareholders to succeed those Directors whose terms have expired and to fill any vacancies thus existing. (b) Directors shall hold their offices for terms of one year and until their successors are elected. Any Director may be removed from office at a meeting called expressly for that purpose by the vote of shareholders holding not less than a majority of the shares entitled to vote at an election of Directors. (c) Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of the majority of the remaining Directors though less than a quorum of the Board of Directors. (d) A majority of the number of Directors fixed by these By-laws shall constitute a quorum for the transaction of business. The act of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. - 4 - 2.4 Meetings of Directors. Meetings of the Board of Directors shall be held at places within or without the State of Florida and at times fixed by resolution of the Board, or upon call of the President, and the Secretary or officer performing the Secretary's duties shall give not less than twenty-four hours' notice by letter, telegraph or telephone (or in person) of all meetings of the Directors, provided that notice need not be given of regular meetings held at times and places fixed by resolution of the Board. An annual meeting of the Board of Directors shall be held as soon as practicable after the adjournment of the annual meeting of shareholders. Meetings may be held at any time without notice if all of the Directors are present, or if those not present waive notice in writing either before or after the meeting. Directors may be allowed, by resolution of the Board, a reasonable fee and expenses for attendance at meetings. 2.5 Action Without Meeting. Any action required or permitted to be taken at a Board of Directors meeting may be taken without a meeting if the action is taken by all of the members of the Board of Directors. The action shall be evidenced by one or more written consents stating the action taken, signed by each Director either before or after the action taken, and included in the minutes or filed with the corporate records reflecting the action taken. Any such consent has the effect of - 5 - a meeting vote and may be described as such in any document of the Corporation. ARTICLE III Committees 3.1 Committees. The Board of Directors, by resolution duly adopted, may establish such committees of the Board having limited authority in the management of the affairs of the Corporation as it may deem advisable and the members, terms and authority of such committees shall be as set forth in the resolutions establishing the same. 3.2 Meetings. Regular and special meetings of any Committee established pursuant to this Article may be called and held subject to the same requirements with respect to time, place and notice as are specified in these By-laws for regular and special meetings of the Board of Directors. 3.3 Quorum and Manner of Acting. A majority of the members of any Committee serving at the time of any meeting thereof shall constitute a quorum for the transaction of business at such meeting. The action of a majority of those members present at a Committee meeting at which a quorum is present shall constitute the act of the Committee. - 6 - 3.4 Term of Office. Members of any Committee shall be elected as provided above and shall hold office until their successors are elected by the Board of Directors or until such Committee is dissolved by the Board of Directors. 3.5 Resignation and Removal. Any member of a Committee may resign at any time by giving written notice of his intention to do so to the President or the Secretary of the Corporation, or may be removed, with or without cause, at any time by such vote of the Board of Directors as would suffice for his election. 3.6 Vacancies. Any vacancy occurring in a Committee resulting from any cause whatsoever may be filled by a majority of the number of Directors fixed by these By-laws. ARTICLE IV Officers 4.1 Election. The officers of the Corporation shall consist of a President, one or more Vice Presidents (any one or more of whom may be designated as Executive Vice Presidents or Senior Vice Presidents), a Secretary and a Treasurer. In addition, such other officers as are provided in section 4.3 of this Article may from time to time be elected by the Board of Directors. All officers shall hold office until the next annual meeting of the Board of Directors or until their successors are elected. Any two officers may be combined in the same person as - 7 - the Board of Directors may determine, except that the President and Secretary may not be the same person. 4.2 Removal of Officers; Vacancies. Any officer of the Corporation may be removed summarily with or without cause, at any time by a resolution passed at any meeting by affirmative vote of a majority of the number of Directors fixed by these By-laws. Vacancies may be filled at any meeting of the Board of Directors. 4.3 Other Officers. Other officers may from time to time be elected by the Board, including, without limitations, one or more Assistant Secretaries and Assistant Treasurers. 4.4 Duties. The officers of the Corporation shall have such duties as generally pertain to their offices, respectively, as well as such powers and duties as are hereinafter provided and as from time to time shall be conferred by the Board of Directors. The Board of Directors may require any officer to give such bond for the faithful performance of his duties as the Board may see fit. 4.5 Duties of the President. The President shall be the chief executive and administrative officer of the Corporation and shall have direct supervision over the business of the Corporation and its several officers, subject to the Board of - 8 - Directors. The President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases where the signing and the execution thereof shall be expressly delegated by the Board of Directors or by these By-laws to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed. He may appoint advisory committees as provided in Article III. In addition, he shall perform all duties incident to the office of the President and such other duties as from time to time may be assigned to him by the Board of Directors. 4.6 Duties of the Vice Presidents. Each Vice President of the Corporation (including any Executive Vice President and Senior Vice President) shall have powers and duties as may from time to time be assigned to him by the Board of Directors or the President. When there shall be more than one Vice President of the Corporation, the Board of Directors may from time to time designate one of them to perform the duties of the President in the absence of the President. Any Vice President of the Corporation may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-laws to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed. - 9 - 4.7 Duties of the Treasurer. The Treasurer shall have charge and custody of and be responsible for all funds and securities of the Corporation, and shall cause all such funds and securities to be deposited in such banks and depositories as the Board of Directors from time to time may direct. He shall maintain adequate accounts and records of all assets, liabilities and transactions of the Corporation in accordance with generally accepted accounting practices; shall exhibit his accounts and records to any of the Directors of the Corporation at any time upon request at the office of the Corporation; shall render such statements of his accounts and records and such other statements to the Board of Directors and officers as often and in such manner as they shall require; and shall make and file (or supervise the making and filing of) all tax returns required by law. He shall in general perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors or the President. 4.8 Duties of the Secretary. The Secretary shall act as a secretary of all meetings of the Board of Directors and all other Committees of the Board, and the shareholders of the Corporation, and shall keep the minutes thereof in the proper book or books to be provided for that purpose. He shall see that all notices required to be given by the Corporation are duly given and served; shall have custody of the seal of the Corporation and - 10 - shall affix the seal or cause it to be affixed to all certificates for stock of the Corporation and to all documents the execution of which on behalf of the Corporation under its corporate seal is duly authorized in accordance with the provisions of these By-laws; shall have custody of all deeds, leases, contracts and other important corporate documents; shall have charge of the books, records and papers of the Corporation relating to its organization and management as a Corporation; shall see that the reports, statements and other documents required by law (except tax returns) are properly filed; and shall, in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors or the President. 4.9 Other Duties of Officers. Any officer of the Corporation shall have, in addition to the duties prescribed herein or by law, such other duties as from time to time shall be prescribed by the Board of Directors or the President. ARTICLE V Capital Stock 5.1 Certificates. The shares of capital stock of the Corporation shall be evidenced by certificates in forms prescribed by the Board of Directors and executed in any manner permitted by law and stating thereon the information required by law. Transfer agents and/or registrars for one or more classes - 11 - of shares of the Corporation may be appointed by the Board of Directors and may be required to countersign certificates representing shares of such class or classes. If any officer whose signature or facsimile thereof shall have been used on a share certificate shall for any reason cease to be an officer of the Corporation and such certificate shall not then have been delivered by the Corporation, the Board of Directors may nevertheless adopt such certificate and it may then be issued and delivered as though such person had not ceased to be an officer of the Corporation. 5.2 Lost, Destroyed and Mutilated Certificates. Holders of the shares of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor, and the Board of Directors, may, in its discretion, cause one or more new certificates for the same number of shares in the aggregate to be issued to such shareholder upon the surrender of the mutilated certificate or upon satisfactory proof of such loss or destruction, and the deposit of a bond in such form and amount and with such surety as the Board of Directors may require. 5.3 Transfer of Shares. The shares of the Corporation shall be transferable or assignable only on the books of the Corporation by the holders in person or by attorney on surrender of the certificate for such shares duly endorsed and, if sought - 12 - to be transferred by attorney, accompanied by a written power of attorney to have the same transferred on the books of the Corporation. The Corporation will recognize the exclusive right of the person registered on its books as the owner of shares to receive dividends and to vote as such owner. 5.4 Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof, or entitled to receive payment for any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. - 13 - ARTICLE VI Miscellaneous Provisions 6.1 Seal. The seal of the Corporation shall consist of a flat-face circular die, of which there may be any number of counterparts, with the name of the Corporation cut or engraved thereon. 6.2 Fiscal Year. The fiscal year of the Corporation shall end on December 31st of each year, and shall consist of such accounting periods as may be recommended by the Treasurer and approved by the Board of Directors. 6.3 Books and Records. The Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders and Board of Directors; and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar a record of its shareholders, giving the names and addresses of all shareholders, and the number, class and series of the shares being held. 6.4 Checks, Notes and Drafts. Checks, notes, drafts and other orders for the payment of money shall be signed by such persons as the Board of Directors from time to time may authorize. When the Board of Directors so authorizes, however, the signature of any such person may be a facsimile. - 14 - 6.5 Amendment of By-laws. These By-laws may be amended or altered at any meeting of the Board of Directors by affirmative vote of a majority of the number of Directors fixed by these By-laws. The shareholders entitled to vote in respect of the election of Directors, however, shall have the power, by majority vote of the outstanding shares of the Corporation, to rescind, alter, amend or repeal any By-laws and to enact By-laws which, if expressly so provided, may not be amended, altered or repealed by the Board of Directors. 6.6 Voting of Shares Held. Unless otherwise provided by resolution of the Board of Directors, the President shall from time to time appoint an attorney or attorneys or agent or agents of this Corporation, in the name and on behalf of this Corporation, to cast the vote which this Corporation may be entitled to cast as a shareholder or otherwise in any other corporation, any of whose stock or securities may be held in this Corporation, at meetings of the holders of the shares or other securities of such other corporation, or to consent in writing to any action by any such other corporation, and shall instruct the person or persons so appointed as to the manner of casting such votes or giving such consent and may execute or cause to be executed on behalf of this Corporation and under its corporate seal or otherwise, such written proxies, consents, waivers or other instruments as may be necessary or proper in the premises; or, in lieu of such appointment, the President may attend in - 15 - person any meetings of the holders of shares or other securities of any such other corporation and there vote or exercise any or all power of this Corporation as the holder of such shares or other securities of such other corporation. - 16 - EX-4.1 14 INDENTURE EXECUTION COPY ================================================================================ PRECISE TECHNOLOGY, INC. 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007 ------------------------ INDENTURE Dated as of June 13, 1997 ------------------------ ------------------------ Marine Midland Bank Trustee ------------------------ ================================================================================ TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE................... 1 Section 1.01. Definitions.................................................. 1 Section 1.02. Other Definitions............................................ 18 Section 1.03. Incorporation By Reference of Trust Indenture Act............ 18 Section 1.04. Rules of Construction........................................ 19 Section 1.05. Compliance Certificates and Opinions......................... 19 ARTICLE 2 THE NOTES.................................................... 21 Section 2.01. Form and Dating.............................................. 21 Section 2.02. Execution and Authentication................................. 22 Section 2.03. Registrar and Paying Agent................................... 23 Section 2.04. Paying Agent to Hold Money in Trust.......................... 23 Section 2.05. Holder Lists................................................. 24 Section 2.06. Transfer and Exchange........................................ 24 Section 2.07. Replacement Notes............................................ 36 Section 2.08. Outstanding Notes............................................ 36 Section 2.09. Treasury Notes............................................... 36 Section 2.10. Temporary Notes.............................................. 36 Section 2.11. Cancellation................................................. 37 Section 2.12. Defaulted Interest........................................... 37 ARTICLE 3 REDEMPTION AND PREPAYMENT.................................... 38 Section 3.01. Applicability of Article..................................... 38 Section 3.02. Election to Redeem; Notice to Trustee........................ 38 Section 3.03. Selection by Trustee of Notes to Be Redeemed................. 38 Section 3.04. Notice of Redemption......................................... 38 Section 3.05. Deposit of Redemption Price.................................. 39 Section 3.06. Notes Payable on Redemption Date............................. 39 Section 3.07. Notes Redeemed in Part....................................... 39 Section 3.08. Optional Redemption.......................................... 40 Section 3.09. Mandatory Redemption......................................... 40 Section 3.10. Offer to Purchase by Application of Excess Proceeds.......... 40 ARTICLE 4 COVENANTS.................................................... 42 Section 4.01. Payment of Principal, Premium and Interest................... 42 Section 4.02. Maintenance of Office or Agency.............................. 43 Section 4.03. Money for Security Payments to Be Held In Trust.............. 43 Section 4.04. Reports...................................................... 44 Section 4.05. Statement as to Compliance; Notice of Default. .............. 45 Section 4.06. Payment of Taxes and Other Claims............................ 46 Section 4.07. Limitation on Liens.......................................... 46 Section 4.08. Corporate Existence.......................................... 46 Section 4.09. Offer to Repurchase Upon Change of Control................... 46 Section 4.10. Asset Sales.................................................. 48 i Section 4.11. Limitation on Restricted Payments............................ 49 Section 4.12. Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock.............................. 51 Section 4.13. Transactions with Affiliates................................. 53 Section 4.14. Dividend and Other Payment Restrictions Affecting Subsidiaries....................................... 54 Section 4.15. Limitation on Issuances and Sales of Capital Stock of Wholly Owned Restricted Subsidiaries...................... 55 Section 4.16. Limitation on Layering Debt.................................. 55 Section 4.17. Additional Subsidiary Guarantees............................. 55 Section 4.18. Payments For Consent......................................... 56 ARTICLE 5 SUCCESSORS................................................... 56 Section 5.01. Merger, Consolidation, or Sale of All or Substantially All Assets..................................... 56 Section 5.02. Successor Corporation Substituted............................ 57 ARTICLE 6 DEFAULTS AND REMEDIES........................................ 57 Section 6.01. Events of Default and Notice Thereof......................... 57 Section 6.02. Acceleration of Maturity; Rescission......................... 58 Section 6.03. Other Remedies............................................... 59 Section 6.04. Waiver of Past Defaults...................................... 59 Section 6.05. Control by Majority.......................................... 59 Section 6.06. Limitation on Suits.......................................... 60 Section 6.07. Rights of Holders of Notes to Receive Payment................ 60 Section 6.08. Collection Suit by Trustee................................... 60 Section 6.09. Trustee May File Proofs of Claim............................. 60 Section 6.10. Priorities................................................... 61 Section 6.11. Undertaking for Costs........................................ 61 Section 6.12. Waiver of Stay, Extension of Usury Laws...................... 61 ARTICLE 7 TRUSTEE...................................................... 62 Section 7.01. Duties of Trustee............................................ 62 Section 7.02. Rights of Trustee............................................ 63 Section 7.03. Individual Rights of Trustee................................. 63 Section 7.04. Trustee's Disclaimer......................................... 64 Section 7.05. Notice of Defaults........................................... 64 Section 7.06. Reports by Trustee to Holders of the Notes................... 64 Section 7.07. Compensation and Indemnity................................... 64 Section 7.08. Replacement of Trustee....................................... 65 Section 7.09. Successor Trustee by Merger, etc............................. 66 Section 7.10. Eligibility; Disqualification................................ 66 Section 7.11. Preferential Collection of Claims Against the Company........ 66 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE..................... 67 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance..... 67 Section 8.02. Legal Defeasance and Discharge............................... 67 Section 8.03. Covenant Defeasance.......................................... 67 Section 8.04. Conditions to Legal Defeasance or Covenant Defeasance........ 68 Section 8.05. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions................ 69 ii Section 8.06. Reinstatement................................................ 70 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER............................. 70 Section 9.01. Without Consent of Holders of Notes.......................... 70 Section 9.02. With Consent of Holders of Notes............................. 71 Section 9.03. Compliance with TIA.......................................... 72 Section 9.04. Revocation and Effect of Consents............................ 72 Section 9.05. Notation on or Exchange of Notes............................. 72 Section 9.06. Trustee to Sign Amendments, etc.............................. 72 ARTICLE 10 SUBORDINATION................................................ 73 Section 10.01.Agreement to Subordinate..................................... 73 Section 10.02.Liquidation; Dissolution; Bankruptcy......................... 73 Section 10.03.Default on Designated Senior Debt............................ 73 Section 10.04.Acceleration of Securities................................... 74 Section 10.05.When Distribution Must Be Paid Over.......................... 74 Section 10.06.Notice by Company............................................ 75 Section 10.07.Subrogation.................................................. 75 Section 10.08.Relative Rights.............................................. 75 Section 10.09.Subordination May Not Be Impaired by Company................. 76 Section 10.10.Distribution or Notice to Representative..................... 76 Section 10.11.Rights of Trustee and Paying Agent........................... 76 Section 10.12.Authorization to Effect Subordination........................ 76 ARTICLE 11 SATISFACTION AND DISCHARGE................................... 77 Section 11.01.Satisfaction and Discharge of Indenture...................... 77 Section 11.02.Application of Trust Money.................................. 77 ARTICLE 12 SUBSIDIARY GUARANTEES........................................ 78 Section 12.01.Subsidiary Guarantee......................................... 78 Section 12.02.Execution and Delivery of Guarantee.......................... 79 Section 12.03.Guarantors May Consolidate, etc., on Certain Terms........... 79 Section 12.04.Releases From Guarantees..................................... 80 Section 12.05.Limitation on Guarantor Liability............................ 80 Section 12.06.Subordination of Subsidiary Guarantees....................... 81 ARTICLE 13 MISCELLANEOUS................................................ 81 Section 13.01.Conflict of Any Provision of Indenture with TIA.............. 81 Section 13.02.Notices...................................................... 81 Section 13.03.Communication by Holders of Notes with Other Holders of Notes............................................. 82 Section 13.04.Certificate and Opinion as to Conditions Precedent........... 82 Section 13.05.Legal Holidays............................................... 83 Section 13.06.No Personal Liability of Directors, Officers, Employees and Stockholders................................... 83 Section 13.07.Governing Law; Submission to Jurisdiction.................... 83 Section 13.08.No Adverse Interpretation of Other Agreements................ 83 Section 13.09.Successors and Assigns....................................... 84 Section 13.10.Severability................................................. 84 iii Section 13.11.Counterpart Originals........................................ 84 Section 13.12.Table of Contents, Headings, etc............................. 84 iv EXHIBITS Exhibit A-1 Form of Restricted Definitive Note, Regulation S Permanent Global Note and Rule 144A Global Note Exhibit A-2 Form of Regulation S Temporary Global Note Exhibit A-3 Form of Unrestricted Note Exhibit B Form of Certificate of Transfer Exhibit C Form of Certificate of Exchange Exhibit D Form of Certificate from Acquiring Institutional Accredited Investor Exhibit E Form of Subsidiary Guarantee Schedule I Schedule of Existing Indebtedness v CROSS-REFERENCE TABLE* Trust Indenture Indenture Section Act Section 310(a)(1)...................................................7.10 (a)(2)...................................................7.10 (a)(3)...................................................N.A. (a)(4)...................................................N.A. (a)(5)...................................................7.10 (b)......................................................7.10 (c)......................................................N.A. 311(a)......................................................7.11 (b)......................................................7.11 (c)......................................................N.A. 312(a)......................................................11.03 (b)......................................................11.03 (c)......................................................11.03 313(a)......................................................7.06 (b)(1)...................................................N.A. (b)(2)...................................................7.06; 7.07 (c)......................................................7.06; 10.02 (d)......................................................7.06 314(a)......................................................4.04; 11.02 (b)......................................................N.A. (c)(1)...................................................11.04 (c)(2)...................................................11.04 (c)(3)...................................................N.A. (d)......................................................N.A. (f)......................................................N.A. 315(a)......................................................7.01 (b)......................................................7.05; 11.02 (c)......................................................7.01 (d)......................................................7.01 (e)......................................................6.11 316(a)(last sentence).......................................2.09 (a)(1)(A)................................................6.05 (a)(1)(B)................................................6.04 (a)(2)...................................................N.A. (b)......................................................6.07 317(a)(1)...................................................6.08 (a)(2)...................................................6.09 (b)......................................................2.04 318(a)......................................................11.01 (b)......................................................N.A. (c)......................................................11.01 N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. vi INDENTURE dated as of June 13, 1997 among Precise Technology, Inc., a Delaware corporation (the "Company"), Precise TMP, Inc., a Virginia corporation ("Precise TMP"), Massie Tool, Mold & Die, Inc., a Florida corporation ("Massie"), Precise Polestar, Inc., a Virginia corporation ("Precise Polestar"), Precise Technology of Delaware Inc., a Delaware corporation ("Precise Delaware"), and Precise Technology of Illinois Inc., a Delaware corporation ("Precise Illinois") (each of Precise TMP, Massie, Precise Polestar, Precise Delaware and Precise Illinois a "Guarantor", and together with certain future Subsidiaries of the Company as set forth herein, the "Guarantors") and Marine Midland Bank, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 11 1/8% Senior Subordinated Notes due 2007 (the "Notes"). ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01.DEFINITIONS. "Accredited Investor" has the meaning set forth in Rule 501(a) (1), (2), (3) or (7) of the Securities Act. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness or preferred stock of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness or preferred stock incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "Agent Members" means members of, or participants in, the Depository. "Applicable Procedures" means applicable procedures of the Depository, Euroclear or Cedel Bank, as the case may be. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of Section 4.09 and/or the provisions of Section 5.01 and not by the provisions of Section 4.10), and (ii) the issuance of Equity Interests in any Restricted Subsidiary or the sale of Equity Interests in any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of assets or Equity Interests by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (iii) the disposal of obsolete equipment and machinery in the ordinary course of business and (iv) a Restricted Payment that is permitted to be made, and is made, under Section 4.11 will not be deemed to be Asset Sales. "Bankruptcy Law" means Title 11, U.S. Code or any similar foreign, federal or state law for the relief of debtors. "Board of Directors" means the board of directors of the Company or any duly authorized committee of such board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Borrowing Base" means, as of any date, an amount equal to the sum of (a) 85% of the face amount of all trade receivables owned by the Company and its Restricted Subsidiaries as of such date that are not more than 90 days past due, less the allowance for doubtful accounts, each of the foregoing determined in accordance with GAAP, and (b) 50% of the book value of all inventory owned by the Company and its Restricted Subsidiaries as of such date, less any applicable reserves, each of the foregoing determined in accordance with GAAP. To the extent that information is not available as to the amount of trade receivables or inventory as of a specific date, the Company may utilize the most recent available information for purposes of calculating the Borrowing Base. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York are authorized or obligated by law, regulation or executive order to close. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 2 "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper rated at least P-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Ratings Services and in each case maturing within six months after the date of acquisition and (vi) investment funds with total assets in excess of $500 million that invest at least 95% of their assets in securities of the types described in clauses (i) through (v) above. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is defined in Section 13(d)(3) of the Exchange Act) other than the Principals or their Related Parties; (ii) the adoption of a plan relating to the liquidation or dissolution of the Company; (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares); or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Code" means the Internal Revenue Code of 1986, as amended, or any successor thereto. "Company" means Precise Technology, Inc., a Delaware corporation, and any successor thereto pursuant to Section 5.01 hereof. "Company Request" or "Company Order" means a written request or order signed in the name of the Company (i) by its Chairman, a Vice Chairman, its President or a Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. 3 "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary, non-recurring or unusual loss plus any net loss realized in connection with an asset sale (to the extent such losses were deducted or otherwise excluded in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, plus (v) an amount equal to all premiums on prepayments of debt, minus (vi) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof that is a Guarantor and, for purposes of determining Consolidated Cash Flow only, shall not exceed the consolidated net income of such Person for such period, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (iv) the cumulative effect of a change in accounting principles shall be excluded and (v) the Net Income of any Person that is an Unrestricted Subsidiary shall be included only to the extent of the amount of cash dividends or cash distributions paid to such Person or a Restricted Subsidiary thereof. 4 "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of this Indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Restricted Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of this Indenture or (ii) was nominated by the Principals or any Related Party to serve on such Board of Directors. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means that certain Credit Agreement, dated as of June 13, 1997, by and among Parent, the Company and the Subsidiaries of the Company named therein, the lenders named therein and Fleet National Bank, as Agent and as issuing bank, providing for up to $30.0 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified (including any agreement extending the maturity of, increasing the total commitment under or otherwise restructuring all or any portion of the Indebtedness under such agreement or any successor or replacement agreement), renewed, refunded, replaced, restated, supplemented or refinanced from time to time. "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Definitive Notes" means Restricted Definitive Notes and Unrestricted Definitive Notes. "Depository" means, with respect to any Global Note, the Person specified in Section 2.03 hereof as the Depository with respect to such Note, until a successor shall have been appointed and become such pursuant to the applicable provision of this Indenture, and, thereafter, "Depository" shall mean or include such successor. "Designated Senior Debt" means (i) any Indebtedness outstanding under the Credit Agreement and (ii) any other Senior Debt, the principal amount of which is $5.0 million or more and that has been designated by a Board Resolution as "Designated Senior Debt." 5 "Disqualified Stock" means any Capital Stock 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 or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "Exchange Offer" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange Notes (as defined in the Registration Rights Agreement) for New Notes. "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Existing Indebtedness" means up to $6.8 million in aggregate principal amount of Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the date hereof and set forth on Schedule I hereto (including any refinancings thereof), until such amounts are permanently repaid. "Fixed Charges" means, with respect to any Person and its Restricted Subsidiaries for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) all dividend payments (including all dividend payments within 60 days of the measurement date for any period), whether or not in cash, on any series of (A) Disqualified Stock of such Person and (B) preferred stock of any Subsidiary of such Person, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company and other than payments to such Person and its Restricted Subsidiaries, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means with respect to any Person and its Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the 6 "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, and the application of the net proceeds thereof, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Global Note" means, individually and collectively, the Regulation S Global Note, the Rule 144A Global Note and the Unrestricted Global Note. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii). "Government Securities" means securities that are (a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantors" means each of (i) the Company's Subsidiaries listed in the preamble to this Indenture and future Restricted Subsidiaries (having either assets or stockholder's equity in excess of $50,000) and 7 (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, currency rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency values. "Holder" means a Person in whose name a Note is registered. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (but only to the extent of the fair market value of the assets subject to such Lien) (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time. "Initial Purchasers" means Bear, Stearns & Co. Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. "Interest Payment Date" means each June 15 and December 15, whether or not such day is a Business Day. "interest" means all interest payable with respect to the Notes, including, without limitation Special Interest. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including Guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; provided, however, that if the sole consideration for any such investment is Capital Stock of the Company or a Subsidiary that is not Disqualified Stock, then such investment shall not be deemed an Investment for purposes of this Indenture. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company 8 shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.11. "Issuance Date" means the closing date for the sale and original issuance of the Notes under this Indenture. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" has the meaning set forth in the Registration Rights Agreement. "Make-Whole Premium" means, with respect to a Note, an amount equal to the greater of (i) 5.563% of the outstanding principal amount of such Note and (ii) the excess of (a) the present value of the remaining interest, premium and principal payments due on such Note as if such Note were redeemed on June 15, 2002, computed using a discount rate equal to the Treasury Rate plus 75 basis points, over (b) the outstanding principal amount of such Note. "Management Agreement" means the agreement, dated as of March 15, 1996, between the Company and Mentmore, as amended from time to time. "Maturity" when used in respect to any Note means the date on which the principal of (and premium, if any) and interest on such Note becomes due and payable as therein or herein provided, whether at Stated Maturity or the applicable Redemption Date and whether by declaration of acceleration, call for redemption or otherwise. "Mentmore" means Mentmore Holdings Corporation, a Delaware corporation, or its successors. "Moody's" means Moody's Investors Service, Inc., or its successors. "Net Income" means, with respect to any Person for any period, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any asset sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). 9 "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale, any provision for permitted minority interests in any Restricted Subsidiary as a result of such Asset Sale and any reserve established in accordance with GAAP against any liabilities associated with the assets sold or disposed of in such Asset Sale, including, without limitation, sales price adjustments, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with the assets sold or disposed of in such Asset Sale or provision for minority interest holders in any Restricted Subsidiary as a result of such Asset Sale. "New Notes" has the meaning set forth in the Registration Rights Agreement. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries in excess of $5.0 million to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Notes" means $75,000,000 aggregate principal amount of the Company's 111/8% Senior Subordinated Notes due 2007 issued pursuant to the Offering Memorandum and any other 111/8% Senior Subordinated Notes due 2007 hereafter issued in compliance with the provisions of this Indenture (including Section 4.12). "Note Custodian" means the custodian for the Depository of the Global Notes, or any successor entity thereto. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering Memorandum" means that certain offering memorandum with respect to the Notes, dated June 10, 1997. "Officer" means the Chairman of the Board, the President, any Vice President, the Secretary or any Assistant Secretary of the Company or any Guarantor, as applicable. "Officers' Certificate" means a certificate signed on behalf of the Company or any Guarantor, as applicable, by two Officers of the Company or any Guarantor, as applicable, one of whom must be the 10 principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company or any Guarantor, as applicable, that meets the requirements set forth in Section 1.05. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company or any Guarantor, as applicable, and who shall be acceptable to the Trustee. Each such opinion shall include the statements provided for in TIA Section 314(e) to the extent applicable. "Parent" means Precise Holding Corporation, a Delaware corporation, or its successors. "Permitted Investments" means (a) any Investment in the Company or in a Wholly Owned Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the Company and a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the Company; (d) any Restricted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) reasonable and customary loans and advances made to employees in connection with their relocation (including related travel expenses) not to exceed $250,000 in the aggregate at any one time outstanding; (g) any Investment existing on the date of this Indenture; (i) any Investment acquired by the Company or any of its Restricted Subsidiaries (x) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such Investment or accounts receivable or (y) as the result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; and (j) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (j) that are at the time outstanding, not to exceed $5.0 million. "Permitted Junior Securities" means Equity Interests in the Company or debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Debt. "Permitted Liens" means (i) Liens securing Senior Debt that was permitted by the terms of this Indenture to be incurred; (ii) Liens in favor of the Company or any Restricted Subsidiary; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (v) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iii) of the second paragraph of Section 4.12 covering only the assets acquired with such Indebtedness; (vi) Liens existing on the date hereof; (vii) Liens for taxes, assessments or governmental charges or claims that 11 are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (viii) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries; (ix) statutory Liens or landlords', carriers', warehousemens', mechanics', suppliers' or similar Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company; (x) easements, minor title defects, irregularities in title or other charges or encumbrances on property not interfering in any material respect with the use of such property by the Company or a Subsidiary of the Company; (xi) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (xii) liens securing industrial revenue bonds or other tax-favored financing; (xiii) deposit arrangements entered into in connection with acquisitions or in the ordinary course of business; (xiv) other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $5.0 million at any one time outstanding; and (xv) any extensions, substitutions, replacements or renewals of the foregoing. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, other Indebtedness of the Company or any of its Restricted Subsidiaries; provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses and prepayment premiums incurred in connection therewith) (except to the extent such increase is a result of a simultaneous incurrence of additional Indebtedness permitted to be incurred under this Indenture); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Permitted Warrant Put Payment" means any payment or distribution (whether in cash or securities of the Company) made after March 29, 2001 and in accordance with the following sentence, by the Company or any of its Restricted Subsidiaries to Parent in order to enable Parent to satisfy Parent's obligations under the Warrant Agreement and/or the Shareholders Agreement to repurchase the Put Shares (as defined in the Warrant Agreement) or to repay indebtedness incurred by Parent to satisfy such obligations. If, after giving pro forma effect to any Permitted Warrant Put Payment by the Company, the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such Permitted Warrant Put Payment is made is (i) greater than 2.50 to 1 and less than 2.75 to 1, then the Company will be permitted to make a Permitted Warrant Put Payment in an amount not to exceed $5.0 million, (ii) greater than or equal to 2.75 to 1 and less than 3.00 to 1, then the Company will be permitted to make a Permitted Warrant Put Payment in an amount not to exceed $10.0 million and (iii) greater than or equal to 3.00 to 12 1, then the Company will be permitted to make a Permitted Warrant Put Payment in an amount not to exceed $15.0 million. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "preferred stock" means any Equity Interest with preferential right of payment of dividends or upon liquidation, dissolution, or winding up. "Principals" means Richard L. Kramer and/or William L. Remley. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i)(A) to be placed on all Notes issued under this Indenture except as permitted pursuant to Section 2.06(g)(i)(B). "Public Equity Offering" means a bona fide underwritten sale to the public of common stock of Parent or the Company pursuant to a registration statement (other than on Form S-8 or any other form relating to securities issuable under any benefit plan of Parent or the Company) that is declared effective by the SEC and results in aggregate gross equity proceeds to the Company of at least $20.0 million. "Redemption Date," when used with respect to any Note to be redeemed, means the date fixed for such redemption pursuant to this Indenture. "Redemption Price," when used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of June 13, 1997, by and among the Company, Precise TMP, Massie, Precise Polestar, Precise Delaware, Precise Illinois and the Initial Purchasers, as such agreement may be amended, modified or supplemented from time to time. "Regular Record Date" for the interest payable on any Interest Payment Date means the June 1 or December 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "Regulation S Permanent Global Note" means a permanent global Note substantially in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depository or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. 13 "Regulation S Temporary Global Note" means a temporary global Note substantially in the form of Exhibit A-2 hereto bearing the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depository or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Related Parties" with respect to any Principal means (A) any spouse or immediate family member of such Principal and any child or spouse of any spouse or immediate family member of such Principal, (B) a trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding, directly or indirectly, a controlling interest of which consist of any of such Principal and/or such other Persons referred to in the immediately preceding clause (A) or (C) the trustees of any trust referred to in clause (B). "Repurchase Offer" means an offer made by the Company to purchase all or any portion of a Holder's Notes pursuant to the provisions described under Sections 4.09 or 4.10. "Responsible Officer," when used with respect to the Trustee, means any officer in the Corporate Trust Office of the Trustee with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Restricted Definitive Notes" means Notes that are substantially in the form of the Notes attached hereto as Exhibit A-1, that do not include the information called for by footnotes 1 and 2 thereof. "Restricted Global Notes" means the Regulation S Global Notes and the Rule 144A Global Notes. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Period" means the 40-day restricted period as defined in Regulation S. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 144A Global Note" means a permanent global note that contains the paragraph referred to in footnote 1 and the additional schedule referred to in footnote 2 to the form of the Note attached hereto as Exhibit A-1, and that is deposited with the Note Custodian and registered in the name of the Depository, representing Notes sold to Accredited Investors or in reliance on Rule 144A, as applicable. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "S&P" means Standard and Poor's Ratings Services, or its successors. 14 "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Senior Debt" of any Person means (i) all Indebtedness of such Person under the Credit Agreement, including, without limitation, obligations to pay principal and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law), reimbursement obligations under letters of credit, fees, expenses and indemnities, and all Hedging Obligations with respect thereto, whether outstanding on the date of this Indenture or hereafter incurred, (ii) the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other Obligations with respect to, any other Indebtedness of such Person permitted to be incurred by such Person under the terms of this Indenture, whether outstanding on the date of this Indenture or hereafter incurred, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes and (iii) all Obligations of such Person with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (w) any liability for federal, state, local or other taxes owed or owing by such Person, (x) any Indebtedness of such Person to any of its Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of this Indenture. "Shareholders Agreement" means the shareholders agreement, dated as of March 29, 1996, as amended, among Parent, Sunderland, Hamilton Holdings Ltd. Corporation, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., Rice Partners II, L.P. and John Hancock Mutual Life Insurance Company, with respect to certain securities of Parent. "Shelf Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary which would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issuance Date. "Special Record Date" means a date fixed by the Trustee for the payment of any Defaulted Interest pursuant to Section 2.12. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subordinated Note Obligations" means any principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes payable pursuant to the terms of the Notes or upon acceleration, redemption, repurchase or other acquisition thereof, together with and including any amounts received 15 upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise, to the extent relating to the purchase price of the Notes or amounts corresponding to such principal, premium, if any, or interest and Liquidated Damages, if any, on the Notes. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Subsidiary Guarantee" means any guarantee of the obligations of the Company pursuant to Section 12 of this Indenture and the Notes by any Person in accordance with the provisions of this Indenture. "Sunderland" means Sunderland Industrial Holdings Corporation, a Delaware corporation, or its successors. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, then "TIA" means, to the extent required by such amendment, the Trust Indenture Act of 1939 as so amended. "Treasury Rate" means the yield to maturity at the time of the computation of United States Treasury securities with a constant maturity (as compiled by and published in the most recent Federal Reserve Statistical Release H.15(519)), which has become publicly available at least two Business Days prior to the date fixed for prepayment (or, if such Statistical Release is no longer published, any publicly available source of similar market data) most nearly equal to the then remaining average life to the first date on which the Notes are subject to optional redemption by the Company; provided, however, that if the average life of such Note is not equal to the constant maturity of the United States Treasury security for which weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the average life of the Notes is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trustee" means the party named as such above unless and until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means such successor. "Unrestricted Definitive Note" means Notes that are substantially in the form of the Notes attached hereto as Exhibit A-3 that do not include the information called for by footnotes 1 and 2 thereof. "Unrestricted Global Note" means a permanent global Note that contains the paragraph referred to in footnote 1 and the additional schedule referred to in footnote 2 to the form of the Note attached hereto as Exhibit A-3, and that is deposited with the Note Custodian and registered in the name of the Depository. 16 "Unrestricted Notes" means the Unrestricted Global Notes and the Unrestricted Definitive Notes. "Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 4.11. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.12, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.12, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Warrant Agreement" means the warrant agreement, dated as of March 29, 1996, as amended, among Parent, Rice Partners II, L.P., John Hancock Mutual Life Insurance Company, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc. and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., with respect to certain warrants of Parent. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person 100% of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) 17 shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02 OTHER DEFINITIONS. Term Defined in Section "Act"................................................ 1.07 "Affiliate Transaction".............................. 4.13 "Asset Sale Offer"................................... 3.10 "Cedel Bank"......................................... 2.01 "Change of Control Offer"............................. 4.09 "Change of Control Payment"........................... 4.09 "Change of Control Payment Date"...................... 4.09 "Covenant Defeasance"................................ 8.03 "Defaulted Interest".................................. 2.12 "DTC"................................................ 2.03 "Euroclear".......................................... 2.01 "Event of Default"................................... 6.01 "Excess Proceeds"..................................... 4.10 "Incur"............................................... 4.12 "Legal Defeasance".................................... 8.02 "Offer Amount"........................................ 3.10 "Offer Period"........................................ 3.10 "Paying Agent"........................................ 2.03 "Payment Blockage Notice"............................. 10.03 "Payment Default".................................... 6.01 "Permitted Debt"...................................... 4.12 "Purchase Date"....................................... 3.10 "QIB"................................................ 2.01 "Registrar".......................................... 2.03 "Restricted Payments"................................ 4.11 "Rule 144 A Global Notes"............................ 2.01 "Successor Company".................................. 5.01 SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: 18 "indenture securities" means the Notes and the Subsidiary Guarantees; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the Notes means the Company, each Guarantor and any successor obligors upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. SECTION 1.05. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion (other than the certificates required by Section 4.05(a)) with respect to compliance with a condition or covenant provided for in this Indenture shall comply with the provisions of TIA 314(e) and shall include: 19 (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (a) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (b) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (c) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 1.06 FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representation with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 1.07. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any 20 purpose of this Indenture and (subject to TIA Section 315) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any reasonable manner that the Trustee deems sufficient. (c) The ownership of Notes shall be proved by a register kept by the Registrar. (d) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of such Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act or to revoke any consent previously given, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), any such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not more than 30 days prior to the first solicitation of Holders generally in connection therewith and no later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act or revocation of any consent previously given may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Notes then outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Notes then outstanding shall be computed as of such record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other Act by the Holders on such recorded date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act by the Holder of any Note shall bind every future Holder of the same Note or the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note. ARTICLE 2 THE NOTES SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibits A-1, A-2 and A-3 attached hereto. The Subsidiary Guarantees shall be substantially in the form of Exhibit E, the terms of which are incorporated in and made part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage, as designated by the Company or its counsel. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof (subject to a minimum initial purchase requirement of $100,000 for Notes sold on original issuance by the Company to Accredited Investors other than in reliance on Rule 144A or Regulation S). 21 The Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of a Rule 144A Global Note. Notes offered and sold to Accredited Investors in transactions exempt from registration under the Securities Act not made in reliance on Rule 144A or Regulation S shall be issued initially in the form of a separate Rule 144A Global Note. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Note Custodian, at its New York office, as custodian for the Depository, and registered in the name of the Depository or the nominee of the Depository for the accounts of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depository or the Note Custodian, together with copies of certificates from Euroclear and Cedel Bank certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note, and (ii) an Officers' Certificate from the Company to the effect set forth in Section 13.04(a) hereof. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. Notes issued in global form shall be substantially in the form of Exhibits A-1, A-2 or A-3 attached hereto (including the Global Note Legend and the "Schedule of Exchanges in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A-1 or A-3 attached hereto (but without the Global Note Legend and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by the Agent Members through Euroclear or Cedel Bank. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. 22 The Trustee shall, upon a written order of the Company signed by two Officers, authenticate Notes for original issue in the aggregate principal amount of up to $200,000,000 in one or more series. The aggregate principal amount of Notes outstanding at any time may not exceed $200,000,000 except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depository with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest on the Notes, and will notify the Trustee of any default by the Company or any Guarantor in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company or any Guarantor, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company and/or the Guarantors shall furnish to the Trustee at least 23 seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company and/or the Guarantors shall otherwise comply with TIA ss. 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository, by a nominee of the Depository to the Depository or to another nominee of the Depository, or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depository that it is unwilling or unable to continue to act as Depository or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depository is not appointed by the Company within 120 days after the date of such notice from the Depository or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates certified in an Officers' Certificate to be required pursuant to Rule 903 under the Securities Act. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depository shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a); however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depository, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer described in the Private Placement Legend to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period transfers of beneficial interests in the Temporary Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred only to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). 24 (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests in a Global Note (other than a transfer of a beneficial interest in a Global Note to a Person who takes delivery thereof in the form of a beneficial interest in the same Global Note), the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from an Agent Member to the Depository in accordance with the Applicable Procedures directing the Depository to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Agent Member account to be credited with such increase or (B) (1) a written order from an Agent Member given to the Depository in accordance with the Applicable Procedures directing the Depository to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depository to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the registration of transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the registration of transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates certified in an Officers' Certificate to be required pursuant to Rule 903 under the Securities Act. Upon an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for registration of transfer or exchange of beneficial interests in Global Notes contained in this Indenture, the Notes and otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of clause (ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of clause (ii) above and: 25 (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Notes issues in the Exchange Offer or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Restricted Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. (v) Transfer and Exchange of Beneficial Interests in the Unrestricted Global Note for Beneficial Interests in a Restricted Global Note. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to, Persons who take delivery thereof in the form of a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests in Global Notes for Definitive Notes. (i) If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial 26 interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person (as defined in Regulation S of the Securities Act) in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Restricted Definitive Note in the appropriate principal amount. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depository and the Agent Member. The Trustee shall deliver such Restricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. 27 (ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be (A) exchanged for a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(B) under the Securities Act or (B) transferred to a Person who takes delivery thereof in the form of a Definiti ve Note prior to the conditions set forth in clause (A) above or unless the transfer is pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Notwithstanding 2.06(c)(i) hereof, a holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Notes issued in the Exchange Offer or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Restricted Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. (iv) If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note or to transfer such beneficial 28 interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Unrestricted Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depository and the Agent Member. The Trustee shall deliver such Unrestricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend. A beneficial interest in an Unrestricted Global Note cannot be exchanged for a Restricted Definitive Note or transferred to a Person who takes delivery thereof in the form of a Restricted Definitive Note. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests in Global Notes. (i) If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; or (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note. (ii) A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an 29 exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Notes issued in the Exchange Offer or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Restricted Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Restricted Definitive Notes are being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Restricted Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Unrestricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or registration of transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate 30 principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, pursuant to the provisions of this Section 2.06(e). (i) Restricted Definitive Notes may be transferred to and registered in the name of Persons who take delivery thereof if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Notes issued in the Exchange Offer or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Restricted Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: 31 (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Restricted Definitive Note is being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. (iii) A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. Unrestricted Definitive Notes cannot be exchanged for or transferred to Persons who take delivery thereof in the form of a Restricted Definitive Note. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letter of Transmittal that they are not (x) Broker-Dealers, (y) Persons participating in the distribution of the Notes issued in the Exchange Offer or (z) Persons who are Affiliates (as defined in Rule 144) of the Company and accepted for exchange in the Exchange Offer and (ii) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrent with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: 32 "THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF THE ISSUER SO REQUESTS, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS." (B) Notwithstanding the foregoing, any Unrestricted Global Note or Unrestricted Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), 33 (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS NOTE." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note, by the Trustee or by the Depository at the direction of the Trustee, to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note, by the Trustee or by the Depository at the direction of the Trustee, to reflect such increase. 34 (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of a Company Order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.07, 4.09, 4.10 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. 35 SECTION 2.07. REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee, or the Company and the Trustee and the Company receive evidence to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement Note if the Trustee's and the Company's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by an Affiliate of the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee has been informed of by the Company as being so owned shall be so disregarded. SECTION 2.10. TEMPORARY NOTES. Until permanent Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon a written order of the Company signed by two Officers of the Company. Temporary Notes shall be substantially in the form of permanent Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the 36 Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Note is registered at the close of business on the Regular Record Date for such interest. Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date and interest on such defaulted interest at the applicable interest rate borne by the Notes, to the extent lawful (such defaulted interest (and interest thereon) herein collectively called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder; and such Defaulted Interest shall be paid by the Company to the Persons in whose names the Notes are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall give the Trustee at least 15 days' written notice (unless a shorter period is acceptable to the Trustee for its convenience) of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held by the Trustee in trust for the benefit of the Persons entitled to such Defaulted Interest as in this subsection provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall not be more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date. In the name and at the expense of the Company, the Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Registrar, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Notes are registered at the close of business on such Special Record Date. 37 Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.01. APPLICABILITY OF ARTICLE. Redemption of Notes at the election of the Company shall be made in accordance with this Article 3. SECTION 3.02. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem any Notes pursuant to Section 3.08 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 45 but not more than 60 days prior to the Redemption Date fixed by it (unless a shorter notice period shall be satisfactory to the Trustee for its convenience), notify the Trustee of such Redemption Date and of the principal amount of Notes to be redeemed. SECTION 3.03. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed, or, if such Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. The Trustee shall promptly notify the Company and the Registrar in writing of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is to be redeemed. SECTION 3.04. NOTICE OF REDEMPTION. Notices of redemption shall be mailed by first class mail, postage prepaid, at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder's registered address. If any Note is to be redeemed in part only, any notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. All notices of redemption shall state: (a) the Redemption Date; 38 (b) the Redemption Price; (c) if less than all Notes then outstanding are to be redeemed, the identification (and, in the case of a Note to be redeemed in part, the principal amount) of the particular Notes to be redeemed; (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Note or portion thereof, and that (unless the Company shall default in payment of the Redemption Price) interest thereon shall cease to accrue on or after said date; (e) the places or places where such Notes are to be surrendered for payment of the Redemption Price; (f) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (g) the CUSIP number, if any, relating to such Notes, and (h) in the case of a Note to be redeemed in part, the principal amount of such Note to be redeemed and that after the Redemption Date upon surrender of such Note, a new Note or Notes in the aggregate principal amount equal to the unredeemed portion thereof will be issued. Notice of redemption of Notes to be redeemed at the election of the Company shall be given by the Company or, at its request, by the Trustee in the name and at the expense of the Company. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its owning Paying Agent, segregate and hold in trust as provided in Section 4.03) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the applicable Redemption Date) sufficient to pay the Redemption Price of, and accrued interest on, all the Notes or portions thereof which are to be redeemed on that date. SECTION 3.06. NOTES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Notes shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Company at the Redemption Price together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall by payable to the Holders of such Notes, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 2.12. If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Redemption Date at the rate borne by such Note. 39 SECTION 3.07. NOTES REDEEMED IN PART. Any Note which is to be redeemed only in part shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 4.02 (with, if the Company, the Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Registrar or the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and a new Note in principal amount equal to the unpurchased or unredeemed portion will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the purchase or redemption date, unless the Company defaults in payment of the purchase or redemption price, interest shall cease to accrue on Notes or portions thereof purchased or called for redemption. SECTION 3.08. OPTIONAL REDEMPTION. (a) Except as described in this Section 3.08, the Notes will not be redeemable at the Company's option prior to June 15, 2002. On and after June 15, 2002, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' written notice, at the Redemption Prices (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on June 15 of each of the years indicated below: REDEMPTION YEAR PRICE - ---- ---------- 2002........................................................... 105.563% 2003........................................................... 103.708% 2004........................................................... 101.854% 2005 and thereafter............................................ 100.000% In addition, at any time prior to June 15, 2000, the Company may on any one or more occasions redeem up to 33 1/3% of the aggregate principal amount of Notes originally issued (including, for this purpose, one or more series of Notes issued under this Indenture after the date hereof) at a Redemption Price of 111.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the Redemption Date, with the net cash proceeds of one or more Public Equity Offerings; provided that at least 66 2/3% of the Notes originally issued (including, for this purpose, one or more series of Notes issued under this Indenture after the date hereof) remain outstanding immediately after the occurrence of such redemption and provided, further, that such redemption occurs within 60 days of the date of the closing of such Public Equity Offering. In addition, at any time prior to June 15, 2002, the Company may, at its option, redeem the Notes, in whole or in part, at a Redemption Price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium. (b) Any redemption pursuant to this Section 3.08 shall be made pursuant to the provisions of Sections 3.01 through 3.07 hereof. SECTION 3.09. MANDATORY REDEMPTION. 40 Except as set forth under Sections 3.10, 4.09 and 4.10 hereof, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. SECTION 3.10 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. If the Purchase Date is on or after a Regular Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such Regular Record Date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.10 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice not later than the third Business Day preceding the end of the Offer Period; (f) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the Business Day preceding the end of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth 41 the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (g) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (h) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before 12:00 p.m. (New York City time) on each Purchase Date, the Company shall, irrevocably deposit with the Trustee or Paying Agent in immediately available funds the aggregate purchase price with respect to a principal amount of Notes equal to the Offer Amount, together with accrued and unpaid interest thereon to the Purchase Date, to be held for payment in accordance with the terms of this Section 3.10. On the Purchase Date, the Company shall, to the extent lawful, (i) accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, (ii) deliver or clause the Paying Agent or depositary, as the case may be, to deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an Officer's Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.10. The Company, the Depository or the Paying Agent, as the case may be, shall promptly (but in any case not later than three Business Days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, plus any accrued and unpaid interest, thereon to the Purchase Date, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company, shall authenticate and mail or deliver such new Note to such Holder, equal in principal amount to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall send a notice to each Holder a stating the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.10, any purchase pursuant to this Section 3.10 shall be made pursuant to the provisions of Sections 3.01 through 3.07 hereof. ARTICLE 4 COVENANTS SECTION 4.01 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately 42 available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain, in The City of New York, an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Notes may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation; provided, however, that no such designation or recession shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or recession and any change in the location of any such office or agency. SECTION 4.03. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of, premium, if any, or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for the Notes, it will, on or before each due date of the principal of, premium, if any, or interest on any Notes, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) sufficient to pay the principal, premium, if any, or interest so becoming due (or at the option of the Company, payment of interest may be mailed by check to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments with respect to Global Notes and Definitive Notes, the holders of which have given wire transfer instructions to the Company shall receive such payments of interest by wire transfer in same day funds) such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. 43 The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal, premium, if any, or interest; (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and (d) acknowledge, accept and agree to comply in all respects with the provisions of this Indenture relating to the duties, rights and obligations of such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Company on Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, shall at the expense of the Company cause notice to be promptly sent to each Holder that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 4.04. REPORTS. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of 44 the Unrestricted Subsidiaries of the Company) and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports; provided, however, that the Company shall not be required to make any such filings on or prior to the date on which the Company's quarterly report on Form 10-Q for the fiscal quarter ended June 30, 1997 would have been required to be filed if, at the time such filings would have been required to be made with the SEC, either (i) the Company shall have provided to each Holder the information that would have been required to be filed or (ii) the Exchange Offer Registration Statement has been filed with the SEC but has not yet been declared effective and copies of the Exchange Offer Registration Statement and any amendments thereto (to the extent such registration statement and/or amendments contain additional information not disclosed in the Offering Memorandum that would have been the subject of a filing required to be made under Section 13 or 15(d) of the Exchange Act) have been provided to each Holder, provided that any exhibits to the Exchange Offer Registration Statement (or any amendments thereto) need not be delivered to any Holder of the Notes, but sufficient copies thereto shall be furnished to the Trustee as reasonably requested to permit the Trustee to deliver any such exhibits to any Holder upon request. In addition, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information and reports with the SEC for public availability (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company and the Guarantors shall, for so long as any Notes remain outstanding, furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.05. STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT. (a) The Company and each Guarantor shall deliver to the Trustee, within 90 days after the end of each fiscal year ending after the date hereof, a brief certificate of its principal executive officer, principal financial officer or principal accounting officer stating whether, to such officer's knowledge, the Company and such Guarantor is in compliance with all covenants and conditions to be complied with by it under this Indenture (including with respect to any Restricted Payments made during such year, the basis upon which the calculations required by this Section 4.05 were computed, which calculations may be based on the Company's latest financial statements), and further stating, as to each Officer signing such certificate, that to the best of his or her knowledge each entity is not in default in the performance or observance of any terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. For purposes of this Section 4.05, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual reports delivered pursuant to Section 4.04 above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, 45 specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. In the event that, after the Company has used its best efforts to obtain the written statement of the Company's independent public accountants required by the provisions of this paragraph, such statement cannot be obtained, the Company shall deliver, in satisfaction of its obligations under this Section 4.05(b), an Officers' Certificate (A) certifying that it has used its best efforts to obtain such required statement but was unable to do so and (B) attaching the written statement of the Company's accountants that the Company received in lieu thereof. (c) The Company shall, within five Business Days, upon becoming aware of any Default or Event of Default or any default under any document, instrument or agreement representing Indebtedness of the Company or any Guarantor, deliver to the Trustee an Officer's Certificate specifying such Default or Event of Default. SECTION 4.06. PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or property of the Company or any of its Subsidiaries and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, might by law become a Lien upon the property of the Company or any of its Subsidiaries that could produce a material adverse effect on the consolidated financial condition of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and in respect of which appropriate reserves (in the good faith judgment of management of the Company) are being maintained in accordance with GAAP. SECTION 4.07. LIMITATION ON LIENS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness or trade payables on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. SECTION 4.08. CORPORATE EXISTENCE. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. 46 SECTION 4.09. OFFER TO REPURCHASE UPON CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, the Company shall make an offer to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Notes pursuant to the offer described below (the "Change of Control Offer") at a price in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. (b) Within 30 days following any Change of Control, the Company shall mail a notice to each Holder of Notes issued under this Indenture, with a copy to the Trustee, with the following statements and/or information: (1) a Change of Control Offer is being made pursuant to this Section 4.09 and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment; (2) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed, except as may be otherwise required by applicable law (the "Change of Control Payment Date"); (3) any Note not properly tendered will remain outstanding and continue to accrue interest; (4) unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date; (5) Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent and at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) Holders will be entitled to withdraw their tendered Notes and their election to require the Company to purchase such Notes, provided that the Paying Agent receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing his tendered Notes and his election to have such Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. 47 (c) Prior to complying with the provisions of this Section 4.09, but in any event within 30 days following a Change of Control, the Company shall either repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all such other Senior Debt and to repay the Indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer or obtain the requisite consents under the Credit Agreement and all such other Senior Debt to permit the repurchase of the Notes. (d) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described in this Indenture by virtue thereof. (e) On the Change of Control Payment Date, the Company shall, to the extent permitted by law, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officers' Certificate stating that the aggregate principal amount of Notes or portions thereof have been tendered to and purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (f) Notwithstanding the foregoing, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.09 applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. (g) The Change of Control provisions described in this Section 4.09 will be applicable whether or not any other provisions of this Indenture are applicable. SECTION 4.10. ASSET SALES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a Board Resolution and as set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash; provided that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or 48 any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability and (y) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to permanently reduce (or, in the case of letters of credit or Eurodollar loans under the Credit Agreement, cash collateralize) any Senior Debt (and to correspondingly reduce commitments with respect thereto in the case of revolving borrowings), or (b) to the acquisition of a controlling interest in another business, the making of a capital expenditure or the acquisition of other long-term assets, in each case, in the same line of business as the Company was engaged in on the date of this Indenture. Pending the final application of any such Net Proceeds, the Company may invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph shall be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall, within ten Business Days thereafter, be required to make an Asset Sale Offer to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase, in accordance with the procedures set forth in this Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof. SECTION 4.11. LIMITATION ON RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or dividends or distributions payable to the Company or any Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company or other Affiliate of the Company (other than any such Equity Interests owned by the Company 49 or any Wholly Owned Subsidiary of the Company); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes more than six months prior to any scheduled maturity, mandatory redemption, scheduled principal repayment or sinking fund payment date (other than regularly scheduled payments of interest); or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default would have occurred and be continuing or would occur as a consequence thereof; and (b) the Company shall, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.12 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (v), (vii) and (viii) of the next succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of this Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company from the issue or sale since the date of this Indenture of Equity Interests of the Company (other than Disqualified Stock) or of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) (but only to the extent not included in subclause (i) of this clause (c)), and (B) the initial amount of such Restricted Investment, plus (iv) $5.0 million. The foregoing provisions shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of scheduled dividends on or the redemption, repurchase, retirement, defeasance or other acquisition of, any Disqualified Stock issued after 50 the date hereof in compliance with the provisions of this Indenture; (v) after March 29, 2001, the Permitted Warrant Put Payment; (vi) payments made with respect to the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company, the Parent, Sunderland or any Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries'), Parent's or Sunderland's management pursuant to any management equity subscription agreement or stock option agreement in effect as of the date of this Indenture (provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in any twelve-month period); (vii) distributions to Parent in order to enable Parent to pay franchise taxes and other ordinary course operating expenses in an amount not to exceed $25,000 in any twelve-month period; and (viii) the application of the proceeds of the offering of the Notes pursuant to the Offering Memorandum in the manner contemplated in the section of the Offering Memorandum titled "Use of Proceeds"; provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (i) through (vii) no Default or Event of Default shall have occurred and be continuing. In addition, payments and transactions permitted pursuant to clauses (s) through (y) under Section 4.13 hereof shall not be deemed to be Restricted Payments. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted Payments at the time of such designation and shall reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments shall be deemed to constitute Investments in an amount equal to the greatest of (x) the net book value of such Investments at the time of such designation and (y) the fair market value of such Investments at the time of such designation. Such designation shall only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.11 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. SECTION 4.12. LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company shall not issue any Disqualified Stock and shall not permit any of its Subsidiaries to issue any shares of preferred stock (other than to the Company or a Restricted Subsidiary of the Company); provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if: (i) the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date 51 on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period; and (ii) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to, such incurrence or issuance. The provisions of the first paragraph of this Section 4.12 shall not apply to the incurrence of any of the following items of Indebtedness or the issuance of preferred stock or Disqualified Stock (collectively, "Permitted Debt"): (i) the incurrence by the Company and its Subsidiaries of Indebtedness arising under or in connection with the Credit Agreement; provided that the aggregate principal amount of all Indebtedness (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) outstanding under the Credit Agreement after giving effect to such incurrence, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (i), does not exceed an amount equal to the greater of $50.0 million or $30.0 million plus the Borrowing Base, in each case less the aggregate amount of all Indebtedness permanently repaid with the Net Proceeds of any Asset Sale; (ii) the incurrence by the Company and its Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount not to exceed the principal amount of such Capital Lease Obligations outstanding on the date hereof plus $15.0 million at any time outstanding; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Acquired Debt in connection with the acquisition of assets or a new Restricted Subsidiary; provided that such Acquired Debt was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by the Company or one of its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, such acquisition by the Company or one of its Restricted Subsidiaries; and provided further that the aggregate principal amount, accreted value or liquidation preference, as applicable, of such Acquired Debt, together with any other outstanding Indebtedness or preferred stock incurred pursuant to this clause (iv), does not exceed $5.0 million; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness that was permitted by this Indenture to be incurred; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned 52 Restricted Subsidiaries; provided, however, that (A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly Owned Restricted Subsidiary and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Restricted Subsidiary (other than any pledge of such Indebtedness to the lenders under the Credit Agreement) shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be; (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding, provided that the notional principal amount of any Hedging Obligations does not significantly exceed the principal amount of Indebtedness to which such agreement relates, or for the purpose of hedging against fluctuations in currency values; (viii) the Guarantee by the Company or any of the Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this covenant; (ix) the issuance by the Company's Unrestricted Subsidiaries of preferred stock or the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company; (x) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness represented by the $75,000,000 aggregate principal amount of Notes issued pursuant to the Offering Memorandum and the Subsidiary Guarantees and any Notes issued pursuant to Section 2.07 hereof; and (xi) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) or the issuance of preferred stock with an aggregate liquidation preference at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (xi), not to exceed $10.0 million. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xi) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify or reclassify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness shall be treated as having been incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness shall not be deemed to be an incurrence of Indebtedness for purposes of this covenant. SECTION 4.13 TRANSACTIONS WITH AFFILIATES. 53 The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a Board Resolution and an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; provided that (r) the application of the proceeds of the offering of the Notes pursuant to the Offering Memorandum and the transactions entered into in connection therewith in the manner contemplated in the section of the Offering Memorandum titled "Use of Proceeds", (s) capital contributions, advances, loans or other investments made by Parent to the Company or any of its Restricted Subsidiaries, (t) (I) payments under the Management Agreement in an amount not to exceed $300,000 in any twelve-month period and (II) after the first anniversary of the original issuance of the Notes, additional payments under the Management Agreement in an amount not to exceed $700,000 in any twelve-month period, provided that the Company's Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such payment under the Management Agreement is made, after giving pro forma effect to such payment, is equal to or greater than 2.25 to 1 (in each case, plus reasonable expenses incurred in connection with and reimbursable under the Management Agreement), (u) payments by the Company or any of its Restricted Subsidiaries to Mentmore and/or its Affiliates made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures, which payments are approved by a majority of the Board of Directors of the Company in good faith, (v) payments under tax sharing agreements to the extent such payments do not otherwise exceed the tax liability the Company would have had were it not part of a consolidated group, (w) any employment agreement, compensation agreement or employee benefit arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business, (x) transactions between or among Parent, the Company and/or its Restricted Subsidiaries, (y) any other payment or reimbursement of reasonable and customary fees and expenses incurred by an Affiliate for services rendered to the Company or any of its Subsidiaries not to exceed $100,000 in any twelve-month period (without duplication for any amounts paid pursuant to any other clause of this covenant) and (z) Restricted Payments that are permitted under Section 4.11 hereof, in each case, shall not be deemed Affiliate Transactions. SECTION 4.14 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any Indebtedness owed to the Company 54 or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the date of this Indenture, (b) the Credit Agreement as in effect as of the date of this Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive on a whole with respect to such dividend and other payment restrictions than those contained in the Credit Agreement as in effect on the date of this Indenture, (c) this Indenture and the Notes, (d) applicable law, (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person (including any Subsidiary of the Person), so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, (f) by reason of customary non-assignment and net worth provisions in leases or other agreements entered into in the ordinary course of business and consistent with past practices, (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, (i) customary restrictions in Capital Lease Obligations, security agreements or mortgages securing Indebtedness of the Company or a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such Capital Lease Obligations, security agreements or mortgages, (j) customary restrictions with respect to an agreement that has been entered into for the sale or disposition of assets or Capital Stock held by the Company or any Restricted Subsidiary, (k) customary restrictions contained in any agreements or documentation governing Indebtedness or preferred stock issued pursuant to clause (xi) of Section 4.12 hereof and (l) the Warrant Agreement and the Shareholders Agreement. SECTION 4.15. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED RESTRICTED SUBSIDIARIES. The Company (i) shall not, and shall not permit any Wholly Owned Restricted Subsidiary of the Company to, issue, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly Owned Restricted Subsidiary of the Company to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company), unless (a) such issuance, transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of such Wholly Owned Restricted Subsidiary and (b) the Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 4.10 hereof and (ii) shall not permit any Wholly Owned Restricted Subsidiary of the Company to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or a Wholly Owned Restricted Subsidiary of the Company. SECTION 4.16. LIMITATION ON LAYERING DEBT. 55 The Company shall not, incur, create, issue, assume, Guarantee or otherwise become liable for any Indebtedness that is by its terms subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes and the Guarantors shall not incur, create, issue, assume, Guarantee or otherwise become liable for any Indebtedness that is by its terms subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Subsidiary Guarantees. SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any of its Subsidiaries shall acquire or create another Subsidiary after the date hereof, then such newly acquired or created Subsidiary (at any time such Subsidiary has net assets or stock holder's equity in excess of $50,000) shall execute a Subsidiary Guarantee and deliver an Opinion of Counsel, in accordance with the terms of this Indenture; provided, however, that all Subsidiaries that have been properly designated as Unrestricted Subsidiaries in accordance with this Indenture shall not be subject to the preceding clause for so long as they continue to constitute Unrestricted Subsidiaries. SECTION 4.18. PAYMENTS FOR CONSENT. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. ARTICLE 5 SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. The Company shall not consolidate or merge with or into or wind up into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person unless: (i) the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia, (the Company or such Person, as the case may be, being herein called the "Successor Company"); (ii) the Successor Company (if other than the Company) assumes all the obligations of the Company under this Indenture and the Notes pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; 56 (iv) except in the case of a merger of the Company with or into a Wholly Owned Subsidiary of the Company, the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) shall have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) shall, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.12 hereof; and (v) the Company has delivered to the Trustee an Officers' Certificate stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Senior Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT AND NOTICE THEREOF. Each of the following constitutes an "Event of Default": (a) default for 30 days or more in the payment when due of interest on, or Liquidated Damages, if any, with respect to the Notes (whether or not prohibited by Article 10 hereof); (b) default in payment when due (whether payable at maturity, upon redemption or otherwise) of the principal of or premium, if any, on the Notes (whether or not prohibited by Article 10 hereof); (c) failure by the Company to comply with Sections 4.09, 4.10 and 5.01 hereof; 57 (d) failure by the Company for 30 days after receipt of written notice to comply with any of its other agreements in this Indenture or the Notes; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, which default (1) is caused by the failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") at its stated final maturity (after giving effect to any applicable grace periods) or (2) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (f) failure by the Company or any of its Restricted Subsidiaries to pay final and non-appealable judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (g) the Company or any Restricted Subsidiary that is a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability generally to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Restricted Subsidiary that is a Significant Subsidiary in an involuntary case in which it is the debtor, (ii) appoints a Custodian of the Company or any Restricted Subsidiary that is a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary that is a Significant Subsidiary; or (iii) orders the liquidation of the Company or any Restricted Subsidiary that is a Significant Subsidiary, 58 and the order or decree contemplated in clauses (i), (ii) or (iii) of this clause (h), remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid and such judgment has become final or non-appealable or shall cease for any other reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor shall deny or disaffirm its obligations under its Subsidiary Guarantee. A Default under Section 6.01(d) is not an Event of Default until the Trustee notifies the Company, or any Holder notifies the Company and the Trustee, of the Default and the Company does not cure the Default within 30 days after receipt of the notice. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." SECTION 6.02. ACCELERATION OF MATURITY; RESCISSION. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company and the Trustee; provided that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any such Indebtedness under the Credit Agreement or (ii) five Business Days after receipt by the Company and the Agent of written notice of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default specified in clause (g) or (h) of Section 6.01 occurring with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce this Indenture or the Notes except as provided in this Indenture. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. 59 Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on, any such Note held by a non-consenting Holder; provided, however, that the Holders of at least a majority in aggregate principal amount of the Notes then outstanding may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. The Trustee may take any other action which it deems proper which is not inconsistent with any such direction. SECTION 6.06. LIMITATION ON SUITS. No Holder of a Note will have any right to institute any proceeding with respect to this Indenture or for any remedy hereunder, unless (i) such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to the Notes, (ii) the Holders of at least 25% in aggregate principal amount of the Notes then outstanding shall have made written request to the Trustee to institute such proceeding and, if requested by the Trustee, provided reasonable indemnity to the Trustee, with respect to such proceeding and (iii) the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the Notes then outstanding a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on any Note, on or after the respective due dates expressed in any Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company or any Guarantor for the whole amount of principal of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee under Section 7.07 hereof. 60 SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, as administrative expenses associated with any such proceeding and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to holders of Senior Debt of the Company and the Guarantors to the extent required by Article 10 hereof or any Subsidiary Guarantee; Third: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and, if any, and interest, respectively; Fourth: without duplication, to the Holders for any other Obligations owing to the Holders under this Indenture and the Notes; and Fifth: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. 61 SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. SECTION 6.12. WAIVER OF STAY, EXTENSION OF USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (1) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, provided that the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: 62 (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture unless the Holders shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or documents, but the Trustee, in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company or any Guaranteeing Subsidiary, personally or by agent or attorney. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. 63 (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company or any Guarantor shall be sufficient if signed by an Officer of the Company or such Guarantor. A permissive right granted to the Trustee hereunder shall not be deemed an obligation to act. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be charged with knowledge of any Default or Event of Default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge of such Default or Event of Default or (ii) written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any Holder. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the direction of the Company under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief 64 report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA ss. 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA ss. 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee, from time to time as may be agreed upon between them, reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses (other than taxes based on the income of the Trustee) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extent applicable. 65 SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof, (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business (including the trust created by this Indenture) to, another corporation, the successor corporation without any further act shall be the successor Trustee. 66 SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has, or is a wholly owned subsidiary of a bank holding company that has, a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at its option by Board Resolution, at any time, with respect to the Notes, elect to have either Section 8.02 hereof or Section 8.03 hereof be applied to all Notes and Subsidiary Guarantees then outstanding upon compliance with the conditions set forth in this Article 8. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.02, the Company and the Guarantors, if any, shall be deemed to have been discharged from their respective obligations with respect to all Notes and Subsidiary Guarantees then outstanding on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such defeasance means that the Company and any Guarantor shall be deemed to have paid and discharged the entire indebtedness represented by the Notes and any Subsidiary Guarantees outstanding, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 and the other Sections of this Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under such Notes, Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Notes then outstanding to receive solely from the trust fund described in Section 8.04 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any), interest and Liquidated Damages, if any, on such Notes when such payments are due, or on the Redemption Date, as the case may be, (B) the Company's obligations with respect to such Notes under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 4.02 and 4.03, (C) the rights, powers, trusts, duties, indemnities and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (D) this Article 8. Subject to compliance with this 67 Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 with respect to the Notes. SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.03, the Company and each Guarantor shall be released from its obligations under the covenants contained in Article 5 and in Sections 4.04, 4.06, 4.07, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17 and 4.18 with respect to the outstanding Notes and Subsidiary Guarantees, if any, on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes and the Subsidiary Guarantees, if any, shall thereafter be deemed to be not "outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes and Subsidiary Guarantees, if any, shall not be deemed outstanding for financial accounting purposes). For this purpose, such covenant defeasance means that, with respect to the outstanding Notes and Subsidiary Guarantees, if any, the Company and any Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01(c) or Section 6.01(d), but, except as specified above, the remainder of this Indenture and such Notes and Subsidiary Guarantees, if any, shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 of the option applicable to Section 8.03, Sections 6.01(c) through 6.01(f) and Section 6.01(i) shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions to application of either Section 8.02 or Section 8.03 to the outstanding Notes and Subsidiary Guarantees: (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes and without retaining any legal interest in the corpus of such trust, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages, if any, due on the outstanding Notes on the Stated Maturity thereof or on the applicable Redemption Date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, (A) the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel in the United States shall confirm that, subject to customary assumptions and exclusions, the Holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal 68 income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or, insofar as Events of Default set forth in Sections 6.01(g) and (h), at any time in the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be satisfied until the expiration of such period); (v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions (which assumptions and exclusions shall not relate to the operation of Section 547 of the United States Bankruptcy Code or any analogous laws of the state governing the provisions of this Indenture) following the deposit the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally under any applicable U.S. federal or state law, and that the Trustee has a perfected security interest in such trust funds for the ratable benefit of the Holders; (vii) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; (viii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with; and (ix) the Trustee shall have received such other documents and assurances as the Trustee shall reasonably require. SECTION 8.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last paragraph of Section 4.03, all money and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, 69 collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 in respect of the Notes then outstanding shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or Government Securities deposited pursuant to Section 8.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Notes then outstanding. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government Securities held by it as provided in Section 8.04 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(i)), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or Government Securities in accordance with Section 8.02 or 8.03, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and any Guarantor's obligations under this Indenture, the Notes and the Subsidiary Guarantees, if any, shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03, as the case may be; provided, however, that if the Company or any Guarantor makes any payment of principal of (or premium, if any) or interest on any Note following the reinstatement of its obligations, the Company or any Guarantor shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or Notes, and with respect to a Subsidiary Guarantee, the Guarantor under such Subsidiary Guarantee and the Trustee may amend or supplement such Subsidiary Guarantee, without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; 70 (c) to comply with Article 5 hereof; (d) to provide for the assumption of the Company's or any Guarantor's obligations to the Holders of the Notes; (e) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any such Holder; (f) to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Company; (g) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; or (h) to add a Guarantor under this Indenture. Upon the written request of the Company accompanied by resolutions of the Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel in compliance with Section 1.05 hereof, the Trustee shall join with the Company and the Guarantors, if any, in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, this Indenture, the Notes and a Subsidiary Guarantee issued hereunder may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to Sections 6.02, 6.04 and 6.07 hereof, any existing default or compliance with any provision of this Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by resolutions of the Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel in compliance with Section 1.05 hereof, the Trustee shall join with the Company and any Guarantor in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. 71 The consent of the Holders is not necessary under this Section 9.02 to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture, the Notes or the Subsidiary Guarantees, if any. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Note or Subsidiary Guarantee held by a non-consenting Holder): (i) reduce the principal amount of the Notes whose Holders must consent to an amendment, supplement or waiver; (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described under Sections 4.09 and 4.10); (iii) reduce the rate of or change the time for payment of interest on any Note; (iv) waive a Default or Event of Default in the payment of principal of, premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of such Notes and a waiver of the payment default that resulted from such acceleration); (v) make any Note payable in money other than that stated in such Notes; (vi) make any change in Section 6.04 or 6.07; (vii) waive a redemption payment with respect to any Note (other than a payment required by Section 4.09 or Section 4.10); (viii) make any change in Article 10 or the subordination provisions of any Subsidiary Guarantee that would adversely affect the legal rights of the Holders of the Notes; or (ix) make any change in the foregoing amendment and waiver provisions of this Article 9. SECTION 9.03. COMPLIANCE WITH TIA. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. 72 Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may, but shall not be required to, place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In signing or refusing to sign any amended or supplemental indenture the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company and the Guarantors, if any, in accordance with its terms. ARTICLE 10 SUBORDINATION SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and each Holder by accepting a Note agrees, that the payment (by set-off or otherwise) of principal of, premium, if any and interest and Liquidated Damages, if any, on the Notes (including with respect to any repurchases of the Notes) shall be subordinated in right of payment, as set forth in this Article 10, to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents of all obligations in respect of Senior Debt, whether outstanding on the date hereof or thereafter incurred. SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company upon any total or partial liquidation, dissolution or winding up of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, whether voluntary or involuntary, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities, the holders of Senior 73 Debt will be entitled to receive payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents, of all Obligations due or to become due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before the Holders of Notes will be entitled to receive any payment of any kind or character with respect to the Notes, and until all Obligations with respect to Senior Debt are paid in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents, any distribution of any kind or character to which the Holders of Notes would be entitled shall be made to the holders of Senior Debt (except that Holders of Notes may receive Permitted Junior Securities and payments made from the trust described in Article 8 hereof). SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT. The Company shall not make, directly or indirectly, (x) any payment upon or in respect of the Notes (except in Permitted Junior Securities or from the trust described in Article 8 hereof) or (y) acquire any of the Notes for cash or property or otherwise or make any other distribution with respect to the Notes if: (i) any default occurs and is continuing (beyond any applicable grace period) in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Designated Senior Debt or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice" ) from the Company or the holders of any Designated Senior Debt. The Company may and shall resume payments on the Notes: (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No new period of payment blockage may be commenced unless and until (i) 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium, if any, and interest and Liquidated Damages, if any, on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such nonpayment default shall have been waived for a period of not less than 90 days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of delivery of any Payment Blockage Notice which, in either case, would give rise to a default pursuant to any provision under which a default previously existed or was continuing shall constitute a new default for this purpose). 74 SECTION 10.04. ACCELERATION OF SECURITIES. If the Company fails to make any payment on the Notes when due or within any applicable grace period, whether or not on account of the payment blockage provision referred to above, such failure shall constitute an Event of Default and shall entitle the holders of the Notes to accelerate the maturity thereof. The Company shall promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default. SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives any payment of any Subordinated Note Obligations at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 10.02 or 10.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. In the event that any Holder receives any payment or payments pursuant to this Indenture and the amount or total amount of such payment or payments exceeds the amount, if any, that such Holder would be entitled to receive upon the proper application of the subordination provisions of this Article 10, the payment of such excess amount shall be deemed null and void, and the Holder agrees that it will be obliged to return the amount of the excess payment to the Company, as instructed in a written notice of such excess payment, within ten days of receiving such notice. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. SECTION 10.06. NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Subordinated Note Obligations to violate this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article 10. SECTION 10.07. SUBROGATION. 75 After all Senior Debt is paid in full and until the Notes are paid in full in cash, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Senior Debt. SECTION 10.08. RELATIVE RIGHTS. This Article 10 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture shall: (1) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of, premium, if any, and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. If the Company fails because of this Article 10 to pay principal of, premium, if any, or interest on a Note on the due date, the failure is nevertheless a Default or an Event of Default. SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. 76 SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Subordinated Note Obligations to violate this Article 10. Only the Company or a representative may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, a representative of Designated Senior Debt is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. ARTICLE 11 SATISFACTION AND DISCHARGE SECTION 11.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall be discharged and will cease to be of further effect as to all Notes issued hereunder, when either (a) all such Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b) (i) all such Notes not theretofore delivered to such Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or a Guarantor, if any, has irrevocably deposited or caused to be deposited with such Trustee as trust funds in trust an amount of money sufficient to pay and discharge the entire Indebtedness on such Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption; 77 (ii) no Default or Event of Default with respect to this Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or a Guarantor, if any, is a party or by which the Company or a Guarantor, if any, is bound; (iii) the Company or a Guarantor, if any, has paid or caused to be paid all sums payable by it under this Indenture; and (iv) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of such Notes at maturity or the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. SECTION 11.02. APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 4.03, all money deposited with the Trustee pursuant to Section 11.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. If the Trustee or Paying Agent is unable to apply any money in accordance with Section 11.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though such deposit had occurred pursuant to Section 11.01; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 12 SUBSIDIARY GUARANTEES SECTION 12.01. SUBSIDIARY GUARANTEE. Each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the Obligations of the Company hereunder or thereunder, that: (a) the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, whether at maturity, by 78 acceleration, redemption or otherwise, and interest on overdue principal, premium, if any, and (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company or any Guarantor, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or any Guarantor, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6, such obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purpose of this Subsidiary Guarantee. Notwithstanding the foregoing, in the event that any Subsidiary Guarantee hereunder would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of a Guarantor under such Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. SECTION 12.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE. To evidence its Subsidiary Guarantee set forth in Section 12.01, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of Exhibit E shall be endorsed by an officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President or one of its Vice Presidents. Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 12.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 79 If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors. SECTION 12.03 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Subject to Section 12.04, no Guarantor may consolidate or merge with or into (whether or not such Guarantor is the surviving Person) another Person unless: (a) such Guarantor is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia and expressly assumes all the Obligations of such Guarantor pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes and this Indenture; (b) immediately after giving effect to such transaction no Default or Event of Default exists; (c) the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction (on a pro forma basis), to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.12 hereof; and (d) the Guarantor has delivered to the Trustee an Officers' Certificate stating that such consolidation or merger and such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. In case of any such consolidation or merger and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5, nothing contained in this Indenture shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. SECTION 12.04 RELEASES FROM SUBSIDIARY GUARANTEES. 80 In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or disposition of all of the Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all of the assets of such Guarantor) shall be released and relieved of its obligations under its Subsidiary Guarantee or Section 12.03, as the case may be; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are applied in accordance with the provisions of Section 4.10. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in this Article 12. SECTION 12.05. LIMITATION ON GUARANTOR LIABILITY. For purposes hereof, each Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and this Indenture and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the United States Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or (B) left such Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into; provided that, it will be a presumption in any lawsuit or other proceeding in which a Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of the Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the Guarantor is the amount set forth in clause (ii) above. In making any determination as to solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantor to contribution from other Guarantors, and any other rights such Guarantor may have, contractual or otherwise, shall be taken into account. SECTION 12.06. SUBORDINATION OF SUBSIDIARY GUARANTEES. The obligations of each Guarantor under its Subsidiary Guarantee pursuant to this Article 12 shall be junior and subordinated to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents of all obligations in respect of Senior Debt of such Guarantor, whether outstanding on the date hereof or thereafter incurred (including amounts for which the Guarantors will be liable for under the Subsidiary Guarantees issued from time to time with respect to Senior Debt of such Guarantor or the Company) on the same basis as the Notes are junior and subordinated to Senior Debt. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof. 81 ARTICLE 13 MISCELLANEOUS SECTION 13.01. CONFLICT OF ANY PROVISION OF INDENTURE WITH TIA. If any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall control. SECTION 13.02. NOTICES. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Guarantor: Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Attention: Secretary Facsimile: (412)823-4110 With, in the case of any notice of a Default or an Event of Default, a copy to: Winston & Strawn 200 Park Avenue, 42nd Floor New York, New York 10166 Attention: Robert W. Ericson, Esq. Facsimile: (212) 294-4700 and Mentmore Holdings Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 Attention: William L. Remley Facsimile (212) 391-1393 82 If to the Trustee: Marine Midland Bank 140 Broadway, 12th Floor New York, New York 10005 Attention: Corporate Trust Department -- Precise Technology, Inc. Facsimile: (212) 658-6425 The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA ss. 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, any Guarantor, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company and/or any Guarantor to the Trustee to take any action under this Indenture, the Company and/or any Guarantor, as the case may be, shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 1.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and 83 (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 1.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 13.05. LEGAL HOLIDAYS. In any case where any Interest Payment Date, any date established for payment of Defaulted Interest pursuant to Section 2.12, or any Maturity with respect to any Note shall not be a Business Day, then (notwithstanding any other provisions of this Indenture, the Notes or any Subsidiary Guarantee) payment of interest or principal (and premium, if any) need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or date established for payment of Defaulted Interest pursuant to Section 2.12 or Maturity, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date or date established for payment of Defaulted Interest pursuant to Section 2.12 or Maturity, as the case may be, to the next succeeding Business Day. SECTION 13.06. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No director, officer, employee, incorporator or stockholder of the Company or a Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Subsidiary Guarantees, if any, or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. SECTION 13.07. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, SHALL BE, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. BY THE EXECUTION AND DELIVERY OF THIS INDENTURE, EACH OF THE COMPANY AND THE GUARANTORS SUBMITS TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT IN THE STATE OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE. SECTION 13.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.09. SUCCESSORS AND ASSIGNS. 84 All covenants and agreements in this Indenture by the Company and the Guarantors shall bind their respective successors and assigns, whether so expressed or not. All covenants and agreements in this Indenture by the Trustee shall bind its respective successors and assigns, whether so expressed or not. SECTION 13.10. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 13.11. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 13.12. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 85 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed in New York, New York as of the day and year first above written. PRECISE TECHNOLOGY, INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: PRECISE TMP, INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: MASSIE TOOL, MOLD & DIE, INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: PRECISE POLESTAR, INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: PRECISE TECHNOLOGY OF DELAWARE INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: PRECISE TECHNOLOGY OF ILLINOIS INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: MARINE MIDLAND BANK, as Trustee Dated: June 13, 1997 By: /s/ Eileen M. Hughes ----------------------------- Name: Eileen M. Hughes Title: Assistant Vice President EXHIBIT A-1 (Face of Note) 11 1/8% Senior Subordinated Notes due 2007 No. CUSIP No: PRECISE TECHNOLOGY, INC. promises to pay to ______ or registered assigns, the principal sum of $________ _______________________________ Dollars on June 15, 2007. Interest Payment Dates: June 15 and December 15 Record Dates: June 1 and December 1 Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. Dated: _______ PRECISE TECHNOLOGY, INC. By:______________________________ Name: Title: By:______________________________ Name: Title: This is one of the 11 1/8% Senior Subordinated Notes due 2007 referred to in the within-mentioned Indenture: Marine Midland Bank, A-1-1 as Trustee By: _____________________________ Authorized Signature A-1-2 (Back of Note) 11 1/8% Senior Subordinated Notes due 2007 [Unless and until it is exchanged in whole or in part for Notes in definitive form, this Note may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC") to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as may be requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.]1 "THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM - ----------------------- 1 This paragraph should be included only if the Note is a Global Note. A-1-3 THE TRUSTEE) AND, IF THE ISSUER SO REQUESTS, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS." "THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below. 1. INTEREST. Precise Technology, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 111/8% per annum from the Issuance Date until June 15, 2007 and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on June 15 and December 15 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issuance Date; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 15, 1997. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate equal to the per annum rate on the Notes then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. A-1-4 2. METHOD OF PAYMENT. The Company shall make payments in respect of Global Notes (including principal, premium, if any, and interest and Liquidated Damages, if any) by wire transfer of immediately available funds to the accounts specified by the Note Custodian or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes. Notwithstanding the foregoing, all payments with respect to the Notes (the Holders of which have provided wire transfer instructions to the Company at least ten Business Days prior to the applicable payment date), will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Such payment shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of June 13, 1997 ("Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are general unsecured obligations of the Company limited to $200,000,000 in aggregate principal amount. 5. OPTIONAL REDEMPTION. Except as set forth in the following paragraphs, the Notes will not be redeemable at the Company's option prior to June 15, 2002. On and after June 15, 2002, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' written notice, at the Redemption Prices (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on June 15 of each of the years indicated below: REDEMPTION Year PRICE ----- 2002 ........................................... 105.563% 2003 ........................................... 103.708% 2004 ........................................... 101.854% 2005 and thereafter.............................. 100.000% In addition, at any time prior to June 15, 2000, the Company may on any one or more occasions redeem up to 33 1/3% of the aggregate principal amount of Notes originally issued A-1-5 (including, for this purpose, one or more series of Notes issued under the Indenture after the date of the Indenture) at a Redemption Price of 111.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the Redemption Date, with the net cash proceeds of one or more Public Equity Offerings; provided that at least 662/3% of the Notes originally issued (including, for this purpose, one or more series of Notes issued under the Indenture after the date of the Indenture) remain outstanding immediately after the occurrence of such redemption and provided, that such redemption occurs within 60 days of the date of the closing of each such Public Equity Offering. The Trustee shall select the Notes to be purchased in the manner described in the Indenture. In addition, at any time prior to June 15, 2002, the Company may, at its option, redeem the Notes, in whole or in part, at a Redemption Price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 8, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder's registered address. If any Note is to be redeemed in part only, any notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. On or after the Redemption Date, unless the Company defaults in making the redemption payments, interest ceases to accrue on the Notes or portions thereof called for redemption. 8. REPURCHASE AT OPTION OF HOLDERS. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase (the "Change of Control Payment"). Prior to complying with the provisions of Section 4.09 of the Indenture, but in any event within 30 days following a Change of Control, the Company shall either repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all such other Senior Debt and to repay the Indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer or obtain the requisite consents under the Credit Agreement and all such other Senior Debt to permit the repurchase of the Notes. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder of Notes issued under the Indenture, with a copy to the Trustee, containing the information set forth in Section 4.09 of the Indenture. Holders of Notes that are subject to an offer to purchase may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. (b) When the aggregate amount of Excess Proceeds in connection with Asset Sales by the Company exceeds $5.0 million, the Company shall make an offer to all Holders of Notes (an A-1-6 "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in Section 3.10 of the Indenture. The Company will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceeds $5.0 million by mailing by first class mail the notice required pursuant to the terms Section 3.10 of the Indenture, with a copy to the Trustee. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof (subject to a minimum initial purchase requirement of $100,000 for Notes sold to institutional investors that qualify as accredited investors as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act other than in reliance on Rule 144A or Regulation S). The transfer of Notes may be registered and Notes may be exchanged only as provided in Article 2 of the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents (including legal opinions) and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. SUBORDINATION. Each Holder by accepting a Note agrees that the payment (by set-off or otherwise) of principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes (including with respect to any repurchases of the Notes) is subordinated in right of payment, to the extent and in the manner provided in Article 10 of the Indenture, to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents of all obligations in respect of Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes or any Subsidiary Guarantee may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to the terms of the Indenture and any applicable Subsidiary Guarantee, any existing default or compliance with any provision of the Indenture, the Notes or any Subsidiary A-1-7 Guarantee may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Without the consent of any Holder of a Note, the Indenture, the Notes and any Subsidiary Guarantee may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to comply with Article 5 of the Indenture, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Company, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA or to add a Guarantor under the Indenture. 13. DEFAULTS AND REMEDIES. Each of the following constitutes an "Event of Default": (a) default in payment when due (payable at maturity, upon redemption or otherwise), of principal of or premium, if any, on the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture); (b) default for 30 days or more in the payment when due of interest on, or Liquidated Damages, if any, with respect to the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture; (c) failure by the Company to comply with Sections 4.09, 4.10 and 5.01 of the Indenture; (d) failure by the Company for 30 days after receipt of written notice to comply with any of its other agreements in the Indenture or the Notes; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (1) is caused by the failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") at its stated final maturity (after giving effect to any applicable grace periods) or (2) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (f) failure by the Company or any of its Restricted Subsidiaries to pay final and non-appealable judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (g) the Company or any Restricted Subsidiary that is a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability generally to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Restricted Subsidiary that is a Significant Subsidiary in an involuntary case in which it is the debtor, (ii) appoints a Custodian of the Company or any Restricted Subsidiary that is a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary that is a Significant Subsidiary; or (iii) orders the liquidation of the Company or any Restricted Subsidiary that is a Significant Subsidiary, and the A-1-8 order or decree contemplated in clauses (i), (ii) or (iii) of this clause (h), remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid and such judgment has become final or non-appealable or shall cease for any other reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company and the Trustee; provided that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any such Indebtedness under the Credit Agreement or (ii) five Business Days after receipt by the Company and the Agent of written notice of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company with the same rights it would have if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under these Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of these Notes waives and releases all such liability. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of the Notes under the Indenture, Holders of Transferred Restricted Securities (as defined in the Registration Rights Agreement) shall have all the rights set forth in the A-1-9 Registration Rights Agreement, dated as of the date hereof, among the Company, the Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). 19. SUBSIDIARY GUARANTEES. Payment of principal, premium, if any, and interest (including interest on overdue principal and overdue interest, if lawful) and Liquidated Damages, if any, is unconditionally guaranteed by certain subsidiaries of the Company. Such guaranties are junior and subordinated to the guaranties of such subsidiaries on the same basis as the Notes are junior and subordinated to Senior Debt. 20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company have caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Attention: Secretary Facsimile: (412)823-4110 A-1-10 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint__________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: __________ Your Signature:___________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. A-1-11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.09 or 4.10 of the Indenture, check the box below: |_| Section 4.09 |_| Section 4.10 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.09 or Section 4.10 of the Indenture, state the amount you elect to have purchased: $_____________ Date: __________ Your Signature:___________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: Signature Guarantee. A-1-12 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE2 The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made: Principal Amount of Amount of Amount decrease in increase in of this Principal Principal Global Note Signature of Amount Amount following such authorized officer of this of this decrease of Trustee or Date of Exchange Global Note Global Note (or increase) Note Custodian - ---------------- ----------- ----------- ------------- -------------- - --------------------- 2 This should be included only if the Note is a Global Note. A-1-13 EXHIBIT A-2 (Face of Regulation S Temporary Global Note) 11 1/8% Senior Subordinated Notes due 2007 No. CUSIP No: PRECISE TECHNOLOGY, INC. promises to pay to Cede & Co. or registered assigns, the principal sum of _______________________________ Dollars on __________, 2007. Interest Payment Dates: June 15 and December 15 Record Dates: June 1 and December 1 Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as of set forth at this place. Dated: __________ PRECISE TECHNOLOGY, INC. By:______________________________ Name: Title: By:______________________________ Name: Title: This is one of the 11 1/8% Senior Subordinated Notes due 2007 referred to in the within-mentioned Indenture: Marine Midland Bank, As Trustee By: _____________________________ Authorized Signature A-2-1 (Back of Regulation S Temporary Global Note) 11 1/8% Senior Subordinated Notes due 2007 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS NOTE. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. "THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO A-2-2 ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF THE ISSUER SO REQUESTS, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS." Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below. 1. INTEREST. Precise Technology, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 111/8% per annum from the Issuance Date until June 15, 2007 and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on June 15 and December 15 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issuance Date; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 15, 1997. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate equal to the per annum rate on the Notes then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. A-2-3 2. METHOD OF PAYMENT. The Company shall make payments in respect of Global Notes (including principal, premium, if any, and interest and Liquidated Damages, if any) by wire transfer of immediately available funds to the accounts specified by the Note Custodian or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes. Notwithstanding the foregoing, all payments with respect to the Notes (the Holders of which have provided wire transfer instructions to the Company at least ten Business Days prior to the applicable payment date), will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Such payment shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of June 13, 1997 ("Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are general unsecured obligations of the Company limited to $200,000,000 in aggregate principal amount. 5. OPTIONAL REDEMPTION. Except as set forth in the following paragraphs, the Notes will not be redeemable at the Company's option prior to June 15, 2002. On and after June 15, 2002, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' written notice, at the Redemption Prices (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on June 15 of each of the years indicated below: Year REDEMPTION PRICE ----- 2002 .................................... 105.563% 2003 .................................... 103.708% 2004 .................................... 101.854% 2005 and thereafter............................... 100.000% In addition, at any time prior to June 15, 2000, the Company may on any one or more occasions redeem up to 331/3% of the aggregate principal amount of Notes originally issued (including, for this purpose, one or more series of Notes issued under the Indenture after the date of the Indenture) at a Redemption Price of 111.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the Redemption Date, with the net cash proceeds of one or more Public Equity Offerings; provided that at least 66 2/3% A-2-4 of the Notes originally issued (including, for this purpose, one or more series of Notes issued under the Indenture after the date of the Indenture) remain outstanding immediately after the occurrence of such redemption and provided, that such redemption occurs within 60 days of the date of the closing of each such Public Equity Offering. The Trustee shall select the Notes to be purchased in the manner described in the Indenture. In addition, at any time prior to June 15, 2002, the Company may, at its option, redeem the Notes, in whole or in part, at a Redemption Price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 8, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder's registered address. If any Note is to be redeemed in part only, any notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. On or after the Redemption Date, unless the Company defaults in making the redemption payments, interest ceases to accrue on the Notes or portions thereof called for redemption. 8. REPURCHASE AT OPTION OF HOLDERS. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase (the "Change of Control Payment"). Prior to complying with the provisions of Section 4.09 of the Indenture, but in any event within 30 days following a Change of Control, the Company shall either repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all such other Senior Debt and to repay the Indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer or obtain the requisite consents under the Credit Agreement and all such other Senior Debt to permit the repurchase of the Notes. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder of Notes issued under the Indenture, with a copy to the Trustee, containing the information set forth in Section 4.09 of the Indenture. Holders of Notes that are subject to an offer to purchase may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. (b) When the aggregate amount of Excess Proceeds in connection with Asset Sales by the Company exceeds $5.0 million, the Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in Section 3.10 of the Indenture. The Company will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceeds $5.0 million by mailing by first class mail the notice required pursuant to the terms Section 3.10 of the Indenture, with a copy to the Trustee. To the extent that A-2-5 the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof (subject to a minimum initial purchase requirement of $100,000 for Notes sold to institutional investors that qualify as accredited investors as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act other than in reliance on Rule 144A or Regulation S). The transfer of Notes may be registered and Notes may be exchanged only as provided in Article 2 of the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents (including legal opinions) and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. SUBORDINATION. Each Holder by accepting a Note agrees that the payment (by set-off or otherwise) of principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes (including with respect to any repurchases of the Notes) is subordinated in right of payment, to the extent and in the manner provided in Article 10 of the Indenture, to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents of all obligations in respect of Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes or any Subsidiary Guarantee may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to the terms of the Indenture and any applicable Subsidiary Guarantee, any existing default or compliance with any provision of the Indenture, the Notes or any Subsidiary Guarantee may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Without the consent of any Holder of a Note, the Indenture, the Notes and any Subsidiary Guarantee may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to comply with Article 5 of the Indenture, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Company, to comply with the requirements A-2-6 of the SEC in order to effect or maintain the qualification of the Indenture under the TIA or to add a Guarantor under the Indenture. 13. DEFAULTS AND REMEDIES. Each of the following constitutes an "Event of Default": (a) default in payment when due (payable at maturity, upon redemption or otherwise), of principal of or premium, if any, on the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture); (b) default for 30 days or more in the payment when due of interest on, or Liquidated Damages, if any, with respect to the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture; (c) failure by the Company to comply with Sections 4.09, 4.10 and 5.01 of the Indenture; (d) failure by the Company for 30 days after receipt of written notice to comply with any of its other agreements in the Indenture or the Notes; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (1) is caused by the failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") at its stated final maturity (after giving effect to any applicable grace periods) or (2) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (f) failure by the Company or any of its Restricted Subsidiaries to pay final and non-appealable judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (g) the Company or any Restricted Subsidiary that is a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability generally to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Restricted Subsidiary that is a Significant Subsidiary in an involuntary case in which it is the debtor, (ii) appoints a Custodian of the Company or any Restricted Subsidiary that is a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary that is a Significant Subsidiary; or (iii) orders the liquidation of the Company or any Restricted Subsidiary that is a Significant Subsidiary, and the order or decree contemplated in clauses (i), (ii) or (iii) of this clause (h), remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid and such judgment has become final or non-appealable or shall cease for any other reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company and the Trustee; provided that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any such Indebtedness under the Credit Agreement or (ii) five Business Days after receipt by the Company and the Agent A-2-7 of written notice of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company with the same rights it would have if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under these Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of these Notes waives and releases all such liability. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of the Notes under the Indenture, Holders of Transferred Restricted Securities (as defined in the Registration Rights Agreement) shall have all the rights set forth in the Registration Rights Agreement, dated as of the date hereof, among the Company, the Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). 19. SUBSIDIARY GUARANTEES. Payment of principal, premium, if any, and interest (including interest on overdue principal and overdue interest, if lawful) and Liquidated Damages, if any, is unconditionally guaranteed by certain subsidiaries of the Company. Such guaranties are junior and subordinated to the guaranties of such subsidiaries on the same basis as the Notes are junior and subordinated to Senior Debt. 20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company have caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: A-2-8 Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Attention: Secretary Facsimile: (412) 823-4110 A-2-9 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint__________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: __________ Your Signature:___________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. A-2-10 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made: Principal Amount of Amount of Amount decrease in increase in of this Principal Principal Global Note Signature of Amount Amount following such authorized officer of this of this decrease of Trustee or Date of Exchange Global Note Global Note (or increase) Note Custodian - ---------------- ----------- ----------- ------------- -------------- A-2-11 EXHIBIT A-3 (Face of Unrestricted Note) 111/8% Senior Subordinated Notes due 2007 No. CUSIP No. PRECISE TECHNOLOGY, INC. promises to pay to Cede & Co. or registered assigns, the principal sum of _______________________________ Dollars on __________, 2007. Interest Payment Dates: June 15 and December 15 Record Dates: June 1 and December 1 Reference is made for the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. Dated: ____________ PRECISE TECHNOLOGY, INC. By:______________________________ Name: Title: By:______________________________ Name: Title: This is one of the 11 1/8% Senior Subordinated Notes due 2007 referred to in the within-mentioned Indenture: Marine Midland Bank, as Trustee By: _____________________________ Authorized Signature A-3-1 (Back of Unrestricted Note) 11 1/8% Senior Subordinated Notes due 2007 [Unless and until it is exchanged in whole or in part for Notes in definitive form, this Note may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC") to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as may be requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.]1 "THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below. 1. INTEREST. Precise Technology, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 111/8% per annum from the Issuance Date until June 15, 2007 and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on June 15 and December 15 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issuance Date; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 15, 1997. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate equal to the per annum rate on the Notes then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on - -------------------- 1. This paragraph should be included only if the Note is a Global Note. A-3-2 overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company shall make payments in respect of Global Notes (including principal, premium, if any, and interest and Liquidated Damages, if any) by wire transfer of immediately available funds to the accounts specified by the Note Custodian or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes. Notwithstanding the foregoing, all payments with respect to the Notes (the Holders of which have provided wire transfer instructions to the Company at least ten Business Days prior to the applicable payment date), will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Such payment shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of June 13, 1997 ("Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are general unsecured obligations of the Company limited to $200,000,000 in aggregate principal amount. 5. OPTIONAL REDEMPTION. Except as set forth in the following paragraphs, the Notes will not be redeemable at the Company's option prior to June 15, 2002. On and after June 15, 2002, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' written notice, at the Redemption Prices (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on June 15 of each of the years indicated below: Year REDEMPTION PRICE 2002 .................................... 105.563% 2003 .................................... 103.708% 2004 .................................... 101.854% 2005 and thereafter............................... 100.000% In addition, at any time prior to June 15, 2000, the Company may on any one or more occasions redeem up to 331/3% of the aggregate principal amount of Notes originally issued (including, for this purpose, one or more series of Notes issued under the Indenture after A-3-3 the date of the Indenture) at a Redemption Price of 111.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the Redemption Date, with the net cash proceeds of one or more Public Equity Offerings; provided that at least 662/3% of the Notes originally issued (including, for this purpose, one or more series of Notes issued under the Indenture after the date of the Indenture) remain outstanding immediately after the occurrence of such redemption and provided, that such redemption occurs within 60 days of the date of the closing of each such Public Equity Offering. The Trustee shall select the Notes to be purchased in the manner described in the Indenture. In addition, at any time prior to June 15, 2002, the Company may, at its option, redeem the Notes, in whole or in part, at a Redemption Price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 8, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder's registered address. If any Note is to be redeemed in part only, any notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. On or after the Redemption Date, unless the Company defaults in making the redemption payments, interest ceases to accrue on the Notes or portions thereof called for redemption. 8. REPURCHASE AT OPTION OF HOLDERS. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase (the "Change of Control Payment"). Prior to complying with the provisions of Section 4.09 of the Indenture, but in any event within 30 days following a Change of Control, the Company shall either repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all such other Senior Debt and to repay the Indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer or obtain the requisite consents under the Credit Agreement and all such other Senior Debt to permit the repurchase of the Notes. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder of Notes issued under the Indenture, with a copy to the Trustee, containing the information set forth in Section 4.09 of the Indenture. Holders of Notes that are subject to an offer to purchase may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. (b) When the aggregate amount of Excess Proceeds in connection with Asset Sales by the Company exceeds $5.0 million, the Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in Section 3.10 of the Indenture. The Company will A-3-4 commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceeds $5.0 million by mailing by first class mail the notice required pursuant to the terms Section 3.10 of the Indenture, with a copy to the Trustee. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof (subject to a minimum initial purchase requirement of $100,000 for Notes sold to institutional investors that qualify as accredited investors as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act other than in reliance on Rule 144A or Regulation S). The transfer of Notes may be registered and Notes may be exchanged only as provided in Article 2 of the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents (including legal opinions) and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. SUBORDINATION. Each Holder by accepting a Note agrees that the payment (by set-off or otherwise) of principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes (including with respect to any repurchases of the Notes) is subordinated in right of payment, to the extent and in the manner provided in Article 10 of the Indenture, to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents of all obligations in respect of Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes or any Subsidiary Guarantee may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to the terms of the Indenture and any applicable Subsidiary Guarantee, any existing default or compliance with any provision of the Indenture, the Notes or any Subsidiary Guarantee may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Without the consent of any Holder of a Note, the Indenture, the Notes and any Subsidiary Guarantee may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to comply with Article 5 of the Indenture, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal A-3-5 rights under the Indenture of any such Holder, to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Company, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA or to add a Guarantor under the Indenture. 13. DEFAULTS AND REMEDIES. Each of the following constitutes an "Event of Default": (a) default in payment when due (payable at maturity, upon redemption or otherwise), of principal of or premium, if any, on the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture); (b) default for 30 days or more in the payment when due of interest on, or Liquidated Damages, if any, with respect to the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture; (c) failure by the Company to comply with Sections 4.09, 4.10 and 5.01 of the Indenture; (d) failure by the Company for 30 days after receipt of written notice to comply with any of its other agreements in the Indenture or the Notes; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (1) is caused by the failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") at its stated final maturity (after giving effect to any applicable grace periods) or (2) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (f) failure by the Company or any of its Restricted Subsidiaries to pay final and non-appealable judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (g) the Company or any Restricted Subsidiary that is a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability generally to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Restricted Subsidiary that is a Significant Subsidiary in an involuntary case in which it is the debtor, (ii) appoints a Custodian of the Company or any Restricted Subsidiary that is a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary that is a Significant Subsidiary; or (iii) orders the liquidation of the Company or any Restricted Subsidiary that is a Significant Subsidiary, and the order or decree contemplated in clauses (i), (ii) or (iii) of this clause (h), remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid and such judgment has become final or non-appealable or shall cease for any other reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company and the Trustee; provided that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any such Indebtedness A-3-6 under the Credit Agreement or (ii) five Business Days after receipt by the Company and the Agent of written notice of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company with the same rights it would have if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under these Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of these Notes waives and releases all such liability. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of the Notes under the Indenture, Holders of Transferred Restricted Securities (as defined in the Registration Rights Agreement) shall have all the rights set forth in the Registration Rights Agreement, dated as of the date hereof, among the Company, the Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). 19. SUBSIDIARY GUARANTEES. Payment of principal, premium, if any, and interest (including interest on overdue principal and overdue interest, if lawful) and Liquidated Damages, if any, is unconditionally guaranteed by certain subsidiaries of the Company. Such guaranties are junior and subordinated to the guaranties of such subsidiaries on the same basis as the Notes are junior and subordinated to Senior Debt. 20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company have caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: A-3-7 Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Attention: Secretary Facsimile: (412) 823-4110 A-3-8 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Marine Midland Bank 140 Broadway, 12th Floor New York, New York 10005 Re: 11 1/8% Senior Subordinated Notes due 2007 Reference is hereby made to the Indenture, dated as of June 13, 1997 (the "Indenture"), between Precise Technology, Inc., as issuer (the "Company"), and Marine Midland Bank, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to __________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1.|_|Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Restricted Definitive Note Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Restricted Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Restricted Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Restricted Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act. 2.|_|Check if Transferee will take delivery of a beneficial interest in the Temporary Regulation S Global Note, the Regulation S Global Note or a Restricted Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting B-1 on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Restricted Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3.|_|Check and complete if Transferee will take delivery of a Restricted Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a)|_|such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b)|_|such Transfer is being effected to the Company or a Subsidiary thereof; or (c)|_|such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d)|_|such Transfer is being effected to an Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that the Transfer complies with the transfer restrictions applicable to Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if the Company so requests, an Opinion of Counsel reasonably acceptable to the Company provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Restricted Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Notes and in the Indenture and the Securities Act. B-2 4.|_|Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note. (a)|_|Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Unrestricted Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b)|_|Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Unrestricted Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c)|_|Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Unrestricted Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. --------------------------- [Insert Name of Transferor] By: ------------------------ Name: Title: Dated: , ------------------ ---- B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: |_|a beneficial interest in the: (i) |_| 144A Global Note (QIB Global Note) (CUSIP No. 74018P AA7), or (ii) 144A Global Note |_| (Accredited Investor Global Note) (CUSIP No. 74018P AB5). 2. After the Transfer, the Transferee will hold: [CHECK ONE] (a)|_|a beneficial interest in the: (i) |_| 144A Global Note (QIB Global Note) (CUSIP No. 74018P AA7), or (ii) |_| 144A Global Note (Accredited Investor Global Note) (CUSIP No. 74018P AB5), or (iii) |_| Unrestricted Global Note (CUSIP_); or (b)|_|a Restricted Definitive Note; or (c)|_|an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Marine Midland Bank 140 Broadway, 12th Floor New York, New York 10005 Re: 11 1/8% Senior Subordinated Notes due 2007 (CUSIP ) ---------------------------------------------------------------------- Reference is hereby made to the Indenture, dated as of June 13, 1997 (the "Indenture"), between Precise Technology, Inc., as issuer (the "Company"), and Marine Midland Bank, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. _________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note (a)|_|Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b)|_|Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. C-1 (c)|_|Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d)|_|Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes (a)|_|Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b)|_|Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] |_| 144A Global Note or |_| Regulation S Global Note, with an equal principal amount, the Owner hereby certifies (i) such Owner acquired such Restricted Definitive Note in a transaction pursuant to Rule 144A or Regulation S, (ii) the beneficial interest is being acquired for the Owner's own account without transfer and (iii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. C-2 [Insert Name of Owner] By: ---------------------------- Name: Title: Dated: , ---------------- ---- C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Marine Midland Bank 140 Broadway, 12th Floor New York, New York 10005 Re: 11 1/8% Senior Subordinated Notes due 2007 Reference is hereby made to the Indenture, dated as of June 13, 1997 (the "Indenture"), between Precise Technology, Inc., as issuer (the "Company"), and First Trust of New York, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of Restricted Definitive Notes we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of each account for which we acquire any Notes (for which are acting as hereinafter stated), that such Notes may be offered, resold, pledged or otherwise transferred only (i) to a person whom we reasonably believe to be a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, outside the United States in a transaction meeting the requirements of Rule 904 under the Securities Act, or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an Opinion of Counsel if the Company so Requests), (ii) to the Company or (iii) pursuant to an effective registration statement, and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction. We further agree to provide to any person purchasing the Definitive Note or a beneficial interest in a Global Note from us in a transaction meeting the requirements of (i) or (ii) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. D-1 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Notes or beneficial interest therein acquired by us must be effected through one of the Placement Agents. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1),(2),(3) or(7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes without a view to distribution thereof in violation of the Securities Act for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ------------------------------------ [Insert Name of Accredited Investor] ------------------------------------ By: Name: Title: Dated: , ----------------- ---- D-2 EXHIBIT E SUBSIDIARY GUARANTEE Each Guarantor hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes and the Obligations of the Company under the Notes or under the Indenture, that: (a) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on overdue principal, premium, if any, (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes and all other payment Obligations of the Company to the Holders or the Trustee under the Indenture or under the Notes will be promptly paid in full and performed, all in accordance with the terms thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other payment Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. The obligations of the Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 12 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The terms of Article 12 of the Indenture are incorporated herein by reference. This Subsidiary Guarantee is subject to release as and to the extent provided in Section 12.04 of the Indenture. This is a continuing Subsidiary Guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Subsidiary Guarantee of payment and not a guarantee of collection. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. For purposes hereof, each Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and the Indenture and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the State of New York) or (B) left such Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into; provided that, it will be a presumption in any lawsuit or other proceeding in which a Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of such Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the Guarantor is limited to the amount set forth in clause (ii) above. The Indenture provides that, in making any determination as to the solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantors to contribution from other Guarantors and any other rights such Guarantors may have, contractual or otherwise, shall be taken into account. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. PRECISE TMP, INC. By: ----------------------------- Name: Title: MASSIE TOOL, MOLD & DIE, INC. By: ----------------------------- Name: Title: PRECISE POLESTAR, INC. By: ----------------------------- Name: Title: PRECISE TECHNOLOGY OF DELAWARE INC. By: ----------------------------- Name: Title: PRECISE TECHNOLOGY OF ILLINOIS INC. By: ----------------------------- Name: Title: SCHEDULE I Term Loans: Delaware State Loan $112,604.00 Concord Comm. Corp. (Phg tool EDM) $186,339.21 Concord Comm. Corp. (TMP EDM) $171,942.12 ----------- SUBTOTAL: $470,885.33 Cap Leases: Phoenixcor (Del Presses) $1,184,237.24 Heller Financial (LAF Presses) $778,009.22 TM Acceptance (PGH Presses) $2,519,605.18 US Bancorp. (Polestar Presses) $382,964.99 Concord Comm. Corp. (TMP S. Graf.) $408,317.06 Pencader Assoc. (Del) $118,102.47 OTHER CAPITAL LEASES: Vision Fin. (PGH fork trk) $3,031.51, Iron & Glass Bank (Eng Software) $40,081.00 Concord Capital Lease (Various Equip) $271,014.89 Concord Comm. (Pgh tooling grinder) $57,701.18 Concord Comm. (Unity Tooling EDM) $118,908.64 Concord Comm. (PHG Tool CNC) $145,262.01 Concord Comm. (Massie Grinder $223,410.00 ------------- $6,250,645.39 ------------- Totals $6,721,530.72 EX-4.2 15 REGISTRATION RIGHTS AGREEMENT EXECUTION COPY ================================================================================ PRECISE TECHNOLOGY, INC. PRECISE TMP, INC. MASSIE TOOL, MOLD & DIE, INC. PRECISE POLESTAR, INC. PRECISE TECHNOLOGY OF DELAWARE INC. PRECISE TECHNOLOGY OF ILLINOIS INC. 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007 REGISTRATION RIGHTS AGREEMENT June 13, 1997 BEAR, STEARNS & CO. INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ================================================================================ This Registration Rights Agreement (this "Agreement") is made and entered into as of June 13, 1997 by and among Precise Technology, Inc., a Delaware corporation (the "Company"), Precise TMP, Inc., a Virginia corporation, Massie Tool, Mold & Die, Inc., a Florida corporation, Precise Polestar, Inc., a Virginia corporation, Precise Technology of Delaware Inc., a Delaware corporation, and Precise Technology of Illinois Inc., a Delaware corporation (collectively, the "Guarantors"), Bear, Stearns & Co. Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (each a "Purchaser" and, collectively, the "Purchasers"), each of whom has agreed to purchase the Company's 11 1/8% Senior Subordinated Notes due 2007 (the "Notes") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated June 10, 1997 (the "Purchase Agreement"), by and among the Company, the Guarantors and the Purchasers. In order to induce the Purchasers to purchase the Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Purchasers set forth in Sections 2 and 3 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Act: The Securities Act of 1933, as amended. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Broker-Dealer Transfer Restricted Securities: New Notes that are acquired by a Broker-Dealer in the Exchange Offer in exchange for Notes that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Notes acquired directly from the Company or any of its affiliates). Closing Date: The date of this Agreement. Commission: The Securities and Exchange Commission. Consummate: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the New Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of New Notes in the same aggregate principal amount as the aggregate principal amount of Notes that were tendered by Holders thereof pursuant to the Exchange Offer. Damages Payment Date: With respect to the Notes, each Interest Payment Date. Effectiveness Target Date: As defined in Section 5. Exchange Act: The Securities Exchange Act of 1934, as amended. Exchange Offer: The registration by the Company under the Act of the New Notes pursuant to a Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for New Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Exempt Resales: The transactions in which the Purchasers propose to sell the Notes to (i) certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act, (ii) certain institutional "accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Act ("Accredited Institutions") and (iii) non-U.S. persons permitted to purchase the Notes in offshore transactions in reliance upon Regulation S under the Act. Holders: As defined in Section 2(b) hereof. Indenture: The Indenture, dated as of June 13, 1997, between the Company, the Guarantors and Marine Midland Bank, as trustee (the "Trustee"), pursuant to which the Subordinated Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. Interest Payment Date: As defined in the Indenture and the Subordinated Notes. NASD: National Association of Securities Dealers, Inc. New Notes: The Company's 11 1/8% New Senior Subordinated Notes due 2007 to be issued pursuant to the Indenture in the Exchange Offer. Person: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Purchasers: As defined in the preamble hereto. Record Holder: With respect to any Damages Payment Date relating to Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Company relating to (a) an offering of New Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer Transfer Restricted Securities. Shelf Filing Deadline: As defined in Section 4 hereof. Shelf Registration Statement: As defined in Section 4 hereof. Subordinated Notes: The Notes and the New Notes. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. Transfer Restricted Securities: Each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Note has been effectively registered under the Act and disposed of in accordance with a Shelf Registration Statement and (c) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act or by a Restricted Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein). Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 45 days after the Closing Date, a Registration Statement under the Act relating to the New Notes and the Exchange Offer, (ii) use their best efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 150 days after the Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the New Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) promptly following the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the New Notes to be offered in exchange for the Transfer Restricted Securities and to permit sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers as contemplated by Section 3(c) below. (b) The Company shall use its best efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. Without the consent of the Purchasers, no securities other than the Subordinated Notes and the Subsidiary Guarantees shall be included in the Exchange Offer Registration Statement. The Company shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 business days thereafter. (c) The Company shall indicate in a "Plan of Distribution" section contained in the Prospectus contained in the Exchange Offer Registration Statement that any Restricted Broker-Dealer who holds Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company or an affiliate of the Company), may exchange such Notes pursuant to the Exchange Offer; however, such Restricted Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with any resales of the New Notes received by such Restricted Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Restricted Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Restricted Broker-Dealer or disclose the amount of Notes held by any such Restricted Broker-Dealer, except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. The Company and the Guarantors shall use their best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers, and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the date on which the Exchange Offer Registration Statement is declared effective. The Company shall provide sufficient copies of the latest version of such Prospectus to such Restricted Broker-Dealers promptly upon request at any time during such one-year period in order to facilitate such resales. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company is not required to file an Exchange Offer Registration Statement or to consummate the Exchange Offer because, in the reasonable determination of the Company, the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) any Holder of Transfer Restricted Securities shall notify the Company within 20 business days of the Consummation of the Exchange Offer, in its reasonable discretion, (A) that such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) that such Holder may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) that such Holder is a Broker-Dealer and holds Notes acquired directly from the Company or one of its affiliates, then the Company and the Guarantors shall (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement") on or prior to the earliest to occur of (1) the 30th day after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement, (2) the 30th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above, and (3) the 60th day after the Closing Date (such earliest date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use their best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 60th day after the Shelf Filing Deadline. The Company and the Guarantors shall use their best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of two years following the Closing Date, or such shorter period ending when (i) all Notes covered by the Shelf Registration Statement have been sold in the manner set forth therein or (ii) a subsequent Shelf Registration Statement relating to the Notes has been declared effective under the Act. Notwithstanding the foregoing, the Company shall not be required to file a Shelf Registration Statement with respect to the Notes of any Holder (other than Notes of a Purchaser) as a result of such Holder not being able to make the representations required by Section 6(a) in connection with the Exchange Offer. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 business days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Guarantors hereby jointly and severally agree to pay liquidated damages ("Liquidated Damages") to each Holder of Transfer Restricted Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the Liquidated Damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued Liquidated Damages shall be paid to the affected Record Holders by the Company by wire transfer of immediately available funds or by federal funds check on each Damages Payment Date, as provided in the Indenture. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of Liquidated Damages with respect to such Transfer Restricted Securities will cease. Notwithstanding the foregoing, the Company may issue a notice that the Shelf Registration Statement is unusable pending the announcement of a material corporate transaction and may issue any notice suspending the use of the Shelf Registration Statement required under applicable securities laws to be issued and, in the event that the aggregate number of days in any consecutive twelve-month period for which all such notices are issued and effective does not exceed 45 days in the aggregate, then Liquidated Damages will not be payable as described above as a result of such suspension. All obligations of the Company and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Security shall have been satisfied in full. If the Company has complied with the provisions of Sections 3, 4 and 6 hereof, the accrual and payment of Liquidated Damages, as set forth above, shall be the sole and exclusive remedy of the Holders against the Company and the Guarantors for the events constituting a Registration Default. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Company and the Guarantors hereby agree, to the extent reasonably practicable, to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for Notes. The Company and the Guarantors each hereby agrees to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Company and the Guarantors each hereby agrees, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate, directly or indirectly, of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the New Notes to be issued in the Exchange Offer, (C) it is acquiring the New Notes in its ordinary course of business and (D) it is not acting on behalf of any Person who could not make the foregoing representations. Such Holder shall also make such other representations as may be required to comply with applicable law or policy of the Commission with respect to the Exchange Offer. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Restricted Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of New Notes obtained by such Holder in exchange for Notes acquired by such Holder directly from the Company. The Company shall not be required to register the Notes of any Holder (other than Notes of a Purchaser) that fails to furnish the representations required by the first sentence of this paragraph. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above and (B) including a representation that neither the Company nor any of the Guarantors has entered into any arrangement or understanding with any Person to distribute the New Notes to be received in the Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Exchange Offer is acquiring the New Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the New Notes received in the Exchange Offer. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company will as expeditiously as possible (in accordance with Section 4 hereof) prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof. (c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Exchange Offer Registration Statement and the related Prospectus, to the extent that the same are required to be available to permit sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the Company shall: (i) use its best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Act or any regulation thereunder, financial statements of the Guarantors) for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company shall, upon becoming aware thereof, file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold or a subsequent Registration Statement has been declared effective; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, advise the managing underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, furnish to each of the selling Holders specifically named in or covered by any Registration Statement or Prospectus and each of the managing underwriter(s) in connection with such sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review of such Holders and underwriter(s) in connection with such sale, if any, for a period of at least five business days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which selling Holders of 25% or more in aggregate principal amount of Transfer Restricted Securities covered by such Registration Statement or the managing underwriter(s) in connection with such sale, if any, shall reasonably object within five business days after the receipt thereof. A selling Holder or managing underwriter, if any, shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (v) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders covered by such Registration Statement and to the managing underwriter(s) in connection with such sale, if any, make the Company's representatives available (and representatives of the Guarantors) for discussion of such document and other customary due diligence matters on reasonable prior notice, and include such information in such document prior to the filing thereof as such selling Holders or managing underwriter(s), if any, reasonably may request within five business days of the receipt of the proposed filing; (vi) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, make available at reasonable times, and at the offices where normally kept, for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees, as applicable, to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness, in each case to the extent reasonably necessary to enable them to exercise any applicable due diligence responsibilities; (vii) in the event that a Shelf Registration Statement is filed, if requested by any selling Holders covered by such Registration Statement or the underwriter(s) in connection with such sale, if any, as promptly as practicable incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided that, if any such Holder or underwriter had the opportunity to review a filing pursuant to clause (iv) or clause (v) above and the information proposed to be included was available at the time of and could have been included in such earlier filing, all costs relating to the inclusion of such information pursuant to a supplement or post-effective amendment to such Registration Statement shall be paid for by the party(ies) requesting such inclusion; (viii) use its best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Subordinated Notes covered thereby or the underwriter(s), if any; (ix) in the event that a Shelf Registration Statement is filed, furnish to each selling Holder covered by such Registration Statement, on request, and each of the managing underwriter(s) in connection with such sale, if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto provided that the Company has not advised such Persons otherwise pursuant to Section 6(c)(iii); (xi) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, enter into, and cause the Guarantors to enter into, such customary agreements (including an underwriting agreement), and make, and cause the Guarantors to make, such customary representations and warranties, and take all such other reasonable actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be reasonably requested by any Holder of Transfer Restricted Securities or managing underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Guarantors shall: (A) furnish to each selling Holder and each managing underwriter, if any, upon the effectiveness of the Shelf Registration Statement and to each Restricted Broker-Dealer upon Consummation of the Exchange Offer: (1) such representations and warranties with respect to the business of the Company and the Guarantors and the Registration Statement, Prospectus and documents, if any, incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in primary underwritten offerings of debt securities similar to the Subordinated Notes, and confirm the same if and when requested; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Guarantors, covering the matters customarily covered in opinions requested in underwritten offerings of debt securities similar to the Subordinated Notes and such other matters as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, the Purchasers' representatives and the Purchasers' counsel in connection with the preparation of such Registration Statement and the related Prospectus and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to a large extent upon facts provided to such counsel by officers and other representatives of the Company and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) provided that the requesting Holders, underwriter(s), if any, or other such financial intermediary furnish the undertaking required in SAS 72, if required, a customary comfort letter in form and substance reasonably satisfactory to the requesting Holders, underwriter(s), if any, or other financial intermediary, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with primary underwritten offerings; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company pursuant to this clause (xi), if any. If at any time the representations and warranties of the Company and the Guarantors contemplated in clause (A)(1) above cease to be true and correct, the Company or the Guarantors shall so advise the Purchasers and the underwriter(s), if any, each selling Holder and Restricted Broker-Dealers, if any, promptly and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities provided for under this Agreement, cooperate with, and cause the Guarantors to cooperate with, the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the state securities or Blue Sky laws of such domestic jurisdictions as the selling Holders or underwriter(s), if any, may reasonably request in writing and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that neither the Company nor any of the Guarantors shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii) in the event that a Shelf Registration Statement is filed, shall issue, upon the request of any Holder of Notes covered by the Shelf Registration Statement contemplated by this Agreement, Notes not bearing legends restricting their transfer, having an aggregate principal amount equal to the aggregate principal amount of Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such New Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Subordinated Notes, as the case may be; in return, the Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) in the event that a Shelf Registration Statement is filed, in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with, and cause the Guarantors to cooperate with, the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may reasonably request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use its best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, except as may be required solely as a consequence of the nature of such seller's business and subject to the proviso contained in clause (xii) above; (xvi) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, if any fact or event contemplated by clause 6(c)(iii)(D) hereof shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the first Registration Statement required by this Agreement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with The Depositary Trust Company; (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use its reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning on the first day of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate, and cause the Guarantors to cooperate, with the Trustee and the Holders of Subordinated Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute, and cause the Guarantors to execute, and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xxi) use its best efforts to cause all Transfer Restricted Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed if requested by the Holders of a majority in aggregate principal amount of Notes or the managing underwriter(s), if any. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any amendments or supplements thereto. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's or the Guarantors performance of or compliance with this Agreement will be borne by the Company or the Guarantors, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the New Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing Subordinated Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Guarantor's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company will reimburse the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. The Company and the Guarantors shall not have any obligation to pay any underwriting fees, discounts or commissions attributable to the sale of any New Notes pursuant to this Agreement. SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors, jointly and severally, agree to indemnify and hold harmless (i) each Holder, (ii) each person, if any, who controls any Holder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (each a "Participant") to the fullest extent lawful, from and against any and all losses, liabilities, claims, damages and expenses whatsoever (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any investigation or litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus, or in any supplement thereto or amendment thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company and the Guarantors will not be liable in any such case to the extent, but only to the extent, that (i) any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company or the Guarantors by or on behalf of any Holder, underwriter or other Purchaser expressly for use therein and (ii) the foregoing indemnity with respect to any untrue statement contained in or omitted from a Registration Statement or the Prospectus shall not inure to the benefit of any Holder (or any person controlling such Holder), from whom the person asserting any such loss, liability, claim, damage or expense purchased any of the Subordinated Notes which are the subject thereof if it is finally judicially determined that such loss, liability, claim, damage or expense resulted solely from the fact that the Holder sold Subordinated Notes to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Registration Statement and the Prospectus, as amended or supplemented, and (x) the Company shall have previously and timely furnished sufficient copies of the Registration Statement or Prospectus, as so amended or Supplemented, to such Holder in accordance with this Agreement and (y) the Registration Statement or Prospectus, as so amended or supplemented, would have corrected such untrue statement or omission of a material fact. This indemnity agreement will be in addition to any liability which the Company and the Guarantors may otherwise have, including, under this Agreement. (b) Each Participant (and each underwriter in an underwritten offering pursuant to a Shelf Registration Statement) will be required to agree (and each Holder hereby agrees), severally and not jointly, to indemnify and hold harmless the Company, the Guarantors and each person, if any, who controls the Company or the Guarantors within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any investigation or litigation, commenced or threatened, or any claim whatsoever and any and all amounts paid in settlement of any claim or litigation), to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company or the Guarantors by or on behalf of such Participant expressly for use therein. This indemnity will be in addition to any liability which a Holder may otherwise have, including under this Agreement. In no event, however, shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon its sale of the Transfer Restricted Securities giving rise to such indemnification obligation. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent that it has been prejudiced in any material respect by such failure or from any liability which it may otherwise have). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have been advised in writing that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying party or parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses of counsel shall be borne by the indemnifying parties; provided, however, that the indemnifying party under subsection (a) or (b) above, shall only be liable for the legal expenses of one counsel (in addition to any local counsel) for all indemnified parties in each jurisdiction in which any claim or action is brought; provided, however, that the indemnifying party shall be liable for separate counsel for any indemnified party in a jurisdiction, if counsel to the indemnified party or parties shall have reasonably concluded in writing that there may be defenses available to such indemnified party that are different from or additional to those available to one or more of the other indemnified parties and that separate counsel for such indemnified party is prudent under the circumstances. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its prior written consent; provided, however, that such consent was not unreasonably withheld. (d) In order to provide for contribution in circumstances in which the indemnification provided for in this Section 8 is for any reason held to be unavailable to an indemnified party or is insufficient to hold harmless a party indemnified thereunder, the Company, the Guarantors and each Participant (or other indemnifying person) shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company, any contribution received by the Company from Persons, other than the Holders, who may also be liable for contribution, including Persons who control the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) to which the Company and any Participant (or other indemnifying person) may be subject, in such proportion as is appropriate to reflect the relative benefits received by the Company and any Participant from their sale of Transfer Restricted Securities or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having received notice as provided in this Section 8, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Guarantors, on the one hand, and the Participants (or other indemnifying person), on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and any Participant shall be deemed to be in the same proportion as (x) the total proceeds from the offering (net of discounts but before deducting expenses) of the Subordinated Notes received by the Company and (y) the total proceeds received by such Participant upon its sale of Subordinated Notes which would otherwise give rise to the indemnification obligation, respectively. The relative fault of the Company and the Guarantors and of the Participant (or other indemnifying person) shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Participants and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to above. Notwithstanding the provisions of this Section 8, (i) no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total value of the Subordinated Notes held by such Holder exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, (A) each person, if any, who controls a Holder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the respective officers, directors, partners, employees, representatives and agents of a Holder or any controlling Person shall have the same rights to contribution as such Holder, and each Person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as the Company, subject in each case to clauses (i) and (ii) of this Section 8(d). Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 8, notify such party or parties from whom contribution may be sought, but the failure to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 8 or otherwise (except to the extent it has been prejudiced in any material respect by such failure). No party shall be liable for contribution with respect to any action or claim settled without its prior written consent; provided, however, that such written consent was not unreasonably withheld. SECTION 9. RULE 144A Unless the Company is then subject to Section 13 or 15(d) of the Exchange Act, the Company hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available, upon request, to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements, which, in any event, shall be reasonably satisfactory to the Company and customary in connection with underwritten securities offerings. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. Except as expressly provided for herein, neither the Company nor the Guarantors shall be responsible for any fees, costs or expenses of such bankers or managers or their respective advisors or representatives. SECTION 12. MISCELLANEOUS (a) Remedies. The Company and the Guarantors agree that monetary damages (including the Liquidated Damages contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate; provided, however, if the Company has complied with the provisions of Sections 3, 4 and 6 hereof, the accrual and payment of Liquidated Damages, as set forth in Section 5 above, shall be the sole and exclusive remedy of the Holders against the Company and the Guarantors for the events constituting a Registration Default. (b) No Inconsistent Agreements. The Company will not, and will cause the Guarantors not to, on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of the Guarantors has previously entered into any agreement granting any registration rights with respect to its securities to any Person which would permit such Person to (i) include its securities in any Registration Statement or (ii) participate in any Underwritten Registration or Underwritten Offering. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Subordinated Notes. The Company and the Guarantors will not take any action with respect to the Subordinated Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are sold or exchanged pursuant to a Registration Statement and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being sold or exchanged pursuant to such Registration Statement. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company: Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137 Telecopier No.: (412) 823-4110 Attention: Secretary With a copy to: Mentmore Holdings Corporation 1430 Broadway 13th Floor New York, New York 10018-3308 Telecopier No.: (212) 391-1393 Attention: William L. Remley and Winston & Strawn 200 Park Avenue New York, New York 10166 Telecopier No.: (212) 294-4700 Attention: Robert W. Ericson, Esq. (iii) notice to the Company shall be deemed notice to any and every Guarantor. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the other Operative Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Precise Technology, Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Precise TMP, Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Massie Tool, Mold & Die, Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Precise Polestar, Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Precise Technology of Delaware Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Precise Technology of Illinois Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Bear, Stearns & Co. Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: Bear, Stearns & Co. Inc. By: /s/ J. Andrew Bugas ----------------------------- Name: J. Andrew Bugas Title: Senior Managing Director EX-4.3 16 PURCHASE AGREEMENT EXECUTION COPY ================================================================================ PRECISE TECHNOLOGY, INC. $75,000,000 11 1/8% Senior Subordinated Notes due 2007 Purchase Agreement June 10, 1997 BEAR, STEARNS & CO. INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ================================================================================ PRECISE TECHNOLOGY, INC. $75,000,000 11 1/8% Senior Subordinated Notes due 2007 PURCHASE AGREEMENT June 10, 1996 New York, New York BEAR, STEARNS & CO. INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED c/o Bear, Stearns & Co. Inc. 245 Park Avenue New York, New York 10167 Ladies & Gentlemen: Precise Technology, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to Bear, Stearns & Co. Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchasers") $75,000,000 aggregate principal amount of its 11 1/8% Senior Subordinated Notes due 2007 (the "Notes"), subject to the terms and conditions set forth herein. The Notes will be issued pursuant to an indenture (the "Indenture"), to be dated the Closing Date (as defined below), among the Company and Marine Midland Bank, as trustee (the "Trustee"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Indenture. 1. Issuance of Securities. The Company proposes, upon the terms and subject to the conditions set forth herein, to issue and sell to the Initial Purchasers an aggregate of $75,000,000 principal amount of Notes. The Company's payment obligations under the Subordinated Notes (as defined below) will be jointly and severally guaranteed (the "Subsidiary Guarantees") on a senior subordinated basis by Precise TMP, Inc., Massie Tool, Mold & Die, Inc., Precise Polestar, Inc., Precise Technology of Delaware Inc. and Precise Technology of Illinois Inc. (collectively, the "Guarantors") pursuant to the Subsidiary Guarantees. The Notes and the New Notes (as defined below) issuable in exchange therefor are collectively referred to herein as the "Subordinated Notes." All references to Notes, New Notes and Subordinated Notes shall be deemed to include the Subsidiary Guarantees related thereto. Upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act of 1933, as amended (the "Act"), the Notes (and all securities issued in exchange therefor or in substitution thereof) shall bear the following legend: "THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF THE ISSUER SO REQUESTS, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT." 2. Offering. The Notes will be offered and sold to the Initial Purchasers pursuant to an exemption from the registration requirements under the Act. The Company has prepared a preliminary offering memorandum, dated May 19, 1997 (the "Preliminary Offering Memorandum"), and a final offering memorandum, dated June 10, 1997 (the "Offering Memorandum"), relating to the Company and the Notes. The Initial Purchasers have advised the Company that the Initial Purchasers will make offers (the "Exempt Resales") of the Notes on the terms set forth in the Offering Memorandum, as amended or supplemented, solely to (i) persons whom the Initial Purchasers reasonably believe to be "qualified institutional buyers" as defined in Rule 144A under the Act ("QIBs"), (ii) a limited number of other institutional "accredited investors," as defined in Rule 501(a) (1), (2), (3) or (7) under the Act, that, prior to their purchase of the Notes, deliver to the Initial Purchasers a letter containing the representations and agreements set forth in Annex A to the Offering Memorandum (each, an "Accredited Institution"), and (iii) to non-U.S. persons permitted to purchase the Notes in offshore transactions in reliance upon Regulation S under the Act (each, a "Regulation S Purchaser") (such persons specified in clauses (i), (ii) and (iii) being referred to herein as the "Eligible Purchasers"). The Initial Purchasers will offer the Notes to Eligible 3 Purchasers initially at a price equal to 100% of the principal amount thereof. Such price may be changed at any time without notice. Holders (including subsequent transferees) of the Notes will have the registration rights set forth in the registration rights agreement relating thereto (the "Registration Rights Agreement") in substantially the form of Exhibit A hereto, to be dated the Closing Date, for so long as such Notes constitute "Transfer Restricted Securities" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company will agree to file with the Securities and Exchange Commission (the "Commission"), under the circumstances set forth therein, (i) a registration statement under the Act (the "Exchange Offer Registration Statement") relating to the 111/8% New Senior Subordinated Notes due 2007 (the "New Notes") to be offered in exchange for the Notes (the "Exchange Offer") and (ii) a shelf registration statement pursuant to Rule 415 under the Act (the "Shelf Registration Statement") relating to the resale by certain holders of the Notes, and to use their best efforts to cause such Registration Statements to be declared effective and to consummate the Exchange Offer. This Agreement, the Subordinated Notes, the Subsidiary Guarantees, the Indenture and the Registration Rights Agreement, are hereinafter sometimes referred to collectively as the "Operative Documents." 3. Purchase, Sale and Delivery. (a) On the basis of the representations, warranties and covenants contained in this Agreement, and subject to its terms and conditions, the Company agrees to issue and sell to the Initial Purchasers, and the Initial Purchasers agree to purchase from the Company, $75,000,000 aggregate principal amount of Notes. The purchase price for the Notes will be $970.00 per $1,000 principal amount thereof. (b) Delivery of the Notes shall be made, against payment of the purchase price therefor, at the offices of Latham & Watkins, 885 Third Avenue, New York, New York 10022, or such other location as may be mutually acceptable. Such delivery and payment shall be made at 9:00 A.M. New York City time, on June 13, 1997, or at such other time as shall be agreed upon by the Initial Purchasers and the Company. The time and date of such delivery and payment are herein called the "Closing Date." (c) Notes sold by the Initial Purchasers to QIBs, Accredited Institutions and pursuant to Regulations S will be represented by separate Notes in definitive global form, registered in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), each having an aggregate principal amount corresponding to the aggregate principal amount of the Notes sold to such QIBs, Accredited Institutions and pursuant to Regulations S (collectively, the "Global Notes"). The Global Notes shall be delivered by the Company to the Initial Purchasers (or as the Initial Purchasers direct) in each case with any transfer taxes thereon duly paid by the Company against payment by the Initial Purchasers of the purchase price thereof by wire transfer in same day funds to the order of the Company. The Global Notes shall be made available to the Initial Purchasers for inspection not later than 9:30 a.m., New York City time, on the business day immediately preceding the Closing Date. 4. Agreements of the Company and the Guarantors. Each of the Company and the Guarantors, jointly and severally, covenants and agrees with the Initial Purchasers as follows: (a) To advise the Initial Purchasers promptly and, if requested by the Initial Purchasers, confirm such advice in writing, (i) of the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of any Subordinated Notes for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose by any state securities commission or other regulatory authority and (ii) of the happening of any event that, in the reasonable opinion of either counsel to the Company or counsel to the Initial Purchasers, makes any statement of a material fact made in the Preliminary 4 Offering Memorandum or the Offering Memorandum untrue or that requires the making of any additions to or changes in the Preliminary Offering Memorandum or the Offering Memorandum in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Company and the Guarantors shall use their best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption of any Subordinated Notes under any state securities or Blue Sky laws and, if at any time any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption of any Subordinated Notes under any state securities or Blue Sky laws, the Company and the Guarantors shall use their best efforts to obtain the withdrawal or lifting of such order at the earliest possible time. (b) To furnish the Initial Purchasers and those persons identified by the Initial Purchasers to the Company, without charge, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments or supplements thereto, as the Initial Purchasers may reasonably request. The Company and the Guarantors consent to the use of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments and supplements thereto required pursuant hereto, by the Initial Purchasers in connection with Exempt Resales. (c) Not to amend or supplement the Offering Memorandum prior to the Closing Date unless the Initial Purchasers shall previously have been advised thereof and shall not have objected thereto within a reasonable time after being furnished a copy thereof. The Company shall promptly prepare, upon the Initial Purchasers' reasonable request, any amendment or supplement to the Preliminary Offering Memorandum or the Offering Memorandum that may be necessary or advisable in connection with Exempt Resales. (d) If, after the date hereof and prior to the consummation of any Exempt Resale, any event shall occur as a result of which, in the judgment of the Company or in the reasonable opinion of counsel for the Company or counsel for the Initial Purchasers, it becomes necessary or advisable to amend or supplement the Offering Memorandum in order to make the statements therein, in the light of the circumstances when such Offering Memorandum is delivered to an Eligible Purchaser which is a prospective purchaser, not misleading, or if it is necessary or advisable to amend or supplement the Offering Memorandum to comply with applicable law, (i) to notify the Initial Purchasers (who will thereafter not use such Offering Memorandum to confirm sales of the Notes until it is appropriately amended or supplemented) and (ii) to prepare promptly an appropriate amendment or supplement to such Offering Memorandum so that the statements therein as so amended or supplemented will not, in the light of the circumstances when it is so delivered, be misleading, or so that such Offering Memorandum will comply with applicable law. (e) To cooperate with the Initial Purchasers and counsel for the Initial Purchasers in connection with the qualification or registration of the Subordinated Notes under the securities or Blue Sky laws of such jurisdictions of the United States as the Initial Purchasers may reasonably request and to continue such qualification in effect so long as required for the Exempt Resales; provided, however, that neither the Company nor any Guarantor shall be required in connection therewith to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to service of process in suits or taxation, in each case, other than as to matters and transactions relating to the Offering Memorandum or Exempt Resales, in any jurisdiction where it is not now so subject. (f) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement becomes effective or is terminated, to pay all costs, expenses, fees and taxes incident to the performance of the obligations of the Company and the Guarantors hereunder, including in connection with: (i) the preparation, printing, filing and distribution of the Preliminary Offering Memorandum and the Offering Memorandum (including, without limitation, 5 financial statements) and all amendments and supplements thereto required pursuant hereto, (ii) the qualification or registration of the Notes for offer and sale under the securities or Blue Sky laws of the several states (including, without limitation, the preparation and delivery of all preliminary and final Blue Sky memoranda and all other agreements, memoranda, correspondence and all other documents prepared and delivered in connection herewith and with the Exempt Resales and the reasonable fees and disbursements of counsel for the Initial Purchasers relating thereto (provided that such fees and disbursements shall not exceed $10,000 in the aggregate)), (iii) the preparation, issuance, transfer and delivery by the Company of the Notes and the Guarantors of the Subsidiary Guarantees to the Initial Purchasers, (iv) furnishing such copies of the Preliminary Offering Memorandum and the Offering Memorandum, and all amendments and supplements thereto, as may be reasonably requested for use in connection with Exempt Resales, (v) the fees, disbursements and expenses of the Company's and Guarantors' counsel and accountants, (vi) all expenses and listing fees in connection with the application for quotation of the Subordinated Notes in the National Association of Securities Dealers, Inc. ("NASD") Private Offering, Resales and Trading through Automated Linkages ("PORTAL") market, (vii) all fees and expenses (including fees and expenses of counsel to the Company) of the Company and the Guarantors in connection with the approval of the Subordinated Notes by DTC for "book-entry" transfer, (viii) rating the Subordinated Notes by rating agencies, (ix) the reasonable fees and expenses of the Trustee and its counsel, (x) the performance by the Company and the Guarantors of their other obligations under this Agreement and the other Operative Documents and (xi) "roadshow" travel and other reasonable expenses incurred in connection with the marketing and sale of the Notes (other than customary expenses paid for by the Initial Purchasers). (g) To use the proceeds from the sale of the Notes in the manner described in the Offering Memorandum under the caption "Use of Proceeds." (h) Not to voluntarily claim, and to resist actively any attempts to claim, the benefit of any usury laws against the holders of any Subordinated Notes. (i) To do and perform all things required to be done and performed under this Agreement by it prior to or after the Closing Date and to satisfy all conditions precedent on its part to the delivery of the Subordinated Notes. (j) Not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) that would be integrated with the sale of the Notes in a manner that would require the registration under the Act of the sale to the Initial Purchasers or the Eligible Purchasers of the Notes or to take any other action that would result in the Exempt Resales not being exempt from registration under the Act. (k) For so long as any of the Subordinated Notes remain outstanding and during any period in which the Company is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), upon request, to make available to any QIB or beneficial owner of Notes in connection with any sale thereof and any prospective purchaser of such Notes from such QIB or beneficial owner, the information required by Rule 144A(d)(4) under the Act. (l) To cause the Exchange Offer to be made in the appropriate form to i permit registered New Notes to be offered in exchange for the Notes and to comply with all applicable federal and state securities laws in connection with the Exchange Offer, subject to the terms of the Registration Rights Agreement. 6 (m) To comply with all of its agreements set forth in the representation letters of the Company to DTC relating to the approval of the Subordinated Notes by DTC for "book-entry" transfer. (n) To use its best efforts to effect the inclusion of the Subordinated Notes in PORTAL and to obtain approval of the Notes by DTC for "book-entry" transfer. (o) For so long as any of the Subordinated Notes remain outstanding, to deliver without charge to the Initial Purchasers, as they may reasonably request, promptly upon their becoming available, copies of all reports, financial statements and proxy or information statements filed by the Company with the Commission or any national securities exchange, all publicly available information that the Company distributes to its public stockholders and such other publicly available information concerning the Company or its Subsidiaries, including without limitation, press releases. (p) Prior to the Closing Date, to furnish to the Initial Purchasers, as soon as they have been prepared in the ordinary course by the Company, copies of any unaudited interim financial statements for any period subsequent to the periods covered by the financial statements appearing in the Offering Memorandum. (q) Not to take and not permit any of its Subsidiaries to take, directly or indirectly, any action designed to, or that would reasonably be expected to, cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Subordinated Notes. Except as permitted by the Act, the Company will not distribute any (i) preliminary offering memorandum, including, without limitation, the Preliminary Offering Memorandum, (ii) offering memorandum, including, without limitation, the Offering Memorandum, or (iii) other offering material in connection with the offering and sale of the Subordinated Notes. (r) To comply with all of its agreements in the Indenture, the Registration Rights Agreement and the other Operative Documents. 5. Representations and Warranties. (a) The Company and the Guarantors, jointly and severally, represent and warrant to the Initial Purchasers that: (i) The Preliminary Offering Memorandum and the Offering Memorandum have been prepared in connection with the Exempt Resales. The Preliminary Offering Memorandum, at the date thereof and at all time subsequent thereto to the date hereof, and the Offering Memorandum as of the date hereof, do not, and any supplement or amendment to them will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties contained in this paragraph shall not apply to statements in or omissions from the Preliminary Offering Memorandum and the Offering Memorandum (or any supplement or amendment thereto) made in reliance upon and in conformity with information relating to the Initial Purchasers furnished to the Company, in writing, by the Initial Purchasers expressly for use therein. (ii) When the Notes are issued and delivered pursuant to this Agreement, no Note will be of the same class (within the meaning of Rule 144A under the Act) as securities of the Company or the Guarantors that are listed on a national securities exchange registered under Section 6 of the Exchange Act or that are quoted in a United States automated inter-dealer quotation system. 7 (iii) Each of the Company and its Subsidiaries (A) has been duly organized and is validly existing as a corporation in good standing under the laws of its respective jurisdiction of incorporation, (B) has all requisite corporate power and authority to carry on its business as described in the Offering Memorandum and to own, lease and operate its properties, and (C) is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not reasonably be expected to (y) result in a material adverse effect on the properties, business, results of operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole or (z) result in a material adverse affect on the ability of the Company and the Guarantors to perform their respective obligations under this Agreement and the other Operative Documents (any of the events set forth in clauses (y) or (z), a "Material Adverse Effect"). (iv) All of the outstanding shares of capital stock of the Company and each of its Subsidiaries have been duly authorized, validly issued, and are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights. On March 31, 1997, after giving pro forma effect to the issuance and sale of the Notes pursuant hereto and the consummation of the other Refinancing Transactions (as defined in the Offering Memorandum) in the manner contemplated in the Offering Memorandum, the Company would have had an authorized and outstanding consolidated capitalization as set forth in the Offering Memorandum under the caption "Capitalization." (v) Except for capital stock of the Company's Subsidiaries pledged in connection with the New Credit Agreement, (i) all of the outstanding capital stock of each of the Company's Subsidiaries is owned by the Company, directly or through another Subsidiary, free and clear of any security interest, claim, lien, limitation on voting rights or encumbrance and (ii) there are not currently, and will not be as a result of the Offering, any outstanding subscriptions, rights, warrants, calls, commitments of sale or options to acquire, or instruments convertible into or exchangeable for, any capital stock or other equity interest of the Company or any of its Subsidiaries. (vi) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and each of the other Operative Documents to which it is a party and to consummate the transactions contemplated hereby and thereby, including, without limitation, the corporate power and authority to issue, sell and deliver the Subordinated Notes as provided herein and therein. (vii) Each Guarantor has all requisite corporate power and authority to execute, deliver and perform its respective obligations under this Agreement and each of the other Operative Documents to which it is a party and to consummate the transactions contemplated hereby and thereby, including, without limitation, the corporate power and authority to endorse its guarantee on the Subordinated Notes as provided herein and therein. (viii) This Agreement has been duly and validly authorized, executed and delivered by each of the Company and the Guarantors and (assuming the due authorization, execution and delivery by the Initial Purchasers) is a valid and binding agreement of the Company and the Guarantors, enforceable against them in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws and court decisions relating to or affecting the rights of creditors generally or by general principles of equity, and except as rights to indemnification and contribution may be limited by applicable law. 8 (ix) The Indenture has been duly and validly authorized by the Company and, when duly executed and delivered by the Company (assuming the due authorization, execution and delivery by the Trustee), will be a valid and binding agreement of the Company, enforceable against it in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws and court decisions relating to or affecting the rights of creditors generally or by general principles of equity, and except as rights to indemnification and contribution may be limited by applicable law. (x) The Notes have been duly and validly authorized for issuance and sale to the Initial Purchasers by the Company pursuant to this Agreement and, when executed, issued and authenticated in accordance with the terms of the Indenture and delivered against payment therefor in accordance with the terms hereof and thereof, will be valid and binding obligations of the Company, enforceable against it in accordance with their terms and entitled to the benefits of the Indenture, except as enforcement may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws and court decisions relating to or affecting the rights of creditors generally or by general principles of equity, and except as rights to indemnification and contribution may be limited by applicable law. (xi) The New Notes have been duly and validly authorized for issuance by the Company and, when executed, issued and authenticated in accordance with the terms of the Exchange Offer and the Indenture, will be valid and binding obligations of the Company, enforceable against it in accordance with their terms and entitled to the benefits of the Indenture, except as enforcement may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws and court decisions relating to or affecting the rights of creditors generally or by general principles of equity, and except as rights to indemnification and contribution may be limited by applicable law. (xii) The Subsidiary Guarantees have been duly and validly authorized by each of the Guarantors and, when executed, issued and authenticated in accordance with the terms of the Indenture and when the Subordinated Notes have been executed, issued, authenticated and delivered in accordance with the terms thereof, will be valid and binding agreements of the Guarantors, enforceable against them in accordance with their terms, except as enforcement may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws and court decisions relating to or affecting the rights of creditors generally or by general principles of equity, and except as rights to indemnification and contribution may be limited by applicable law. (xiii) No registration under the Act of the Notes is required for the sale of the Notes to the Initial Purchasers as contemplated hereby or for the Exempt Resales assuming (A) that the purchasers who buy the Notes in the Exempt Resales are Eligible Purchasers and (B) the accuracy of the Initial Purchasers' representations regarding the absence of general solicitation in connection with the sale of Notes to the Initial Purchasers and the Exempt Resales contained herein. No form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) was used by the Company, the Guarantors or any of their representatives (other than the Initial Purchasers, as to which the Company and the Guarantors make no representation or warranty) in connection with the offer and sale of any of the Notes in connection with Exempt Resales, including, but not limited to, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. No securities of the same class as the Notes have been issued and sold by the Company or any of its Subsidiaries within the six-month period immediately prior to the date hereof. 9 (xiv) The Registration Rights Agreement has been duly and validly authorized by each of the Company and the Guarantors and, when duly executed and delivered by each of the Company and the Guarantors (assuming due authorization, execution and delivery thereof by the Initial Purchasers), will be a valid and binding agreement of each of the Company and the Guarantors, enforceable against them in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws and court decisions relating to or affecting the rights of creditors generally or by general principles of equity, and except as rights to indemnification and contribution may be limited by applicable law. (xv) The New Credit Agreement (as defined in the Offering Memorandum) has been duly and validly authorized by each of the Company and its Subsidiaries party thereto and, when duly executed and delivered by each of the Company and its Subsidiaries party thereto (assuming the due authorization, execution and delivery by the agent and the lenders party thereto), will be a valid and binding agreement of each of the Company and its Subsidiaries party thereto, enforceable against them in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws and court decisions relating to or affecting the rights of creditors generally or by general principles of equity, and except as rights to indemnification and contribution may be limited by applicable law. (xvi) The Amendment and Consent Agreement (the "Amendment and Consent Agreement"), by and among the parties to the Warrant Agreement (as defined in the Offering Memorandum) and the Shareholder Agreement (as defined in the Offering Memorandum) has been duly and validly authorized, executed and delivered by each of Parent (as defined in the Offering Memorandum) and the Company and, (assuming the due authorization, execution and delivery by the other parties thereto), is a valid and binding agreement of each of Parent and the Company, enforceable against them in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws and court decisions relating to or affecting the rights of creditors generally or by general principles of equity, and except as rights to indemnification and contribution may be limited by applicable law. (xvii) The terms of Indenture, the Notes, the New Notes, the Subsidiary Guarantees, the Registration Rights Agreement and the New Credit Agreement, respectively, when executed and delivered, will conform in all material respects to the descriptions thereof in the Offering Memorandum. (xviii) None of (A) the execution, delivery or performance by the Company and the Guarantors of this Agreement and the other Operative Documents, (B) the issuance and sale of the Subordinated Notes and the Subsidiary Guarantees by the Company and the Guarantors and (C) the consummation by the Company and the Guarantors of the transactions described in the Offering Memorandum under the caption "Use of Proceeds," violates, conflicts with or constitutes a breach of any of the terms or provisions of, or a default under (or an event that with notice or the lapse of time, or both, would constitute a default), or requires consent under (other than those as to which the requisite waivers or consents have been obtained or will be obtained on or prior to the Closing Date by the Company or any of its Subsidiaries), or results in the imposition of a lien or encumbrance on any properties of the Company or any of its Subsidiaries (except as contemplated by any of the Operative Documents or the New Credit Agreement), or an acceleration of any indebtedness of the Company or any of its Subsidiaries pursuant to (assuming compliance with all applicable state securities or Blue Sky laws and assuming the accuracy of the representations and 10 warranties of the Initial Purchasers in this Agreement), (1) the charter or bylaws of the Company or any of its Subsidiaries, (2) any material obligation, agreement, covenant or condition contained in any bond, debenture, note, indenture, mortgage, deed of trust or other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of them or their property is or may be bound (except any such agreement or instrument that is terminated on or prior to the Closing Date and after giving effect to any amendment of such agreement or instrument on or prior to the Closing Date), (3) any statute, rule or regulation applicable to the Company, the Guarantors or any Subsidiary thereof or any of their assets or properties (whether owned or leased), or (4) any judgment, order or decree of any court or governmental agency or authority having jurisdiction over the Company or any of its Subsidiaries or any of their assets or properties, except for violations, conflicts, breaches or defaults with respect to clauses (C)(2) through (C)(4) of this paragraph that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. To the best knowledge of the Company and the Guarantors, there exists no condition that, with notice, the passage of time or otherwise, would constitute a default under any such agreement or instrument referred to in clause (C)(2), except for such defaults that would not reasonably be expected to have a Material Adverse Effect. No consent, approval, authorization or order of, or filing, registration, qualification, license or permit of or with any court or governmental agency, body or administrative agency having jurisdiction over the Company, any of the Guarantors or any of their respective properties or assets is required for (i) the execution, delivery and performance by the Company and the Guarantors of this Agreement and the other Operative Documents, (ii) the issuance and sale of the Subordinated Notes and the Subsidiary Guarantees by the Company and the Guarantors and the transactions contemplated hereby and thereby, or (iii) the consummation by the Company and the Guarantors of the transactions described in the Offering Memorandum under the caption "Use of Proceeds," except such as have been obtained or made or will be obtained or made on or prior to the Closing Date or (w) as may be required under state securities or Blue Sky laws or the laws of any foreign jurisdiction in connection with the offer and sale of the Subordinated Notes and the Subsidiary Guarantees, (x) as may be required by the NASD, (y) in the case of the Registration Rights Agreement and the transactions contemplated thereby, under the Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and (z) as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (xix) There is (A) no action, suit or proceeding before or by any court, arbitrator or governmental agency, body or official, domestic or foreign, having jurisdiction over the Company or any of its Subsidiaries, now pending or, to the best knowledge of the Company or any Subsidiary, threatened to which the Company or any Subsidiary thereof is or may be a party or to which the business or property of the Company or any Subsidiary thereof is or may be subject, (B) no statute, rule, regulation or order applicable to the Company or any Subsidiary or any of their respective businesses or properties that has been enacted, adopted or issued by any governmental agency or, to the knowledge of the Company, that has been proposed by any governmental body or (C) no injunction, restraining order or order by a federal or state court or foreign court of competent jurisdiction to which the Company or any Subsidiary thereof is or may be subject or to which the business, assets, or property of the Company or any Subsidiary thereof are or may be subject, that, in the case of clauses (A), (B) and (C) above, (1) would be required to be disclosed in the Preliminary Offering Memorandum and the Offering Memorandum if each of such documents were a prospectus under the Act and that is not so disclosed, or (2) would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (xx) No action has been taken and no statute, rule, regulation or order has been enacted, adopted or issued by any governmental agency that has jurisdiction over the Company or any of its Subsidiaries that prohibits the issuance of the Subordinated Notes or prohibits the use of the 11 Offering Memorandum; no injunction, restraining order or order of any nature by a federal or state court of competent jurisdiction has been issued that prohibits the issuance of the Subordinated Notes or prohibits the sale of the Subordinated Notes in any jurisdiction referred to in Section 4(e) hereof. (xxi) There is (A) no material unfair labor practice complaint pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company and the Guarantors, threatened against any of them, before the National Labor Relations Board, any state or local labor relations board or any foreign labor relations board, and no material grievance or material arbitration proceeding arising out of or under any collective bargaining agreement is pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company and the Guarantors, threatened against any of them, (B) no material strike, labor dispute, slowdown or stoppage pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company and the Guarantors, threatened against any of them and (C) to the best knowledge of the Company and the Guarantors, no union representation question existing with respect to the employees of the Company and its Subsidiaries which, in the case of clauses (A), (B) or (C), would reasonably be expected to have a Material Adverse Effect. None of the Company or any of its Subsidiaries has violated (A) any federal, state or local law or foreign law relating to discrimination in hiring, promotion or pay of employees applicable to the Company or any of its Subsidiaries, (B) any applicable wage or hour laws or (C) any provision of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules and regulations thereunder applicable to the Company or any of its Subsidiaries, which, in the case of clauses (A), (B) or (C), would reasonably be expected to have a Material Adverse Effect. (xxii) None of the Company or any of its Subsidiaries has violated any foreign, federal, state or local law or regulation relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws") which would reasonably be expected to have a Material Adverse Effect. (xxiii) There is no liability, or to the best knowledge of the Company, alleged potential liability, (including, without limitation, alleged or potential liability or investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damages, personal injuries or penalties) of the Company or any of its Subsidiaries arising out of, based on or resulting from (a) the presence or release into the environment of any Hazardous Material (as defined herein) at any location, whether or not owned by the Company or any of its Subsidiaries which would reasonably be expected to have a Material Adverse Effect or (b) any violation or alleged violation of any Environmental Law, which alleged or potential liability would be required to be disclosed in the Offering Memorandum if such document were a prospectus under the Act and that is not so disclosed. The term "Hazardous Material" means (a) any "hazardous substance" as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (b) any "hazardous waste" as defined by the Resource Conservation and Recovery Act, as amended, (c) any petroleum or petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material waste or substance regulated under or within the meaning of any other Environmental Law. (xxiv) The Company and each of its Subsidiaries has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits"), including, without limitation, under any applicable Environmental Laws, as are necessary to own, lease and operate their respective properties and to conduct their respective businesses in the manner described in the Offering Memorandum, except for those permits the absence of which would not reasonably be expected to have a Material Adverse Effect; the Company and each of its Subsidiaries has 12 fulfilled and performed all of its obligations with respect to such permits, except for such obligations the failure of which to be fulfilled or performed would not reasonably be expected to have a Material Adverse Effect, and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such permit, except for any such events that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect and, except as described in the Offering Memorandum, such permits contain no restrictions that are or will be materially burdensome to the Company or any of its Subsidiaries. (xxv) Each of the Company and its Subsidiaries has, (A) good and marketable title to all of the properties and assets described in the Offering Memorandum as owned by it, free and clear of all liens, charges, encumbrances and restrictions (except Permitted Liens (as defined in the Offering Memorandum under "Description of Notes") and liens under agreements that will be terminated on the Closing Date), (B) peaceful and undisturbed possession under all material leases to which any of them is a party as lessee and (C) all material licenses, certificates, permits, authorizations, approvals, franchises and other rights from, and has made all material declarations and filings with, all federal, state and local authorities, all self-regulatory authorities and all courts and other tribunals (each an "Authorization") necessary to engage in the business conducted by it in the manner described in the Offering Memorandum, except, in the case of clauses (A), (B) and (C), for such exceptions which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. No proceeding has been instituted by any governmental body or agency to limit, suspend or revoke any such Authorization, except such proceedings which, individually, or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. All such Authorizations are and, after giving effect to the Refinancing Transactions, will be valid and in full force and effect and the Company and its Subsidiaries are in compliance in all material respects with the terms and conditions of all such Authorizations and with the rules and regulations of the regulatory authorities having jurisdiction with respect thereto, except for such noncompliances which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. All material leases to which the Company or any of its Subsidiaries is a party are valid and binding and no default by the Company or any of its Subsidiaries has occurred and is continuing thereunder and, to the best knowledge of the Company and the Guarantors, no defaults by the other parties thereto are existing under any such lease that adversely affect the Company's or any Guarantor's rights under such lease in any material respect. (xxvi) The material properties of the Company and its Subsidiaries are in good repair (reasonable wear and tear excepted) and are suitable for their uses, with such exceptions as would not reasonably be expected to have a Material Adverse Effect. (xxvii) The Company and each of its Subsidiaries owns, possesses or has the right to employ all patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, software, systems or procedures), trademarks, service marks and trade names, inventions, computer programs, technical data and information (collectively, the "Intellectual Property"), the absence of which would reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing. The use of the Company's material Intellectual Property in connection with the business and operations of the Company and its Subsidiaries as it is now conducted does not infringe on the rights of any person. (xxviii) All tax returns required to be filed by the Company and except where the failure to file such tax returns 13 would not reasonably be expected to have a Material Adverse Effect. All taxes, including withholding taxes, penalties and interest, assessments, fees and other charges due or claimed to be due from such entities or that are due and payable have been paid, other than those for which the failure to pay would not reasonably be expected to have an Material Adverse Effect or that are being contested in good faith and for which adequate reserves have been provided in accordance with generally accepted accounting principles or those currently payable without penalty or interest. To the knowledge of the Company and the Guarantors, there are no material proposed additional tax assessments against the Company, any of its Subsidiaries or the assets or property of the Company or any of its Subsidiaries. (xxix) None of the Company or any of its Subsidiaries is an "investment company" or a "promoter" or "principal" for an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"). (xxx) There are no holders of securities of the Company or any of its Subsidiaries who, by reason of the execution by the Company and the Guarantors of this Agreement or any other Operative Document or the consummation of the transactions contemplated hereby and thereby, have the right to request or demand that the Company or any of its Subsidiaries register under the Act securities held by them. (xxxi) Each of the Company and its Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (a) transactions are executed in accordance with management's general or specific authorizations; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (c) access to assets is permitted only in accordance with management's general or specific authorization; and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect thereto. (xxxii) Each of the Company and its Subsidiaries maintains insurance (including self-insurance) covering its properties, operations, personnel and businesses and, in the reasonable judgment of the Company, such insurance will insure against such losses and risks as are adequate in accordance with customary industry practice to protect the Company and its Subsidiaries and their respective businesses. None of the Company or any of its Subsidiaries has received notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance. All material insurance policies will be outstanding and in full force and effect as of the Closing Date. (xxxiii) None of the Company or any Guarantor has (a) taken, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of any security of the Company or any Guarantor to facilitate the sale or resale of the Notes or (b) since the date of the Preliminary Offering Memorandum (1) sold, bid for, purchased or paid any person any compensation for soliciting purchases of the Notes or (2) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company or any Guarantor, except as disclosed in the Offering Memorandum. (xxxiv) The execution and delivery of this Agreement, the other Operative Documents and the sale of the Notes to be purchased by the Eligible Purchasers will not involve any non-exempt prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986 on the part of the Company or any of its Subsidiaries. The representation made by the Company and the Guarantors in the preceding sentence is made in reliance upon and 14 subject to the accuracy of, and compliance with, the representations and covenants made or deemed made by the Eligible Purchasers as set forth in the Offering Memorandum under the caption "Notice to Investors." (xxxv) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its date, and each amendment or supplement thereto, as of its date, contains the information specified in, and meets the requirements of, Rule 144A(d)(4) under the Act. (xxxvi) Subsequent to the respective dates as of which information is given in the Offering Memorandum and up to the Closing Date, except as disclosed in the Offering Memorandum, (a) none of the Company or any of its Subsidiaries has incurred any liabilities or obligations, direct or contingent, which are material, individually or in the aggregate, to the Company and its Subsidiaries taken as a whole, nor entered into any transaction not in the ordinary course of business, (b) there has not been, singly or in the aggregate, any change or development which would reasonably be expected have a Material Adverse Effect and (c) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (xxxvii) None of the execution, delivery and performance of this Agreement, the issuance and sale of the Subordinated Notes, the application of the proceeds from the issuance and sale of the Subordinated Notes and the consummation of the Refinancing Transactions as set forth in the Offering Memorandum, will violate Regulations G, T, U or X promulgated by the Board of Governors of the Federal Reserve System. (xxxviii) The Company has no direct or indirect Subsidiaries other than the Guarantors. (xxxix) To the best knowledge of the Company and the Guarantors, the accountants who have certified or will certify the financial statements included or to be included as part of the Offering Memorandum are independent accountants. The historical financial statements of the Company and its Subsidiaries comply as to form in all material respects with the accounting requirements applicable to registration statements on Form S-1 under the Act and present fairly in all material respects the financial position and results of operations of the Company and its Subsidiaries at the dates and for the periods indicated. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods presented. The pro forma financial statements included in the Offering Memorandum have been prepared on a basis consistent with such historical statements, except for the pro forma adjustments specified therein, and give effect to assumptions made on a reasonable basis and present fairly in all material respects the historical and proposed transactions contemplated by this Agreement and the other Operative Documents; and such pro forma financial statements comply as to form in all material respects with the accounting requirements applicable to registration statements on Form S-1 under the Act. In the opinion of the Company and the Guarantors, the assumptions used in the preparation of the pro forma financial statements are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. The other financial and statistical information and data included in the Offering Memorandum, historical and pro forma, are accurately presented in all material respects and were prepared on a basis consistent with the financial statements, historical and pro forma, included in the Offering Memorandum and the books and records of the Company and the Guarantors. (xl) The Company and the Guarantors do not intend to, nor do they believe that they will, incur debts beyond their ability to pay such debts as they mature. Immediately after the consummation of the transactions contemplated by this Agreement, the fair value and the present 15 fair saleable value of the assets of the Company on a consolidated basis will exceed the amount that will be required to be paid on or in respect of the existing debts and other liabilities (including contingent liabilities) of the Company on a consolidated basis as they become absolute and matured. Immediately after the consummation of the transactions contemplated by this Agreement, the assets of the Company on a consolidated basis will not constitute unreasonably small capital to carry out its businesses as it is proposed to be conducted, including the capital needs of the Company on a consolidated basis, taking into account the projected capital requirements and capital availability. (xli) Except pursuant to this Agreement, there are no contracts, agreements or understandings between the Company and any other person or between any Guarantor and any other person that would give rise to a valid claim against the Company, any Guarantor or the Initial Purchasers for a brokerage commission, finder's fee or like payment in connection with the issuance, purchase and sale of the Subordinated Notes. (xlii) The Company and each of its Subsidiaries have complied with all of the provisions of Florida H.B. 1771, codified as Section 517.075 of the Florida statutes, and all regulations promulgated thereunder relating to issuers doing business with the Government of Cuba or with any person or any affiliate located in Cuba. (xliii) Each certificate signed by any officer of the Company or any Guarantor and delivered to the Initial Purchasers or counsel for the Initial Purchasers shall be deemed to be a representation and warranty by the Company or the Guarantor, as the case may be, to the Initial Purchasers as to the matters covered thereby. (xliv) Prior to the Exchange Offer or the effectiveness of the Shelf Registration Statement, the Indenture is not required to be qualified under the Trust Indenture Act. (xlv) None of the Company, the Guarantors nor any of their respective affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation) has engaged or will engage in any directed selling efforts within the meaning of Regulation S with respect to the Notes or the Subsidiary Guarantees. The Company and the Guarantors acknowledge that each of the Initial Purchasers and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Section 8 hereof, counsel for the Company and the Guarantors and counsel for the Initial Purchasers, will rely upon the accuracy and truth of the foregoing representations and hereby consent to such reliance. (b) Each of the Initial Purchasers individually represents, warrants and covenants to the Company and the Guarantors and agrees that: (i) Such Initial Purchaser is a QIB, with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the Notes. (ii) Such Initial Purchaser (A) is not acquiring the Notes with a view to any distribution thereof that would violate the Act or the securities laws of any state of the United States or any other applicable jurisdiction and (B) will be reoffering and reselling the Notes only to (x) QIBs in reliance on the exemption from the registration requirements of the Act provided by Rule 144A, (y) not more than ten Accredited Institutions that execute and deliver a letter containing certain representations and agreements in the form attached as Annex A to the Offering Memorandum and 16 (z) persons other than U.S. persons (as such term is defined in Regulation S) in offshore transactions in reliance upon Regulation S under the Act. (iii) No form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) nor any conduct constituting a public offering within the meaning of Section 4(2) of the Act has been or will be used by the Initial Purchaser or any of its representatives in connection with the offer and sale of any of the Notes, including, but not limited to, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. (iv) Such Initial Purchaser agrees that, in connection with the Exempt Resales, it will solicit offers to buy the Notes only from, and will offer to sell the Notes only to, Eligible Purchasers. The Initial Purchaser further agrees that it will offer to sell the Notes only to, and will solicit offers to buy the Notes only from, (1)(A) QIBs who, in purchasing the Notes will be deemed to have represented and agreed that (x) they are purchasing the Notes for their own accounts or accounts with respect to which they exercise sole investment discretion and that they or such accounts are QIBs and (y) they acknowledge that the seller of such Notes may be relying on the exemption from the provisions of Section 5 of the Act provided by Rule 144A thereunder and that such Notes will not have been registered under the Act, (B) Accredited Institutions who make the representations contained in, and execute and return to the Initial Purchaser, a certificate in the form of Annex A attached to the Offering Memorandum and (C) Regulation S purchasers who, in purchasing the Notes will be deemed to have represented and agreed that their purchase of Notes pursuant to Regulation S is not part of a plan or scheme to evade the registration provisions of the Act and (2) Eligible Purchasers that agree that (x) Notes purchased by them may be resold, pledged or otherwise transferred only (I) to a person whom the seller reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A under the Act, (II) in a transaction meeting the requirements of Rule 144 under the Act, (III) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 of the Act, (IV) in accordance with another exemption from the registration requirements of the Act (and based upon an opinion of counsel acceptable to the Company), (V) to the Company or (VI) pursuant to an effective registration statement and, in each case, in accordance with the applicable securities laws of any state of the United States or any other applicable jurisdiction and (y) they will deliver to each person to whom such Notes or an interest therein is transferred a notice substantially to the effect of the foregoing. (v) None of such Initial Purchaser nor any of its affiliates or any person acting on its or their behalf has engaged or will engage in any directed selling efforts within the meaning of Regulation S with respect to the Notes or the Subsidiary Guarantees. (vi) The Notes offered and sold by such Initial Purchaser pursuant hereto in reliance on Regulation S have been and will be offered and sold to persons who are not U.S. persons only in offshore transactions (as such terms are defined in Regulation S). (vii) The sale of the Notes offered and sold by such Initial Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or scheme to evade the registration provisions of the Act. (viii) Such Initial Purchaser further represents and agrees that (1) it has not offered or sold and will not offer or sell any Notes to persons in the United Kingdom prior to the expiry of the period of six months from the issue date of the Notes, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) 17 for the purposes of their business or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of the Notes to a person who is of a kind described in Article 11(3) of the Financial Services Act of 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the document may otherwise lawfully be issued or passed on. Each of the Initial Purchasers understands that the Company and the Guarantors and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Section 8 hereof, counsel for the Company and counsel for the Initial Purchasers will rely upon the accuracy and truth of the foregoing representations and hereby consents to such reliance. 6. Indemnification. (a) The Company and the Guarantors, jointly and severally, agree to indemnify and hold harmless (i) each of the Initial Purchasers, (ii) each person, if any, who controls either of the Initial Purchasers within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (iii) the respective officers, directors, partners, employees, representatives and agents of any of the Initial Purchasers or any controlling person to the fullest extent lawful, from and against any and all losses, liabilities, claims, damages and expenses whatsoever (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any investigation or litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum, or in any supplement thereto or amendment thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that neither the Company nor any Guarantor will be liable in any such case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense (i) arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Initial Purchasers expressly for use therein or (ii) is caused by an untrue statement or omission or alleged untrue statement or omission that was contained or made in the Preliminary Offering Memorandum and (1) any such loss, liability, claim, damage or expense suffered by any indemnified party resulted from an action, claim, or suit by any person who purchased Notes from the Initial Purchasers in the Offering, (2) the Initial Purchasers failed to deliver or provide a copy of the Offering Memorandum to such person at or prior to the confirmation of the sale of such Notes, (3) the Company shall have previously furnished copies of the Offering Memorandum to the Initial Purchasers and (4) the Offering Memorandum (as so amended and supplemented) would have cured the defect giving rise to such loss, liability, claim, damage or expense. This indemnity agreement will be in addition to any liability which the Company and the Guarantors may otherwise have, including under this Agreement. (b) Each of the Initial Purchasers, severally and not jointly, agrees to indemnify and hold harmless (i) each of the Company and the Guarantors, (ii) each person, if any, who controls the 18 Company or any Guarantor within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (iii) their respective officers, directors, partners, members, employees, representatives and agents or any controlling person to the fullest extent lawful from and against any losses, liabilities, claims, damages and expenses whatsoever (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any investigation or litigation, commenced or threatened, or any claim whatsoever and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Initial Purchasers expressly for use therein; provided, however, that in no case shall the Initial Purchasers be liable or responsible for any amount in excess of the discounts and commissions received by the Initial Purchasers, as set forth on the cover page of the Offering Memorandum. This indemnity will be in addition to any liability which the Initial Purchasers may otherwise have, including under this Agreement. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this Section 6 or otherwise except to the extent that it has been prejudiced in any material respect by such failure). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have been advised in writing by counsel that there may be legal defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying party or parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses of counsel shall be borne by the indemnifying parties; provided, however, that the indemnifying party under subsection (a) or (b) above shall only be liable for the legal expenses of one counsel (in addition to any local counsel) for all indemnified parties in each jurisdiction in which any claim or action is brought; provided, however, that the indemnifying party shall be liable for separate counsel for any indemnified party in a jurisdiction, if counsel to the indemnified party or parties shall have reasonably concluded in writing that there may be defenses available to such indemnified party that are different from or additional to those 19 available to one or more of the other indemnified parties and that separate counsel for such indemnified party is prudent under the circumstances. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its prior written consent; provided, however, that such consent was not unreasonably withheld. 7. Contribution. In order to provide for contribution in circumstances in which the indemnification provided for in Section 6 is for any reason held to be unavailable to an indemnified party or is insufficient to hold harmless a party indemnified thereunder, the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company or the Guarantors, any contribution received by the Company or the Guarantors from persons, other than the Initial Purchasers, who may also be liable for contribution, including persons who control the Company or the Guarantors within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) to which the Company, the Guarantors and one or both of the Initial Purchasers may be subject, in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on one hand, and the Initial Purchasers, on the other hand, from the offering of the Notes or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having received notice as provided in Section 6, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Guarantors, on one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors, on one hand, and the Initial Purchasers, on the other hand, shall be deemed to be in the same proportion as (i) the total proceeds from the offering of Notes (net of discounts but before deducting expenses) received by the Company and the Guarantors and (ii) the discounts received by the Initial Purchasers, respectively, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault of the Company and the Guarantors, on one hand, and of the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Guarantors or the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantors and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to above. Notwithstanding the provisions of this Section 7, (i) in no case shall either of the Initial Purchasers be required to contribute any amount in excess of the amount by which the discount applicable to the Notes purchased by such Initial Purchaser pursuant to this Agreement exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, (A) each person, if any, who controls either of the Initial Purchasers within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the respective officers, directors, partners, employees, representatives and agents of any of the Initial Purchasers or any controlling person shall have the same rights to contribution as such Initial Purchaser, and each person, if any, who controls the Company or any Guarantor within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as the Company or such Guarantor, subject in each case to clauses (i) and (ii) of this Section 7. Any party entitled to contribution will, promptly after receipt 20 of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 7, notify such party or parties from whom contribution may be sought, but the failure to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 7 or otherwise (except to the extent it has been prejudiced in any material respect by such failure). No party shall be liable for contribution with respect to any action or claim settled without its prior written consent; provided, however, that such written consent was not unreasonably withheld. 8. Conditions of Initial Purchasers' Obligations. The several obligations of the Initial Purchasers to purchase and pay for the Notes, as provided herein, shall be subject to the satisfaction or waivers of the following conditions: (a) All of the representations and warranties of the Company and the Guarantors contained in this Agreement shall be true and correct in all material respects on the date hereof and on the Closing Date with the same force and effect as if made on and as of the date hereof and the Closing Date, respectively. The Company and the Guarantors shall have performed or complied in all material respects with all of the agreements herein contained and required to be performed or complied with by it at or prior to the Closing Date. (b) The Offering Memorandum shall have been printed and copies made available to the Initial Purchasers not later than 12:00 p.m., New York City time, on the day following the date of this Agreement or at such later date and time as to which the Initial Purchasers may agree, and no stop order suspending the qualification or exemption from qualification of the Notes in any jurisdiction referred to in Section 4(e) shall have been issued and no proceeding for that purpose shall have been commenced or shall be pending or, to the best knowledge of the Company, threatened. (c) As of the Closing Date, no action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency which would, as of the Closing Date, prohibit the issuance of the Notes; no action, suit or proceeding shall have been commenced and be pending against or affecting or, to the best knowledge of the Company and the Guarantors, threatened against, the Company or any of the Guarantors before any court or arbitrator or any governmental body, agency or official that, if adversely determined, would reasonably be expected to have a Material Adverse Effect; and no stop order shall have been issued preventing the use of the Offering Memorandum, or any amendment or supplement thereto, or which would reasonably be expected to have a Material Adverse Effect. (d) Since the dates as of which information is given in the Offering Memorandum and except as disclosed in the Offering Memorandum, (i) there shall not have been any material adverse change, or any development that is reasonably likely to result in a material adverse change, in the capital stock or the long-term debt, or material increase in the short-term debt, of the Company and the Guarantors from that set forth in the Offering Memorandum, (ii) no dividend or distribution of any kind shall have been declared, paid or made by the Company on any class of its capital stock, and (iii) neither the Company nor any of its Subsidiaries shall have incurred any liabilities or obligations, direct or contingent, that are material, individually or in the aggregate, to the Company and its Subsidiaries, taken as a whole, and that are required to be disclosed on a balance sheet or notes thereto in accordance with generally accepted accounting principles and are not disclosed on the latest balance sheet or notes thereto included in the Offering Memorandum. Since the date hereof and since the dates as of which information is given in the Offering Memorandum, there shall not have occurred any change in the properties, business, 21 results of operations, condition (financial or otherwise), affairs or prospects of the Company or the Guarantors which has had or would reasonably be expected to have a Material Adverse Effect. (e) The Initial Purchasers shall have received a certificate, dated the Closing Date, signed on behalf of the Company and the Guarantors by the Chief Executive Officer, President or any Vice President and the Controller or other principal financial or accounting officer of the Company, in form and substance reasonably satisfactory to the Initial Purchasers, confirming, as of the Closing Date, (i) the matters set forth in paragraphs (a), (b), (c) and (d) of this Section 8, (ii) each signer of such certificate has examined the Offering Memorandum and the Offering Memorandum does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and (iii) that, as of the Closing Date, the obligations of the Company and the Guarantors to be performed hereunder on or prior thereto have been duly performed in all material respects. (f) The Initial Purchasers shall have received on the Closing Date (i) an opinion, dated the Closing Date, in form and substance satisfactory to the Initial Purchasers and counsel to the Initial Purchasers, of Winston & Strawn, counsel for the Company and the Guarantors, to the effect set forth in Exhibit B hereto (with customary exceptions and qualifications) and (ii) copies of each opinion of counsel to the Company or the Guarantors, if any, delivered in connection with the New Credit Agreement and the Amendment and Consent Agreement, which opinions shall allow the Initial Purchasers to rely thereon. (g) The Initial Purchasers shall have received an opinion, dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, of Latham & Watkins, counsel to the Initial Purchasers, covering such matters as are customarily covered in such opinions. (h) At the time this Agreement is executed and at the Closing Date, the Initial Purchasers shall have received from Ernst & Young LLP, independent public accountants for the Company, dated as of the date of this Agreement and as of the Closing Date, customary comfort letters addressed to the Initial Purchasers and in form and substance satisfactory to the Initial Purchasers and counsel to the Initial Purchasers with respect to the financial statements for the fiscal years ended December 31, 1994, December 31, 1995 and December 31, 1996 and certain other financial information of the Company contained in the Offering Memorandum. (i) Latham & Watkins shall have been furnished with such documents, in addition to those set forth above, as they may reasonably require for the purpose of enabling them to review or pass upon the matters referred to in this Section 8 and in order to evidence the accuracy, completeness or satisfaction in all material respects of any of the representations, warranties or conditions herein contained. (j) Prior to the Closing Date, the Company and the Guarantors shall have furnished to the Initial Purchasers such further information, certificates and documents as the Initial Purchasers may reasonably request. (k) The Company, the Guarantors and the Trustee shall have entered into the Indenture and the Subsidiary Guarantees, as the case may be, and the Initial Purchasers shall have received counterparts, conformed as executed, thereof. (l) The Company and the Guarantors shall have entered into the Registration Rights Agreement and the Initial Purchasers shall have received counterparts, conformed as executed, thereof. 22 (m) The Company and its Subsidiaries party thereto shall have entered into the New Credit Agreement, in the form attached hereto as Exhibit C (with such changes as the Initial Purchasers shall have agreed to in their reasonable discretion), and the Initial Purchasers shall have received counterparts, conformed as executed, thereof and of all other documents and agreements entered into in connection therewith. (n) Each condition to the initial borrowing under the New Credit Agreement (other than the issuance and sale of the Subordinated Notes pursuant hereto) shall have been satisfied or waived. There shall exist at and as of the Closing Date (after giving effect to the transactions contemplated by this Agreement) no conditions that would constitute a default (or an event that with notice or the lapse of time, or both, would constitute a default) under the New Credit Agreement. At or prior to the Closing Date, the closing under the New Credit Agreement shall have been consummated on terms that conform in all material respects to the description thereof in the Offering Memorandum and the Initial Purchasers shall have received evidence satisfactory to the Initial Purchasers of the consummation thereof. (o) The Amendment and Consent Agreement, in form and substance reasonably acceptable to the Initial Purchasers, shall have been executed by all the parties thereto and shall have become effective, and the Initial Purchasers shall have received counterparts, conformed as executed, thereof and of all other documents and agreements entered into in connection therewith. (p) Mentmore (as defined in the Offering Memorandum) and the Company shall have entered into the Management Agreement (as defined in the Offering Memorandum), in the form attached hereto as Exhibit D (with such changes as the Initial Purchasers shall have agreed to in their reasonable discretion), and the Initial Purchasers shall have received counterparts, conformed as executed, thereof and of all other documents and agreements entered into in connection therewith. (q) Parent, the Company and the other parties thereto shall have entered into the First Amendment to Warrant Purchase Agreement, in the form attached hereto as Exhibit E (with such changes as the Initial Purchasers shall have agreed to in their reasonable discretion), and the Initial Purchasers shall have received counterparts, conformed as executed, thereof and of all other documents and agreements entered into in connection therewith. (r) Parent, the Company and the other parties thereto shall have entered into the First Amendment to Shareholder Agreement, in the form attached hereto as Exhibit F (with such changes as the Initial Purchasers shall have agreed to in their reasonable discretion), and the Initial Purchasers shall have received counterparts, conformed as executed, thereof and of all other documents and agreements entered into in connection therewith. All opinions, certificates, letters and other documents required by this Section 8 to be delivered by the Company and the Guarantors will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to the Initial Purchasers. The Company and the Guarantors will furnish the Initial Purchasers with such conformed copies of such opinions, certificates, letters and other documents as they shall reasonably request. 9. Initial Purchasers' Information. The Company and the Guarantors acknowledge that the statements with respect to the offering of the Notes set forth in the last paragraph of the cover page, the first sentence of the third paragraph, the sixth sentence of the fourth paragraph and the fifth paragraph under the caption "Plan of Distribution" in such Offering Memorandum constitute the only information furnished in writing by the Initial Purchasers expressly for use in the Offering Memorandum. 23 10. Survival of Representations and Agreements. All representations and warranties, covenants and agreements of the Initial Purchasers, the Company and the Guarantors contained in this Agreement, including the agreements contained in Sections 4(f) and 11(d), the indemnity agreements contained in Section 6 and the contribution agreements contained in Section 7, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Initial Purchasers, any controlling person thereof or by or on behalf of the Company or any Guarantor or any controlling person thereof, and shall survive delivery of and payment for the Notes to and by the Initial Purchasers. The representations contained in Section 5 and the agreements contained in Sections 4(f), 6, 7 and 11(d) shall survive the termination of this Agreement, including any termination pursuant to Section 11. 11. Effective Date of Agreement; Termination. (a) This Agreement shall become effective upon execution and delivery of a counterpart hereof by each of the parties hereto. (b) The Initial Purchasers shall have the right to terminate this Agreement at any time prior to the Closing Date by notice to the Company from the Initial Purchasers, without liability (other than with respect to Sections 6 and 7) on the Initial Purchasers' part to the Company or any Guarantor if, on or prior to such date, (i) the Company or any Guarantor shall have failed, refused or been unable to perform in any material respect any agreement on its part to be performed hereunder at or prior thereto, (ii) any other condition to the obligations of the Initial Purchasers hereunder as provided in Section 8 is not fulfilled when and as required in any material respect (other than solely as a result of nonfulfillment of the condition set forth in Section 8(g)), (iii) since the date hereof, in the reasonable judgment of the Initial Purchasers, there shall have occurred an event or development that has or would be reasonably expected to have a Material Adverse Effect, other than as set forth in the Offering Memorandum, or (iv)(A) any domestic or international event or act or occurrence has materially disrupted, or in the reasonable opinion of the Initial Purchasers will in the immediate future materially disrupt, the market for the Company's securities or for securities in general; or (B) trading in securities generally on the New York or American Stock Exchanges shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been established, or maximum ranges for prices for securities shall have been required, on such exchange, or by such exchange or other regulatory body or governmental authority having jurisdiction; or (C) a banking moratorium shall have been declared by federal or state authorities, or a moratorium in foreign exchange trading by major international banks or persons shall have been declared; or (D) there is an outbreak or escalation of armed hostilities involving the United States on or after the date hereof, or if there has been a declaration by the United States of a national emergency or war, the effect of which shall be, in the Initial Purchasers' reasonable judgment, to make it inadvisable or impracticable to proceed with the offering or delivery of the Notes on the terms and in the manner contemplated in the Offering Memorandum; or (E) there shall have been such a material adverse change in general economic, political or financial conditions or if the effect of international conditions on the financial markets in the United States shall be such as, in the Initial Purchasers' reasonable judgment, makes it inadvisable or impracticable to proceed with the delivery of the Notes as contemplated hereby. (c) Any notice of termination pursuant to this Section 11 shall be by telephone, telex, telephonic facsimile, or telegraph, confirmed in writing by letter. (d) If this Agreement shall be terminated pursuant to any of the provisions hereof (otherwise than pursuant to any of clauses (iii) or (iv) of Section 11(b), in which case each party will be responsible for its own expenses), or if the sale of the Notes provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth herein is 24 not satisfied (other than solely as a result of the nonfulfillment of the condition set forth in Section 8(g)) or because of any refusal, inability or failure on the part of the Company or any Guarantor to perform any agreement herein or comply with any provision hereof, the Company and the Guarantors will reimburse the Initial Purchasers for all out-of-pocket expenses (including the reasonable fees and expenses of Initial Purchasers' counsel), incurred by the Initial Purchasers in connection herewith. 12. Notice. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing and, if sent to the Initial Purchasers shall be mailed, delivered, or telexed, telegraphed or telecopied and confirmed in writing to Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, Attention: High Yield Capital Markets, telecopy number: (212) 272-2725, with a copy to Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022, Attention: Roger H. Kimmel, Esq., telecopy number (212) 751-4864; and if sent to the Company or any Guarantor, shall be mailed, delivered or telexed, telegraphed or telecopied and confirmed in writing to Precise Technology, Inc., 501 Mosside Boulevard, North Versailles, Pennsylvania 15137, Attention: Secretary, telecopy number: (412) 823-4110, with copies to Mentmore Holdings Corporation, 1430 Broadway, 13th Floor, New York, New York, 10018-3308, Attention: William L. Remley, telecopy number (212) 391- 1393 and Winston & Strawn, 200 Park Avenue, New York, New York 10166, Attention: Robert W. Ericson, Esq., telecopy number (212) 294-4700; provided, however, that any notice pursuant to Section 7 shall be mailed, delivered or telexed, telegraphed or telecopied and confirmed in writing. 13. Parties. This Agreement shall be binding upon the Initial Purchasers, the Company, and the Guarantors and their respective successors and assigns. This Agreement shall inure solely to the benefit of the Initial Purchasers, the Company and the Guarantors and the controlling persons and agents referred to in Sections 6 and 7, and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. The term "successors and assigns" shall not include a purchaser, in its capacity as such, of Subordinated Notes from the Initial Purchasers. 14. Construction. This Agreement shall be construed in accordance with the internal laws of the State of New York. TIME IS OF THE ESSENCE IN THIS AGREEMENT. 15. Captions. The captions included in this Agreement are included solely for convenience of reference and are not to be considered a part of this Agreement. 16. Counterparts. This Agreement may be executed in various counterparts which together shall constitute one and the same instrument. [Signature page to follow] 25 If the foregoing correctly sets forth the understanding among the Initial Purchasers, the Company and the Guarantors please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us. Very truly yours, PRECISE TECHNOLOGY, INC. By: /s/ William L. Remley ---------------------------------------- Name: Title: PRECISE TMP, INC. By: /s/ William L. Remley ---------------------------------------- Name: Title: MASSIE TOOL, MOLD & DIE, INC. By: /s/ William L. Remley ---------------------------------------- Name: Title: PRECISE POLESTAR, INC. By: /s/ William L. Remley ---------------------------------------- Name: Title: PRECISE TECHNOLOGY OF DELAWARE INC. By: /s/ William L. Remley ---------------------------------------- Name: Title: PRECISE TECHNOLOGY OF ILLINOIS INC. By: /s/ William L. Remley ---------------------------------------- Name: Title: BEAR, STEARNS & CO. INC. By: /s/ J. Andrew Bugas ---------------------------------- Name: J. Andrew Bugas Title: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Gregory Alan Margolies ---------------------------------- Name: Gregory Alan Margolies Title: Authorized Signatory EX-10.1 17 CREDIT AGREEMENT Execution Copy -------------- $30,000,000 CREDIT AGREEMENT Dated as of June 13, 1997 Among PRECISE HOLDING CORPORATION, as Guarantor, ------------- PRECISE TECHNOLOGY, INC., as Borrower, ------------ CERTAIN SUBSIDIARIES OF PRECISE TECHNOLOGY, INC., as Subsidiary Guarantors, ------------------------- and FLEET NATIONAL BANK, as Issuing Bank, ---------------- and FLEET NATIONAL BANK, as Lender and as Agent ---------------------- T A B L E O F C O N T E N T S Section Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01. Certain Defined Terms................................................. 1 1.02. Computation of Time Periods........................................... 25 1.03. Accounting Terms...................................................... 25 1.04. Construction.......................................................... 26 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT 2.01. The Advances.......................................................... 26 2.02. Making the Advances................................................... 27 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit.... 28 2.04. Repayment of Advances................................................. 29 2.05. Termination or Reduction of the Commitments........................... 31 2.06. Prepayments........................................................... 31 2.07. Interest.............................................................. 33 2.08. Fees.................................................................. 34 2.09. Conversion of Revolving Credit Advances............................... 35 2.10. Increased Costs, Etc.................................................. 35 2.11. Payments and Computations............................................. 37 2.12. Taxes................................................................. 38 2.13. Sharing of Payments, Etc.............................................. 40 2.14. Use of Proceeds....................................................... 41 2.15. Source of Funds....................................................... 41 ARTICLE III CONDITIONS OF LENDING 3.01. Conditions Precedent to Initial Extension of Credit................... 42 3.02. Conditions Precedent to Each Borrowing and Issuance................... 50 3.03. Certain Requirements with respect to Permitted Acquisitions........... 50 3.04. Determinations Under Section 3.01..................................... 51 ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.01. Representations and Warranties........................................ 51 i Section Page ARTICLE V COVENANTS 5.01. Affirmative Covenants................................................. 62 5.02. Negative Covenants.................................................... 67 5.03. Reporting Requirements................................................ 78 5.04. Financial Covenants................................................... 82 ARTICLE VI EVENTS OF DEFAULT 6.01. Events of Default..................................................... 85 6.02. Actions in Respect of the Letters of Credit upon Default.............. 88 ARTICLE VII THE AGENT 7.01. Authorization and Action.............................................. 88 7.02. Agent's Reliance, Etc................................................. 89 7.03. Fleet and Affiliates.................................................. 89 7.04. Lender Credit Decision................................................ 89 7.05. Indemnification....................................................... 90 7.06. Successor Agents...................................................... 91 ARTICLE VIII MISCELLANEOUS 8.01. Amendments, Etc....................................................... 91 8.02. Notices, Etc.......................................................... 92 8.03. No Waiver; Remedies................................................... 93 8.04. Costs and Expenses.................................................... 93 8.05. Right of Set-off...................................................... 94 8.06. Binding Effect........................................................ 95 8.07. Assignments and Participations........................................ 95 8.08. Execution in Counterparts............................................. 98 8.09. No Liability of the Issuing Bank...................................... 98 8.10. Confidentiality....................................................... 99 8.11. Jurisdiction, Etc..................................................... 99 ii SCHEDULES Schedule I - Commitments and Applicable Lending Offices Schedule II - Existing Accounts Schedule 4.01(a) - Share Ownership Schedule 4.01(b) - Subsidiaries Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and Filings Schedule 4.01(l) - Plans and Multiemployer Plans Schedule 4.01(y) - Open Years Schedule 4.01(cc) - Existing Debt Schedule 4.01(dd) - Owned Real Property Schedule 4.01(ee) - Leased Real Property Schedule 4.01(ff) - Investments Schedule 4.01(gg) - Intellectual Property Schedule 4.01(ii) - Labor Matters Schedule 5.02(a)(iii) - Existing Liens iii EXHIBITS Exhibit A - Form of Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Assignment and Acceptance Exhibit D-1 - Form of Pledge and Security Agreement Exhibit D-2 - Form of Parent Pledge and Security Agreement Exhibit E - Form of Intellectual Property Security Agreement Exhibit F-1 - Form of Parent Guaranty Exhibit F-2 - Form of Subsidiary Guaranty Exhibit G - Form of Opinion of Borrower's Counsel Exhibit H - Form of Senior Subordinated Notes Indenture Exhibit I - Form of Senior Subordinated Notes Guaranty Exhibit J - Form of Registration Rights Agreement iv CREDIT AGREEMENT CREDIT AGREEMENT dated as of June 13, 1997 among PRECISE HOLDING CORPORATION, a Delaware corporation (together with its successors and assigns, "Parent"), PRECISE TECHNOLOGY, INC., a Delaware corporation (together with its successors and assigns, the "Borrower"), each Subsidiary Guarantor (together with each of their respective successors and assigns, collectively, the "Subsidiary Guarantors"), the banks, financial institutions and other institutional lenders listed on the signature pages hereof and each Eligible Assignee that shall become a party hereto pursuant to Section 8.07 (the "Lenders") and Fleet National Bank, as agent (together with any successor appointed pursuant to Article VII, the "Agent") for the Lenders hereunder and as Issuing Bank. PRELIMINARY STATEMENTS: The Borrower has requested that the Lenders lend to the Borrower up to $30,000,000 in order to (i) effect the Refinancing Transactions, (ii) furnish certain working capital, (iii) fund the Permitted Acquisitions and certain general corporate requirements of the Borrower and its Subsidiaries and (iv) pay transaction fees and expenses in connection with the transactions contemplated hereby. The Lenders have indicated their willingness to agree to lend such amounts on the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Advance" means a Revolving Credit Advance or a Letter of Credit Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Agent" has the meaning specified in the recital of parties to this Agreement. "Agent's Account" means the account of the Agent maintained by the Agent at Fleet National Bank, ABA No. 011-000-138, for further credit to Account No. 151035103156 or such other account maintained by the Agent and designated by the Agent in a written notice to the Lenders and the Borrower. "Agreement" shall mean this Credit Agreement, as supplemented, amended, restated or otherwise modified from time to time. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "Applicable Margin" means, in the case of (x) Base Rate Advances, 1.50% and (y) Eurodollar Rate Advances, 2.50%. "Appropriate Lender" means, at any time, with respect to (a) the Revolving Credit Facility, all Lenders (other than the Issuing Bank) and (b) the Letter of Credit Facility, (i) the Issuing Bank and (ii) if the other Lenders have made Letter of Credit Advances pursuant to Section 2.03(c) that are outstanding at such time, each such other Lender. "Assigned Agreements" means all Assigned Agreements referred to in Section 1(e) of the Security Agreement. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in accordance with Section 8.07 and in substantially the form of Exhibit C hereto. "Available Amount" of any Letter of Credit means, at any time, the maximum amount available to be drawn and unreimbursed under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing). "Bank Hedge Agreement" means any interest rate Hedge Agreement required or permitted under Article V that is entered into by and between the Borrower and any Lender. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of: (a) the rate of interest announced publicly by Fleet in New York, New York, from time to time, as its prime rate (and such term shall not be construed to be its best or most favorable rate); and (b) 1/2 of one percent per annum above the Federal Funds Rate. - 2 - "Base Rate Advance" means an Advance that bears interest as provided in Section 2.07(a)(x). "Borrower" has the meaning specified in the recital of parties to this Agreement. "Borrower's Account" means the account of the Borrower maintained by the Borrower with Fleet at its office at One Federal Street, Boston, Massachusetts 02110, Account No. 9373825604, or such other account as the Borrower and the Agent may from time to time designate as the "Borrower's Account". "Borrowing" means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by the Lenders. "Business" means the business of operating an injection molder of plastic products for sale and distribution, including without limitation the assets relating to any such business. "Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City or Pittsburgh, Pennsylvania and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "Calculation Period" means the period of four consecutive fiscal quarters last ended before the date of the respective event or incurrence which requires calculations to be made on a Pro Forma Basis. "Capital Expenditures" means, for any Person for any period, the sum of, without duplication, all cash expenditures made, directly or indirectly, by such Person or any of its Subsidiaries during such period for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, that have been or should be, in accordance with GAAP, reflected as additions to property, plant or equipment on a Consolidated balance sheet of such Person; provided, however, in no event shall any Capital Expenditures made with the proceeds of a Recovery Payment in accordance with the proviso set forth in the definition of Extraordinary Receipt be deemed to constitute Capital Expenditures for purposes hereof; provided further that it is understood that in no event shall any payment of principal or interest under or the incurrence of any Capitalized Lease be deemed to be a Capital Expenditure for purposes of this definition. "Capitalized Leases" means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases. "Cash Equivalents" means any of the following, to the extent owned by any Loan Party free and clear of all Liens other than Liens created under the Collateral Documents and having a maturity of not greater than 180 days from the date of acquisition thereof: (a) readily marketable direct obligations of the Government of the United States or any - 3 - agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) insured certificates of deposit or time deposits, certificates of deposit and Eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers acceptances with maturities not exceeding six months, and overnight bank deposits, in each case with any commercial bank that is a Lender or a member of the Federal Reserve System, issues (or the parent of which issues) commercial paper rated as described in clause (c), is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $500,000,000, (c) commercial paper in an aggregate amount of no more than $250,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any State of the United States and rated at least "Prime-1" (or the then equivalent grade) by Moody's or "A-1" (or the then equivalent grade) by S&P, (d) repurchase obligations with a maturity of not more than seven days for underlying securities of the type described in clauses (a) and (b) above with any financial institution meeting the criteria of (b) above or (e) Investments in money market or mutual funds that invest in Cash Equivalents of the types described in clauses (a), (b), (c) and (d) above. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, 42 U.S.C. ss. 9601 et seq. "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency. "Change of Control" means at any time (i) a "Change of Control" under and as defined in the Senior Subordinated Notes Indenture shall have occurred; (ii) the Permitted Holders (individually or collectively) shall cease to be the record and beneficial owner (directly or indirectly) of at least 80% in the aggregate of the Voting Stock of Parent; (iii) Parent shall cease to be the record and beneficial owner of at least 100% of the Voting Stock of the Borrower; (iv) any Person or two or more Persons (other than the Permitted Holders) acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of Parent (or other securities convertible into such Voting Stock) representing more than 20% of the combined voting power of all Voting Stock of Parent; or (v) any Person or two or more Persons (other than the Permitted Holders) acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of Parent. "Collateral" means all "Collateral" and all "Intellectual Property Collateral" referred to in the Collateral Documents, all Mortgaged Properties, all cash and Cash Equivalents delivered as collateral and all other property (whether real or personal) that is or is intended to be subject to any Lien in favor of the Collateral Agent for the benefit of the Secured Parties. - 4 - "Collateral Agent" means the Agent acting as collateral agent for the Secured Parties pursuant to the Collateral Documents, and any successor thereto appointed pursuant to the terms of the respective Collateral Documents. "Collateral Documents" means the Security Agreement, the Intellectual Property Security Agreement, each Guaranty, each Mortgage and any other agreement that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Secured Parties. "Commitment" means a Revolving Credit Commitment or a Letter of Credit Commitment. "Confidential Information" means information that the Borrower furnishes to the Agent or any Lender on a confidential basis, but does not include any such information that is or becomes generally available to the public or that is or becomes available to the Agent or such Lender from a source other than the Borrower. "Consolidated" refers, with respect to any Person, to the consolidation of accounts of such Person and its Subsidiaries in accordance with GAAP. "Conversion", "Convert" and "Converted" each refer to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.09 or 2.10. "Current Assets" of any Person means all assets of such Person that would, in accordance with GAAP, be classified as current assets of a company conducting a business the same as or similar to that of such Person, after deducting adequate reserves in each case in which a reserve is proper in accordance with GAAP. "Current Liabilities" of any Person means (a) all Debt of such Person that by its terms is payable on demand or matures within one year after the date of determination excluding Funded Debt and (b) all other items (including, without limitation, taxes accrued as estimated) that in accordance with GAAP would be classified as current liabilities of such Person. "Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 90 days (unless diligently contested in good faith) incurred in the ordinary course of such Person's business), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under Capitalized Leases, (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, - 5 - defease or otherwise make any payment in respect of any capital stock of or other ownership or profit interest in such Person or any other Person or any warrants, rights or options to acquire such capital stock (other than Obligations of such Person in respect of management profit sharing plans), valued, in the case of Redeemable Preferred Stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Obligations of such Person in respect of Hedge Agreements, (i) all Debt of others referred to in clauses (a) through (h) above or clause (j) below guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (1) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (3) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (4) otherwise to assure a creditor against loss, and (j) all Debt referred to in clauses (a) through (i) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt, but only to the extent of the fair market value of such property securing such Debt. "Debt Agreements" has the meaning specified in Section 3.01(g)(xviii)(C). "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Documents" means the Loan Documents and the Senior Subordinated Notes Documents. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, as the case may be, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "EBITDA" means, with respect to any Person for any period, the sum, determined on a Consolidated basis, of (a) net income (or net loss), (b) Interest Expense, (c) income tax expense, (d) depreciation expense, (e) amortization expense (including, to the extent excluded from the definition of Interest Expense, any amortization of deferred financing costs), (f) investment banking fees incurred by such Person in connection with the transactions contemplated by this Agreement and the Senior Subordinated Note Documents, and (g) extraordinary or non-recurring losses and charges deducted in calculating net income less extraordinary or non-recurring gains added in calculating net income, in each case of such Person and its Subsidiaries, determined in accordance with GAAP for such period. - 6 - "Effective Date" has the meaning specified in Section 8.06. "Eligible Assignee" means with respect to any Facility: (i) a Lender; (ii) an Affiliate of a Lender; (iii) 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 $500,000,000; (iv) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $500,000,000; (v) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow or a political subdivision of any such country, and having a combined capital and surplus of at least $500,000,000, so long as such bank is acting through a branch or agency located in the United States; (vi) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having a combined capital and surplus of at least $500,000,000; and (vii) any other Person approved by the Agent and the Borrower, such approval not to be unreasonably withheld or delayed; provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition. "Environmental Claim" means any written allegation, notice of violation, action, claim, Environmental Lien, demand, abatement or other order or direction by any Governmental Authority or any other Person for personal injury (including sickness, disease or death), tangible or intangible property damage, damage to the environment, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restrictions resulting from or based upon (i) the existence, or the continuation of the existence, of a release (including, without limitation, sudden or non-sudden accidental or non-accidental releases) of, or exposure to, any Hazardous Material, audible noise above applicable standards in, into or onto the environment (including, without limitation, the air, soil, surface water or groundwater) at, in, by, from or related to any property currently or formerly owned, operated or leased by any Loan Party or any activities or operations thereof; (ii) the transportation, storage, treatment or disposal of Hazardous Materials in connection with any property currently or formerly owned, operated or leased by any Loan Party or its current or former operations or facilities; or (iii) the violation, or alleged violation, of any Environmental Law, order or Environmental Permit relating to environmental matters connected with any property currently or formerly owned, leased or operated by any Loan Party. "Environmental Costs and Liabilities" means any and all losses, liabilities, obligations, damages, fines, penalties, judgments, actions, claims, costs and expenses (including, without limitation, fees, disbursements and expenses of legal counsel, experts, engineers and consultants and the costs of investigation, feasibility studies and removal and remedial actions) arising from or under any Environmental Law or from any order, contract or agreement with any Governmental Authority or other Person. - 7 - "Environmental Law" means any Federal, state, local or foreign law (including common law), ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance having the force and effect of law, relating to the environment, health, safety or natural resources, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss. 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. ss. 1801 et seq.; the Toxic Substances and Control Act, 15 U.S.C. ss. 2601 et. seq.; the Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq.; and any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "Environmental Permit" means any permit, approval, license, authorization, variance, registration or permission required under any Environmental Law or by any Governmental Authority. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any corporation, trade or business that is or was (i) a member or general partner of the controlled group of any Loan Party, or under common control with any Loan Party, within the meaning of Section 414(b) or (c) of the Internal Revenue Code or (ii) a member of an affiliated group as defined in Section 414(m) of the Internal Revenue Code. "ERISA Event" means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043(c) of ERISA, with respect to any Pension Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC; or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Pension Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Pension Plan within the following 30 days; (b) failure by any Loan Party or an ERISA affiliate to make a payment to a Pension Plan required under Section 302(c) of ERISA; (c) the provision by the administrator of any Pension Plan of a notice of intent to terminate such Pension Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Loan Party or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan or a multiple employer plan (as described in Sections 4063 and 4064 of ERISA) during a plan year; (f) the conditions for imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Pension Plan; (g) the adoption of an amendment to a Pension Plan requiring the - 8 - provision of security to such Pension Plan, pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Pension Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that could reasonably constitute grounds for the termination of, or the appointment of a trustee to administer, such Pension Plan. "Eurocurrency Liabilities" has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "Eurodollar Rate" means, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Agent from time to time for purposes of providing quotations of interest rates applicable to U.S. dollar deposits in the London interbank market) at approximately 11:00 A.M., London time, two Business Days prior to the commencement of such Interest Period, as the rate for U.S. dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "Eurodollar Rate" with respect to such Eurodollar Rate Advance for such Interest Period shall be the rate at which U.S. dollar deposits of $5,000,000, and for a maturity comparable to such Interest Period, are offered in immediately available funds in the London interbank market at approximately 11:00 A.M., London time, two Business Days prior to the commencement of such Interest Period. "Eurodollar Rate Advance" means an Advance that bears interest as provided in Section 2.07(a)(y). "Eurodollar Rate Reserve Percentage" for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. - 9 - "Events of Default" has the meaning specified in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended (or any similar successor Federal statute), and the rules and regulations thereunder, as the same are in effect from time to time. "Existing Accounts" means each of the accounts of the Borrower maintained by the Borrower as listed on Schedule II. "Existing Debt" has the meaning specified in Section 4.01(cc). "Existing Precise Credit Agreement" means the Credit Agreement, dated as of March 28, 1996, as amended through the date hereof, among Parent, the Borrower and the lenders party thereto. "Existing Precise Redeemable Preferred Stock" means (i) 575 shares of Series A Cumulative Exchangeable Preferred Stock and (ii) 250 shares of Series B Cumulative Redeemable Preferred Stock issued by the Borrower in connection with the acquisition of TMP. "Existing Precise Subordinated Notes" means the 12.25% senior subordinated notes due 2006 issued by the Borrower. "Extraordinary Receipt" means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including, without limitation, proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings) and condemnation awards (and payments in lieu thereof); provided, however, that an Extraordinary Receipt shall not include cash receipts received by the Borrower or any Subsidiary of the Borrower from proceeds of insurance or a condemnation award in respect of loss or damage to equipment, fixed assets or real property of the Borrower or any Subsidiary of the Borrower (such receipt, a "Recovery Payment") to the extent that such proceeds are applied (or in respect of which expenditures were previously incurred) to replace or repair the equipment, fixed assets or real property for which such proceeds were received in accordance with the terms of the Loan Documents and so long as (i) no Default or Event of Default exists or is continuing at the time such Recovery Payment is received by the Borrower or any Subsidiary of the Borrower, (ii) such replacement or repair is commenced within nine months after the occurrence of such damage or loss and (iii) such proceeds do not exceed $10,000,000 in the aggregate for all occurrences. The Borrower shall deliver a certificate to the Agent on behalf of the Lenders signed by an authorized officer of the Borrower within ten (10) days after the end of each Fiscal Year certifying compliance with the foregoing clauses (i), (ii) and (iii). "Facility" means the Revolving Credit Facility or the Letter of Credit Facility. - 10 - "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period (i) to the rate published by the Telerate service on page five of its daily report as the "New York Offered Rate" as of 10:00 A.M. (New York City time) for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) or (ii) if the Telerate service shall cease to publish or otherwise shall not publish such rate for any day that is a Business Day, to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Final Maturity Date" means June 30, 2002. "Fiscal Year" means a fiscal year of any Loan Party or any Subsidiary of any Loan Party ending on December 31 in any calendar year. "Fixed Charge Coverage Ratio" means, with respect to any Person for any Rolling Period, the ratio of (a) Consolidated EBITDA for such Person and its Subsidiaries for such Rolling Period less the amount of all Capital Expenditures of such Person and its Subsidiaries that have been paid in cash during such Rolling Period to (b) the sum of (i) Interest Expense of such Person and its Subsidiaries that has been paid in cash during such Rolling Period and (ii) regularly scheduled principal payments of Funded Debt and any Capitalized Leases of such Person and its Subsidiaries made during such Rolling Period. "Fleet" means Fleet National Bank in its individual capacity. "Funded Debt" of any Person means Debt of such Person that by its terms matures more than one year after the date of creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year after such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year after such date, including, without limitation, all amounts of Funded Debt of such Person required to be paid or prepaid within one year after the date of determination. "GAAP" has the meaning specified in Section 1.03. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranties" has the meaning specified in Section 3.01(g)(x). - 11 - "Guarantor" means each of Parent, each Subsidiary Guarantor and each other party to a Guaranty. "Guaranty" has the meaning specified in Section 3.01(g)(x). "Hazardous Materials" means (a) any petroleum or petroleum products, radioactive materials, asbestos, urea formaldehyde, polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous waste," "hazardous materials," "extremely hazardous substances," "restricted hazardous waste," "toxic substances," "toxic pollutants," "contaminants," or "pollutants," or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority under Environmental Laws. "Hedge Agreements" means interest rate swap, cap, floor or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other similar agreements or arrangement. "Hedge Bank" means any Lender in its capacity as a party to a Bank Hedge Agreement. "Indemnified Party" has the meaning specified in Section 8.04(b). "Information Package" means, with respect to each Permitted Acquisition, an information package consisting of (i) a description of the Business being acquired, (ii) historical financial statements (which may be unaudited) for the respective Business for at least the two full fiscal years most recently ended and the latest 12-month period ended with the last day of the fiscal quarter last ended, (iii) projections for the five years after the respective Permitted Acquisition, (iv) an officer's certificate for the Rolling Period ended on the date of the most recent delivery of quarterly financial statements pursuant to Section 5.03(c) hereof indicating Pro Forma compliance with the financial covenants contained in Section 5.04 hereof and (v) any other information which the Borrower in good faith determines should be furnished so that the Information Package for the respective Business being acquired is, to the best of the Borrower's knowledge after reasonable investigation, true and correct in all material respects and is not incomplete by omitting to state any fact necessary to make the information (taken as a whole) contained therein not misleading in any material respect. "Initial Extension of Credit" means the earlier to occur of the initial Borrowing and the initial issuance of a Letter of Credit hereunder. "Insufficiency" means, with respect to any Pension Plan or Multiemployer Plan, the amount, if any, of its unfunded benefit liabilities (with respect to a Multiemployer - 12 - Plan, its proportionate share of unfunded benefit liabilities), as defined in Section 4001(a)(18) of ERISA. "Intellectual Property Collateral" means all Intellectual Property Collateral referred to in Section 1 of the Intellectual Property Security Agreement. "Intellectual Property Security Agreement" has the meaning specified in Section 3.01(g)(xv). "Interest Coverage Ratio" means, with respect to any Person for any Rolling Period, the ratio of (a) Consolidated EBITDA of such Person and its Subsidiaries for the most recent twelve month period to (b) Interest Expense of such Person and its Subsidiaries during such Rolling Period. "Interest Expense" means, with respect to any Person for any period, the amount by which (i) interest expense (including the interest component on obligations under Capitalized Leases but excluding any amortization of deferred financing costs), whether paid or accrued, on all Debt of such Person and its Subsidiaries for such period, including, without limitation and without duplication, (a) interest expense in respect of Debt resulting from Advances, (b) commissions, discounts and other fees and charges payable in connection with letters of credit (including, without limitation, any Letters of Credit) and (c) any net payment payable in connection with Hedge Agreements exceeds (ii) the sum of (A) any net credits received in connection with Hedge Agreements and (B) interest income, whether paid or accrued, of such Person for such period. "Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, upon notice received by the Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (a) the Borrower may not select any Interest Period with respect to any Eurodollar Rate Advance that ends after the Final Maturity Date; (b) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration; (c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be - 13 - extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the immediately preceding Business Day; and (d) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Inventory" means all Inventory referred to in Section 1(b) of the Security Agreement. "Investment" in any Person means any loan or advance to such Person, any purchase or other acquisition of any capital stock or other ownership or profit interest, warrants, rights, options, obligations or other securities of such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (i) or (j) of the definition of "Debt" in respect of such Person. "Investment Agreements" has the meaning specified in Section 3.01(g)(xviii)(F). "Issuing Bank" means Fleet and each Eligible Assignee to which a Letter of Credit Commitment hereunder has been assigned pursuant to Section 8.07. "L/C Cash Collateral Account" means the non-interest bearing cash collateral account with the Issuing Bank in the name of the Borrower but under the sole dominion and control of the Agent, which account is subject to the terms of the Security Agreement. "L/C Related Documents" has the meaning specified in Section 2.04(b)(ii). "Lenders" means Fleet, the Issuing Bank and each Person that shall become a Lender hereunder pursuant to Section 8.07 (but excludes any participant of any Lender). "Letter of Credit" has the meaning specified in Section 2.01(b). "Letter of Credit Advance" means an advance made by the Issuing Bank or any Lender pursuant to Section 2.03(c). "Letter of Credit Agreement" has the meaning specified in Section 2.03(a). - 14 - "Letter of Credit Commitment" means the amount set forth opposite the Issuing Bank's name on Schedule I hereto under the caption "Letter of Credit Commitment" or, if the Issuing Bank has entered into one or more Assignment and Acceptances, the aggregate amount set forth for the Issuing Bank in the Register maintained by the Agent pursuant to Section 8.07(e) as the Issuing Bank's "Letter of Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.05. "Letter of Credit Facility" means, at any time, an amount equal to the aggregate amount of the Issuing Bank's Letter of Credit Commitment at such time. "Leverage Ratio" means, with respect to any Person at any date of determination, the ratio of (a) Funded Debt (other than contingent obligations of the type described in clause (f) or (h) in the definition of "Debt") of such Person at such date to (b) EBITDA of such Person and its Subsidiaries for the then most recent twelve month period on such date. "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Documents" means for purposes of this Agreement and the Notes and any amendment or modification hereof or thereof and for all other purposes other than for purposes of the Collateral Documents, (i) this Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each Letter of Credit Agreement and (v) each Guaranty and (b) for purposes of the Collateral Documents, (i) this Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each Letter of Credit Agreement, (v) each Guaranty and (vi) each Bank Hedge Agreement, in each case as amended or otherwise modified from time to time. "Loan Parties" means the Borrower and each Subsidiary Guarantor. "Management Agreements" has the meaning specified in Section 3.01(g)(xviii)(D). "Margin Stock" has the meaning specified in Regulation U. "Material Adverse Change" means any material adverse change in the assets, business, condition (financial or otherwise), operations, performance or properties of the Borrower and its Subsidiaries (on a Consolidated basis). "Material Adverse Effect" means a material adverse effect on (a) the assets, business, condition (financial or otherwise), operations, performance or properties of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or any Lender under any Loan Document or (c) the ability of Parent or any Loan Party - 15 - to perform its Obligations in any material respect under any Loan Document to which it is or is to be a party. "Mentmore Holdings" means Mentmore Holdings Corporation, a Delaware corporation. "Mentmore Management Agreement" means the Management Agreement, dated as of March 15, 1996, between the Borrower and Mentmore Holdings, as amended. "Moody's" means Moody's Investor Service, Inc. "Mortgage" means each mortgage, deed of trust or deed to secure debt required to be delivered pursuant to the terms of this Agreement and pursuant to which any Loan Party shall have granted to the Collateral Agent a mortgage lien on such Loan Party's Mortgaged Property, together with any assignment of leases and rents to be executed in connection therewith. "Mortgage Policy" means each mortgage title insurance policy (and all endorsements thereto) in form and substance satisfactory to the Agent for each Mortgaged Property required to be delivered pursuant to this Agreement. "Mortgaged Property" means each real property owned or leased by the Borrower and each Subsidiary Guarantor and required to be mortgaged pursuant to this Agreement. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Net Cash Proceeds" means, with respect to any sale, lease, transfer or other disposition of any asset or the sale or issuance of any Debt or capital stock or other ownership or profit interest, any securities convertible into or exchangeable for capital stock or other ownership or profit interest or any warrants, rights, options or other securities to acquire capital stock or other ownership or profit interest by any Person, then the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction after deducting therefrom only (without duplication) (a) brokerage commissions, underwriting fees and discounts, investment banking fees to unaffiliated third parties, legal fees, finder's fees and other similar fees and commissions, (b) the amount of taxes (including, without limitation, any Federal, state or local income taxes payable pursuant to any Tax Sharing Agreement) payable in connection with or as a result of such transaction, (c) the amount of any Debt secured by a Lien on such asset that, by the terms of such transaction, is required to be repaid upon such disposition, (d) (without duplication) any portion of the Net Cash Proceeds for which the Borrower determines in good faith that a reserve should be taken - 16 - under GAAP against potential liabilities incurred with the receipt of such net proceeds (including not by way of limitation against any purchase price adjustment or indemnity claim), in each case to the extent, but only to the extent, that the amounts so deducted are properly attributable to such transaction or to the asset that is the subject thereof and are, at the time of receipt of such cash, actually paid, accrued or reserved (other than pursuant to any Tax Sharing Agreement) to a Person that is not an Affiliate of such Person or any Loan Party or any Affiliate of any Loan Party and (e) an amount equal to 10% of the Consolidated assets of the Borrower and its Subsidiaries set forth on the most recently available Consolidated financial statements of the Borrower. "New Subordinated Notes" has the meaning specified in Section 5.02(b)(vi). "Non-Precise Subsidiary" means each Subsidiary of Sunderland other than Parent and its Subsidiaries and the Borrower and its Subsidiaries. "Nonratable Assignment" means an assignment by a Lender pursuant to Section 8.07(a) of a portion of its rights and obligations under this Agreement, other than an assignment of a uniform, and not a varying, percentage of all of the rights and obligations of such Lender under and in respect of all of the Revolving Credit Facility. "Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Credit Advances made by such Lender. "Notice of Borrowing" has the meaning specified in Section 2.02(a). "Notice of Issuance" has the meaning specified in Section 2.03(a). "NPL" means the National Priorities List under CERCLA. "Obligation" means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation of any Loan Party to reimburse any amount in respect of any of the foregoing that any Lender, in its reasonable discretion, may elect to pay or advance on behalf of such Loan Party. - 17 - "OECD" means the Organization for Economic Cooperation and Development. "Offering Memorandum" means the final offering memorandum, dated June 10, 1997, provided to the Agent by the Borrower prior to the Effective Date. "Open Year" has the meaning specified in Section 4.01(y). "Other Taxes" has the meaning specified in Section 2.12(b). "Parent" has the meaning specified in the recital of parties to this Agreement. "Parent Guaranty" has the meaning specified in 3.01(g)(ix). "Parent Shareholders Agreement" means the shareholders agreement, dated as of March 29, 1996, as amended, among Parent, Sunderland, Hamilton Holdings Ltd. Corporation, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., Rice Partners II, L.P. and John Hancock Mutual Life Insurance Company, with respect to certain securities of Parent. "PBGC" means the Pension Benefit Guaranty Corporation as established and maintained pursuant to Title IV of ERISA. "Pension Plan" means any Plan that is an "employee pension benefit plan" as defined in Section 3(2) of ERISA. "Permitted Acquisition" means the acquisition by the Borrower or any of its Wholly-Owned Subsidiaries of assets constituting an entire business, division or product line of any Person engaged in the Business not already a Subsidiary of the Borrower or 100% of the capital stock of such Person in accordance with the requirements of this Agreement. "Permitted Holders" means (i) Sunderland, (ii) any Principal and (iii) (A) any spouse or immediate family member of either Principal and any child or spouse of any spouse or immediate family member of such Principal, (B) a trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding, directly or indirectly, a controlling interest of which consist of any of such Principal and/or such other Persons referred to in the immediately preceding clause (A), or (C) the trustees of any trust referred to in clause (B). "Permitted Liens" means (a) Liens in favor of any Loan Party or any of its Subsidiaries; (b) Liens placed upon assets of a Person to be used in the ordinary course of business of the Borrower or any Wholly-Owned Subsidiary of the Borrower existing at the time such Person is merged into or consolidated with the Borrower or any Wholly-Owned Subsidiary of the Borrower in compliance with this Agreement, provided that (1) - 18 - the aggregate outstanding principal amount of all Debt secured by Liens permitted by this clause (b) shall not at any time exceed the amount permitted by Section 5.02(b)(iii) and (2) in all events, the Lien encumbering such assets does not encumber any other asset, any inventory or any receivables of the Borrower or such Subsidiary; (c) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (d) Liens for taxes, assessments or governmental charges or claims arising as a matter of law that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (e) statutory Liens or landlords', carriers', warehousemens', mechanics', suppliers' or similar Liens incurred in the ordinary course of business of any Loan Party or any of its Subsidiaries which do not secure Debt for borrowed money and (x) which do not in the aggregate materially detract from the value of the property or assets of the Borrower and its Subsidiaries taken as a whole or materially impair the operation of the business of the Borrower and its Subsidiaries taken as a whole or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (f) easements, minor title defects, irregularities in title or other charges or encumbrances on property, in each case whether now or hereafter in existence, not securing Debt and, in the reasonable opinion of the Agent, not interfering in any material respect with the use of such property by any Loan Party or any of its Subsidiaries; (g) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security (exclusive of obligations in respect of the payment for borrowed money); (h) Liens securing industrial revenue bonds or other tax-favored financing; (i) deposit arrangements entered into in connection with acquisitions permitted by this Agreement or in the ordinary course of business; (j) Liens not otherwise permitted by the foregoing clauses (a) through (k) securing obligations incurred in the ordinary course of business which obligations do not exceed in the aggregate $2,000,000 at any time outstanding; and (k) any extensions, substitutions, replacements or renewals of the foregoing, provided that (x) the aggregate principal amount of the Debt, if any, secured by such Liens does not increase from that amount outstanding at the time of any such renewal or extension and (y) any such renewal or extension does not encumber any additional assets or properties of the Borrower or any of its Subsidiaries. "Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means any employee benefit plan within the meaning of Section 3(3) of ERISA and any other similar plans, policies, programs, practices, agreements, understandings or arrangements (written or oral), established or maintained by any Loan Party or any ERISA Affiliate or under which any Loan Party or any ERISA Affiliate has - 19 - or could have any obligation or liability, actual or contingent, other than a Multiemployer Plan, including, without limitation, all incentive, bonus, deferred compensation, stock option, stock purchase, pension, medical, severance, profit sharing and retirement plans, policies, programs, practices, agreements, understandings or arrangements. "Plan Asset Regulations" has the meaning specified in Section 2.15. "Plant and Equipment" means all Plant and Equipment referred to in Section 1(a) of the Security Agreement. "Pledged Debt" means all Pledged Debt referred to in the Preliminary Statement to the Security Agreement. "Pledged Shares" means all Pledged Shares referred to in the Preliminary Statement to the Security Agreement. "Preferred Stock" means, with respect to any corporation, capital stock issued by such corporation that is entitled to a preference or priority over any other capital stock issued by such corporation upon any distribution of such corporation's assets, whether by dividend or upon liquidation. "Principal" means Richard L. Kramer and/or William L. Remley. "Pro Forma Basis" means, with respect to any incurrence of Debt or Permitted Acquisition, the calculation of the Consolidated results of the Borrower and its Subsidiaries otherwise determined in accordance with this Agreement as if the respective Debt or Permitted Acquisition (and all other Debt incurred or Permitted Acquisitions effected during the respective Calculation Period or thereafter and on or prior to the date of determination) (each such date, a "Determination Date") had been effected on the first day of the respective Calculation Period; provided that all such calculations shall take into account the following assumptions: (i) pro forma effect shall be given to (1) any Debt incurred subsequent to the end of the Calculation Period and prior to the Determination Date, (2) any Debt incurred during such period to the extent such Debt is outstanding at the Determination Date and (3) any Debt to be incurred on the Determination Date, in each case as if such Debt had been incurred on the first day of such Calculation Period and after giving effect to the application of the proceeds thereof; (ii) interest expense attributable to interest on any Debt (whether existing or being incurred) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period; - 20 - (iii) there shall be excluded from interest expense any interest expense related to any amount of Debt that was outstanding during such Calculation Period or thereafter but that is not outstanding or is to be permanently repaid on the Determination Date; and (iv) pro forma effect shall be given to all Permitted Acquisitions that occur during such Calculation Period or thereafter and on or prior to the Determination Date (including any Debt assumed or acquired in connection therewith) as if they had occurred on the first day of such Calculation Period. "Pro Rata Share" of any amount means, with respect to any Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender's Revolving Credit Commitment at such time and the denominator of which is the Revolving Credit Facility at such time. "PTCE 90-1" has the meaning specified in Section 2.15. "PTCE 91-38" has the meaning specified in Section 2.15. "PTCE 95-60" has the meaning specified in Section 2.15. "PTCE 96-23" has the meaning specified in Section 2.15. "QPAM" has the meaning specified in Section 2.15. "QPAM Exemption" has the meaning specified in Section 2.15. "RCRA" means the Resource Conservation and Recovery Act, as the same may be amended from time to time, 42 U.S.C. ss. 6901 et seq. "Receivables" means all Receivables referred to in Section 1(c) of the Security Agreement. "Recovery Payment" has the meaning set forth in the definition of "Extraordinary Receipt." "Redeemable" means, with respect to any capital stock or other ownership or profit interest, Debt or other right or Obligation, any such right or Obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder. "Refinancing Transactions" collectively refers to the transactions set forth in Section 3.01(e). - 21 - "Register" has the meaning specified in Section 8.07(e). "Registration Rights Agreement" means the Registration Rights Agreement by and among the Borrower, the Subsidiary Guarantors and the Initial Purchasers named therein substantially in the form of Exhibit J hereto. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Lenders" means at any time Lenders owed or holding in excess of 50% of the sum of (a) the aggregate principal amount of the Revolving Credit Advances outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time and (c) the aggregate Unused Revolving Credit Commitments at such time. For purposes of this definition, the aggregate principal amount of Letter of Credit Advances owing to the Issuing Bank and the Available Amount of each Letter of Credit shall be considered to be owed to the Lenders ratably in accordance with their respective Revolving Credit Commitments. "Responsible Officer" means any executive officer of any Loan Party or any Subsidiary of any Loan Party. "Revolving Credit Advance" has the meaning specified in Section 2.01(a). "Revolving Credit Commitment" means, with respect to any Revolving Credit Lender at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Revolving Credit Commitment" or, if a Lender has entered into one or more Assignments and Acceptances, the aggregate amount set forth for such Lender in the Register maintained by the Agent pursuant to Section 8.07(e) as such Lender's "Revolving Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.05. "Revolving Credit Facility" means, at any time, the aggregate amount of the Lenders' Revolving Credit Commitments at such time. "Rolling Period" means with respect to any month, the consecutive twelve month period ending on the last day of such month. "S&P" means Standard & Poors Ratings Group. "Secured Obligations" has the meaning specified in the Security Agreement. "Secured Parties" means the Collateral Agent, the Agent, the Lenders, the Hedge Banks and the other Persons the Obligations owing to which are or are purported to be secured by the Collateral under the terms of the Collateral Documents. - 22 - "Security Agreement" has the meaning specified in Section 3.01(g)(vii). "Senior Debt" of any Person means all Funded Debt of such Person other than Debt outstanding under the Senior Subordinated Notes. "Senior Leverage Ratio" means, with respect to any Person at any date of determination, the ratio of (a) Total Senior Debt (other than contingent obligations of the type described in clause (f) or (h) of the definition of "Debt") of such Person at such date to (b) EBITDA of such Person and its Subsidiaries for the then most recent twelve month period ending on such date. "Senior Subordinated Note Documents" means the Senior Subordinated Notes, the Senior Subordinated Notes Indenture, the Registration Rights Agreement, the Senior Subordinated Notes Guaranty and all other documents and agreements executed and delivered in connection therewith. "Senior Subordinated Notes" means the Company's senior subordinated notes due 2007 in the aggregate principal amount of $75,000,000 issued by the Borrower pursuant to the Senior Subordinated Notes Indenture, including any notes offered in the Exchange Offer (as defined in the Offering Memorandum). "Senior Subordinated Notes Guaranty" means the Guaranty provided by the Subsidiary Guarantors pursuant to the terms of the Senior Subordinated Notes Indenture substantially in the form of Exhibit I hereto. "Senior Subordinated Notes Indenture" means the Indenture between the Borrower, as issuer, and Marine Midland Bank, as trustee, substantially in the form of Exhibit H hereto. "Shareholders' Agreements" has the meaning specified in Section 3.01(g)(xviii)(A). "Solvent" and "Solvency" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. - 23 - "Source" has the meaning specified in Section 2.15. "Stock Option Plan" means the Sunderland Industrial Holdings Corporation 1997 Key Employee Nonqualified Stock Option Plan established by Sunderland in April 1997. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Subsidiary Guarantor" has the meaning specified in the recital of parties to this Agreement, all such Subsidiary Guarantors are Wholly-Owned Subsidiaries of the Borrower. "Subsidiary Guaranty" has the meaning specified in Section 3.01(g)(x). "Sunderland" means Sunderland Industrial Holdings Corporation, a Delaware corporation. "Tax Sharing Agreements" has the meaning specified in Section 3.01(g)(xviii)(E). "Taxes" has the meaning specified in Section 2.12(a). "TMP" means Precise TMP, Inc. (formerly known as Tredegar Molded Products Company), a Virginia corporation and a Wholly-Owned Subsidiary of the Borrower. "Total Leverage Ratio" means, with respect to any Person at any date of determination, the ratio of (a) Funded Debt (other than contingent obligations of the type described in clause (f) or (h) in the definition of "Debt") of such Person at such date to (b) EBITDA of such Person and its Subsidiaries for the then most recent twelve month period ending on such date. "Total Senior Debt" means, for any period, the aggregate outstanding principal amount of all Senior Debt on any date of determination thereof. "Type" refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate. - 24 - "UCC" means the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction. "Unused Revolving Credit Commitment" means, with respect to any Lender at any time, (a) such Lender's Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Advances made by such Lender (in its capacity as a Lender) and outstanding at such time, plus (ii) such Lender's Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time and (B) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Bank, in its capacity as Issuing Bank, outstanding at such time. "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. "Warrant Agreement" means the warrant agreement, dated as of March 29, 1996, as amended, among Parent, Rice Partners II, L.P., John Hancock Mutual Life Insurance Company, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc. and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., with respect to certain warrants of Parent. "Warrant Payments" means the interest payments required to be made by Parent pursuant to and arising in accordance with the Warrant Agreement and/or the Parent Shareholders Agreement. "Wholly-Owned Subsidiary" means, as to any Person, (i) any corporation 100% of whose capital stock is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time. "Withdrawal Liability" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(f) ("GAAP"). - 25 - SECTION 1.04. Construction. References to a Section, subsection, Schedule or Exhibit mean a Section or subsection of or a Schedule or Exhibit to this Agreement, unless otherwise specified, and the word "including" means "including, without limitation," whether so stated or not. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT SECTION 2.01. The Advances. (a) The Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a "Revolving Credit Advance") to the Borrower from time to time on any Business Day during the period from the Effective Date until the Final Maturity Date in an amount for each such Advance not to exceed such Lender's Unused Revolving Credit Commitment at such time after giving effect to any repayment of Letter of Credit Advances from proceeds of such Revolving Credit Advances, which Revolving Credit Advances shall, at the option of the Borrower, be Base Rate Advances or Eurodollar Rate Advances. Each Borrowing of (x) Base Rate Advances shall be in an aggregate amount of $100,000 or any whole multiple thereof and (y) Eurodollar Rate Advances shall be in an aggregate amount of $300,000 or an integral multiple of $100,000 in excess thereof, (other than a Borrowing the proceeds of which shall be used solely to repay or prepay in full outstanding Letter of Credit Advances made by the Issuing Bank) and shall consist of Revolving Credit Advances made simultaneously by the Lenders ratably according to their Revolving Credit Commitments. Within the limits of each Lender's Unused Revolving Credit Commitment in effect from time to time, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(a). (b) Letters of Credit. The Issuing Bank agrees, on the terms and conditions hereinafter set forth, to issue letters of credit (the "Letters of Credit") for the account of the Borrower from time to time on any Business Day during the period from the Effective Date until 60 days before the Final Maturity Date (i) in an aggregate Available Amount for all Letters of Credit issued by the Issuing Bank not to exceed at any time the Letter of Credit Commitment at such time and (ii) in an Available Amount for each such Letter of Credit not to exceed the lesser of (x) the Letter of Credit Facility at such time and (y) the aggregate Unused Revolving Credit Commitments of the Lenders at such time. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the earlier of 60 days before the Final Maturity Date and one year after the date of issuance thereof. Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Borrower may request the issuance of Letters of Credit under this Section 2.01(b), repay any Letter of Credit Advances resulting from drawings thereunder pursuant to Section 2.03(c) and request the issuance of additional Letters of Credit under this Section 2.01(b). The Letter of Credit Advances shall not exceed $2,000,000 in the aggregate at any one time outstanding. - 26 - SECTION 2.02. Making the Advances. (a) Except as otherwise provided in Section 2.03, each Borrowing shall be made on notice, given not later than 11:00 A.M. (New York City time) on the second Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances or on the same Business Day in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Agent, which shall give to each Appropriate Lender prompt notice thereof by telex or telecopier. Each such notice by the Borrower of a Borrowing (a "Notice of Borrowing") shall be in writing, or telex or telecopier, in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type of Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Appropriate Lender shall, before 1:00 P.M. (New York City time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Agent at the Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing in accordance with the respective Commitments under the Revolving Credit Facility of such Lender and the other Appropriate Lenders. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent shall first make a portion of such funds equal to the aggregate principal amount of any Letter of Credit Advances made by the Issuing Bank and by any other Lender and outstanding on the date of such Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to the Issuing Bank and such other Lenders for repayment of such Letter of Credit Advances. (b) Anything in subsection (a) of this Section 2.02 to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for the initial Borrowing or for any Borrowing if the aggregate amount of such Borrowing is less than $300,000 and any integral multiple of $100,000 in excess thereof or if the obligation of the Appropriate Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.09 or Section 2.10 and (ii) with respect to Borrowings consisting of Eurodollar Rate Advances, such Eurodollar Rate Advances may not be outstanding as part of more than six separate Borrowings in the aggregate. (c) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Appropriate Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (d) Unless the Agent shall have received notice from an Appropriate Lender prior to the date of any Borrowing under a Facility under which such Lender has a Commitment that such Lender will not make available to the Agent such Lender's ratable portion of such Borrowing, the Agent may assume that such Lender has made such portion available to the - 27 - Agent on the date of such Borrowing in accordance with subsection (a) or (b) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Agent, such Lender and the Borrower severally agree to repay or pay to the Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid or paid to the Agent, at (i) in the case of the Borrower, the interest rate applicable at such time under Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall pay to the Agent such corresponding amount, such amount so paid shall constitute such Lender's Advance as part of such Borrowing for all purposes. (e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon notice, given not later than 12:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed issuance of such Letter of Credit, by the Borrower to the Issuing Bank. Each such notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be by telephone, confirmed immediately in writing, or telex or telecopier, specifying therein the requested (A) date of such issuance (which shall be a Business Day), (B) Available Amount of such Letter of Credit, (C) expiration date of such Letter of Credit, (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit, and shall be accompanied by such application and agreement for letter of credit as the Issuing Bank may specify to the Borrower for use in connection with such requested Letter of Credit (a "Letter of Credit Agreement"). If the requested form of such Letter of Credit is acceptable to the Issuing Bank in its reasonable discretion, the Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Borrower at its office referred to in Section 8.02 or as otherwise agreed with the Borrower in connection with such issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern. (b) Letter of Credit Reports. The Issuing Bank shall furnish to each Lender (A) on the first Business Day of the first two months of each quarterly period a written report summarizing issuance and expiration dates of Letters of Credit issued by the Issuing Bank during the preceding month and drawings during such month under all Letters of Credit issued by the Issuing Bank and (B) on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by the Issuing Bank. - 28 - (c) Drawing and Reimbursement. The payment by the Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by the Issuing Bank of a Letter of Credit Advance, which shall be a Base Rate Advance, in the amount of such draft. In the event of any drawing under a Letter of Credit, the Agent shall promptly notify each Lender and each Lender shall purchase from the Issuing Bank, and the Issuing Bank shall sell and assign to each such Lender, such Lender's Pro Rata Share of such outstanding Letter of Credit Advance as of the date of such purchase, by making available for the account of its Applicable Lending Office to the Agent for the account of the Issuing Bank, by deposit to the Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Letter of Credit Advance to be purchased by such Lender. Promptly after receipt thereof, the Agent shall transfer such funds to the Issuing Bank. The Borrower hereby agrees to each such sale and assignment. Each Lender agrees to purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i) the Business Day on which notice of the drawing under the related Letter of Credit is given by the Issuing Bank, provided such notice is given not later than 12:00 P.M. (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if such notice is given after such time. Upon any such assignment by the Issuing Bank to any other Lender of a portion of a Letter of Credit Advance, the Issuing Bank represents and warrants to such other Lender that the Issuing Bank is the legal and beneficial owner of such interest being assigned by it, free and clear of any liens, but makes no other representation or warranty and assumes no responsibility with respect to such Letter of Credit Advance, the Loan Documents or any Loan Party. If and to the extent that any Lender shall not have so made the amount of such Letter of Credit Advance available to the Agent, such Lender agrees to pay to the Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by the Issuing Bank until the date such amount is paid to the Agent, at the Federal Funds Rate for its account or the account of the Issuing Bank, as applicable. If such Lender shall pay to the Agent such amount for the account of the Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute a Letter of Credit Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Letter of Credit Advance made by the Issuing Bank shall be reduced by such amount on such Business Day. (d) Failure to Make Letter of Credit Advances. The failure of any Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.03(c) shall not relieve any other Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Letter of Credit Advance to be made by such other Lender on such date. SECTION 2.04. Repayment of Advances. (a) Revolving Credit Advances. The Borrower shall repay to the Agent for the ratable account of the Lenders on the Final Maturity Date the aggregate outstanding principal amount of the Revolving Credit Advances then outstanding. (b) Letter of Credit Advances. (i) The Borrower shall repay to the Agent for the account of the Issuing Bank and each other Lender that has made a Letter of Credit Advance - 29 - on the earlier of demand and the Final Maturity Date the outstanding principal amount of each Letter of Credit Advance made by each of them. (ii) The Obligations of the Borrower under this Agreement, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances: (A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement, instrument or document relating thereto (all of the foregoing being, collectively, the "L/C Related Documents"); (B) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (C) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (D) any statement under a Letter of Credit or another L/C Related Document proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect, provided that the Issuing Bank shall not have acted with willful misconduct or gross negligence with respect to such statement; (E) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; (F) any exchange, release or non-perfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the Obligations of the Borrower in respect of the L/C Related Documents; or (G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. - 30 - SECTION 2.05. Termination or Reduction of the Commitments. (a) Optional. The Borrower may, upon at least five Business Days' notice to the Agent, terminate in whole or reduce in part the unused portions of the Letter of Credit Facility and the Unused Revolving Credit Commitments; provided, however, that each partial reduction of the Revolving Credit Facility or the Letter of Credit Facility (i) shall be in an aggregate amount of $1,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii) shall be made ratably among the Appropriate Lenders in accordance with their Commitments with respect to such Facility. (b) Mandatory. (i) The Revolving Credit Facility shall terminate in its entirety on June 30, 1997 unless the date of the Initial Extension of Credit has occurred on or before such date. (ii) The Revolving Credit Facility shall terminate in its entirety on the Final Maturity Date. (iii) The Revolving Credit Facility shall be automatically and permanently reduced on the date on which any prepayment is required to be made pursuant to Section 2.06(b)(i) or 2.06(b)(ii) by an amount equal to the aggregate amount of Net Cash Proceeds required to be used to prepay the Revolving Credit Facility under Section 2.06(b)(i) or 2.06(b)(ii). The Letter of Credit Facility shall be automatically and permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Letter of Credit Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility. SECTION 2.06. Prepayments. (a) Optional. The Borrower shall have the right to prepay the outstanding aggregate principal amount of the Advances comprising part of the same Borrowing, in whole or ratably in part, without premium or penalty, together with accrued interest and fees to the date of such prepayment on the aggregate principal amount prepaid on the following terms and conditions: (i) the Borrower shall have the right to prepay Base Rate Advances on the same day's notice but shall give at least three Business Days' notice in the case of Eurodollar Rate Advances, in each case to the Agent (received not later than 12:00 P.M. (New York City time)) stating the proposed date and aggregate principal amount of the prepayment; (ii) each partial prepayment of (x) Base Rate Advances shall be in an aggregate principal amount of $100,000 or any whole multiple thereof and (y) Eurodollar Rate Advances shall be in an aggregate principal amount of $300,000 or an integral multiple of $100,000 in excess thereof, provided that if any partial prepayment of Eurodollar Rate Advances made pursuant to any Borrowing shall reduce the outstanding Eurodollar Rate Advances made pursuant to such Borrowing to an amount less than the minimum borrowing amount applicable pursuant to Section 2.02(b), then such Borrowing shall be Converted at the end of the then current Interest Period into a Base Rate Advance and - 31 - any election of an Interest Period with respect thereto given by the Borrower shall have no force or effect; (iii) if any prepayment of a Eurodollar Rate Advance is made on a date other than the last day of an Interest Period for such Advance the Borrower shall also pay any amounts owing pursuant to Section 8.04(c). (b) Mandatory. (i) The Borrower shall, on the date of receipt of the Net Cash Proceeds by any Loan Party or any Subsidiary of any Loan Party from (A) the sale, lease, transfer or other disposition of any assets (other than sales of (x) Inventory or (y) equipment which, in the good faith opinion of the Borrower, is obsolete, each in the ordinary course of business and consistent with past practices) of such Loan Party or such Subsidiary, (B) the incurrence or issuance by such Loan Party or such Subsidiary of any Debt (other than Debt incurred or issued pursuant to Section 5.02(b)), or (C) any Extraordinary Receipt received by or paid to or for the account of such Loan Party or such Subsidiary and not otherwise included in clause (A) or (B) above, prepay an aggregate principal amount of the Revolving Credit Advances equal to, in the case of clause (A) and (C) above, 100% of the amount of such Net Cash Proceeds and, in the case of Clause (B) above, 50% of such Net Cash Proceeds and to permanently reduce the Revolving Credit Facility to the extent set forth in Section 2.05(b)(iii); provided, however, that so long as (i) no Default or Event of Default then exists and (ii) the Senior Leverage Ratio of the Borrower and its Subsidiaries for the twelve month period then most recently ended is less than 2.0x, the percentage of Net Cash Proceeds used for such prepayment from issuances of debt described under clause (B) above shall be reduced to zero. (ii) The Borrower shall, on the date of receipt of the Net Cash Proceeds by any Loan Party or any Subsidiary of any Loan Party from the sale or issuance by any Loan Party or any Subsidiary of any Loan Party of any capital stock or other ownership or profit interest, any securities convertible into or exchangeable for capital stock or other ownership or profit interest or any warrants, rights or options to acquire capital stock or other ownership or profit interest received by or paid to or for the account of such Loan Party or such Subsidiary and not otherwise included herein (other than capital stock of the Borrower issued in connection with a Permitted Acquisition or stock options granted to management of the Borrower and permitted under this Agreement to acquire capital stock of the Borrower), prepay an aggregate principal amount of the Revolving Credit Advances equal to the amount of such Net Cash Proceeds and to permanently reduce the Revolving Credit Facility to the extent set forth in Section 2.05(b)(iii). (iii) The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, and the Letter of Credit Advances equal to the amount by which (A) the sum of the aggregate principal amount of (x) the Revolving Credit Advances and (y) the Letter of Credit Advances then outstanding plus the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Revolving Credit Facility. Each such prepayment shall be applied as set forth in Section 2.06(c). - 32 - (iv) The Borrower shall, on each Business Day, pay to the Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in such Account to equal the amount by which the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on such Business Day. (v) All prepayments under this Section 2.06(b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. (c) Prepayment of Revolving Credit Facility. Each prepayment of the Revolving Credit Facility made pursuant to Section 2.06(a) or Section 2.06(b) shall be (1) first, applied to prepay Letter of Credit Advances then outstanding until such Advances are paid in full, (2) second, applied to prepay Revolving Credit Advances then outstanding comprising part of the same Borrowings in accordance with the respective Pro Rata Share of the Lenders until such Advances are paid in full and (3) third, deposited in the L/C Cash Collateral Account to cash collateralize 100% of the Available Amount of the Letters of Credit then outstanding; and, in the case of prepayments of the Revolving Credit Facility required pursuant to Sections 2.06(b)(i) and 2.06(b)(ii), the Revolving Credit Facility shall be permanently reduced as set forth in Section 2.05(b)(iii). Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the Issuing Bank or the Lenders, as applicable. SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: (x) Base Rate Advances. For each Letter of Credit Advance and during such periods as each such Revolving Credit Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time plus (B) the Applicable Margin in effect from time to time, payable in arrears quarterly on the last Business Day of each March, June, September and December during such periods commencing September 30, 1997, on the date of any prepayment thereof to the extent required under Section 2.06 and on the Final Maturity Date. (y) Eurodollar Rate Advances. During such periods as each such Revolving Credit Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for each such Revolving Credit Advance to the sum of (A) the Eurodollar Rate for such Interest Period for such Advance plus (B) the Applicable Margin, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, subject to clause (d) of the definition of "Interest Period," on each day that occurs during such Interest Period every three months from the first day of such Interest Period until the date such Eurodollar Rate Advance shall be Converted or paid in full. - 33 - (b) Default Interest. Upon the occurrence and during the continuance of an Event of Default under Section 6.01(c) with respect to any covenant contained in Section 5.04 or under Section 6.01(a), the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a) of this Section 2.07 and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a) of this Section 2.07 and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid, in the case of interest, on the Type of Advance on which such interest has accrued pursuant to clause (a) of this Section 2.07. (c) Notice of Interest Rate. Promptly after receipt of a Notice of Borrowing pursuant to Section 2.02(a), the Agent shall give notice to the Borrower and each Lender of the applicable interest rate determined by the Agent for purposes of clause (a) of this Section 2.07. SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall pay to the Agent for the account of the Lenders a commitment fee, from the date hereof in the case of the Agent and the Lenders named herein and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Final Maturity Date, payable in arrears quarterly on the last Business Day of each March, June, September and December, commencing September 30, 1997, and on the Final Maturity Date, at the rate of 1/2 of 1% per annum on the average daily Unused Revolving Credit Commitment of such Lender. (b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the Agent for the account of each Lender a Letter of Credit fee, payable in arrears quarterly on the last Business Day of each March, June, September and December, commencing September 30, 1997, and on the Final Maturity Date, at the rate of 2.25% per annum on such Lender's Pro Rata Share of the average daily aggregate Available Amount during such quarter of all Letters of Credit outstanding from time to time. (ii) The Borrower shall pay to the Issuing Bank, for its own account, a facing fee in respect of each Letter of Credit issued by it hereunder, payable in arrears on the last Business Day of each March, June, September and December, commencing September 30, 1997, and on the Final Maturity Date, at the rate of 1/4 of 1% per annum on the average daily aggregate Available Amount during such quarter of such Letter of Credit. (iii) In addition, the Borrower shall pay to the Issuing Bank, for its own account, such commissions, issuance fees, fronting fees, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Borrower and the Issuing Bank shall agree. - 34 - (c) Agent's Fees. The Borrower shall pay to the Agent for its own account such fees as may from time to time be agreed between the Borrower and the Agent. SECTION 2.09. Conversion of Revolving Credit Advances. (a) Optional. The Borrower may on any Business Day, upon notice given to the Agent not later than 12:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.07 and 2.10, Convert all or any portion of the Revolving Credit Advances of one Type comprising the same Borrowing into Revolving Credit Advances of the other Type; provided, however, that if any Conversion of Eurodollar Rate Advances into Base Rate Advances is made other than on the last day of an Interest Period for such Eurodollar Rate Advances the Borrower shall also pay any amounts owing pursuant to Section 8.04(c), any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b), no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(b) and each Conversion of Revolving Credit Advances comprising part of the same Borrowing shall be made ratably among the Lenders in accordance with their Revolving Credit Commitments. Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Revolving Credit Advances to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the Borrower. (b) Mandatory. (i) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $300,000, such Advances shall automatically Convert into Base Rate Advances. (ii) If the Borrower shall fail to select the duration of any Interest Period for any Revolving Credit Advances that are outstanding and have been Converted into Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance. (iii) Upon the occurrence and during the continuance of any Event of Default, (x) each Revolving Credit Advance that has been Converted into a Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (y) the obligation of the Lenders to make, or to Convert Revolving Credit Advances into, Eurodollar Rate Advances shall be suspended. SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) any change in, or in the interpretation of, any law or regulation or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) effective after the date hereof, there shall be any increase in the cost to any Lender of agreeing to make or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to issue or of issuing or maintaining Letters of Credit or of agreeing to make or of making or - 35 - maintaining Letter of Credit Advances, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender reasonably determines that compliance with any law or regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) effective after the date hereof affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend or to issue Letters of Credit hereunder and other commitments of such type or the issuance or maintenance of the Letters of Credit (or similar contingent obligations), then, upon demand by such Lender (with a copy of such demand to the Agent), the Borrower shall pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend or to issue Letters of Credit hereunder or to the issuance or maintenance of any Letters of Credit. A certificate as to such amounts submitted to the Borrower by such Lender shall be conclusive and binding for all purposes, absent manifest error. (c) If, with respect to any Eurodollar Rate Advances under any Facility, Lenders owed at least 50% of the then aggregate unpaid principal amount thereof notify the Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Lenders of making, funding or maintaining their Eurodollar Rate Advances for such Interest Period, the Agent shall forthwith so notify the Borrower and the Appropriate Lenders, whereupon (i) each such Eurodollar Rate Advance under any Facility will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower that such Lenders have determined that the circumstances causing such suspension no longer exist. (d) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Borrower through the Agent, (i) each Eurodollar Rate Advance under each Facility under which such Lender has a Commitment will automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of the Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower that such Lender has determined that the circumstances causing such suspension no longer exist. - 36 - SECTION 2.11. Payments and Computations. (a) The Borrower shall make each payment hereunder and under the Notes, irrespective of any right of counterclaim or set-off, not later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the Agent at the Agent's Account in same day funds. The Agent will promptly thereafter cause like funds to be distributed (i) if such payment by the Borrower is in respect of principal, interest, commitment fees or any other Obligation then payable hereunder and under the Notes to more than one Lender, to such Lenders for the account of their respective Applicable Lending Offices ratably in accordance with the amounts of such respective Obligations then payable to such Lenders and (ii) if such payment by the Borrower is in respect of any Obligation then payable hereunder to one Lender, to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(e), from and after the effective date of such Assignment and Acceptance, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) If the Agent receives funds for application to the Obligations under the Loan Documents under circumstances for which the Loan Documents do not specify the Advances or the Facility to which, or the manner in which, such funds are to be applied, the Agent may, but shall not be obligated to, elect to distribute such funds to each Lender ratably in accordance with such Lender's proportionate share of the principal amount of all outstanding Advances and the Available Amount of all Letters of Credit then outstanding, in repayment or prepayment of such of the outstanding Advances or other Obligations owed to such Lender as the Agent shall direct. (c) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or, in the case of a Lender, under the Note held by such Lender, to charge from time to time against any or all of the Borrower's accounts with such Lender any amount so due. (d) All computations of interest, fees and Letter of Credit commissions shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error. (e) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be - 37 - made in the next following calendar month, such payment shall be made on the next preceding Business Day. (f) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each such Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each such Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.12. Taxes. (a) Subject to Sections 2.12(e) and (f), any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.11, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings imposed by a Governmental Authority, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, net income taxes that are imposed by the United States and franchise taxes and net income taxes that are imposed on such Lender or the Agent by the state or foreign jurisdiction under the laws of which such Lender or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, franchise taxes and net income taxes that are imposed on such Lender by the state or foreign jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.12) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) The Borrower shall indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes, and for the full amount of taxes imposed by any jurisdiction on amounts payable under this Section 2.12, paid by such Lender or the Agent (as the case may be) and any liability (including penalties, additions to Tax, interest and expenses) arising - 38 - therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Agent, at its address referred to in Section 8.02, the original receipt of payment thereof or a certified copy of such receipt. In the case of any payment hereunder or under the Notes by or on behalf of the Borrower through an account or branch outside the United States or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Agent, at such address, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender or the Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long thereafter as such Lender remains lawfully able to do so), provide the Agent and the Borrower with Internal Revenue Service form 1001 or 4224, as well as form W-9 or W-8, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is exempt from or is entitled to a reduced rate of United States withholding tax on payments under this Agreement or the Notes. If the form provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) of this Section 2.12 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender assignee on such date. If any form or document referred to in this subsection (e) of this Section 2.12 requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form 1001 or 4224, that the Lender reasonably considers to be confidential, the Lender shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. Notwithstanding anything to the contrary contained herein, if the withholding taxes applicable to any payment under any Note or under this Agreement to a Lender or Lender assignor shall be increased from that which would have otherwise been applicable at the time of the execution and delivery by such Lender of this Agreement or the date of the Assignment and Acceptance pursuant to which it became a Lender, as the case may be, due to (i) a change in the manner in which such Lender or Lender assignor - 39 - holds its interest in the Note, or (ii) an audit of the Internal Revenue Service indicating that such Lender or Lender assignor is not entitled to an exemption from, or a reduced rate for, such withholding taxes at the date of the execution and delivery by such Lender of this Agreement or the date of the Assignment and Acceptance pursuant to which it became a Lender then any withholding taxes resulting therefrom shall be considered excluded from Taxes. (f) For any period with respect to which a Lender has failed to provide the Borrower with the appropriate form described in subsection (e) of this Section 2.12 (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e) of this Section 2.12), such Lender shall not be entitled to indemnification under subsection (a) or (c) of this Section 2.12 with respect to Taxes imposed by the United States; provided, however, that should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. SECTION 2.13. Sharing of Payments, Etc. If any Lender shall obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) (a) on account of Obligations due and payable to such Lender hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender at such time to (ii) the aggregate amount of the Obligations due and payable to all Lenders hereunder and under the Notes at such time) of payments on account of the Obligations due and payable to all Lenders hereunder and under the Notes at such time obtained by all the Lenders at such time or (b) on account of Obligations owing (but not due and payable) to such Lender hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Lender at such time to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lenders hereunder and under the Notes at such time) of payments on account of the Obligations owing (but not due and payable) to all Lenders hereunder and under the Notes at such time obtained by all of the Lenders at such time, such Lender shall forthwith purchase from the other Lenders such participations in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each other Lender shall be rescinded and such other Lender shall repay to the purchasing Lender the purchase price to the extent of such Lender's ratable share (according to the proportion of (i) the purchase price paid to such Lender to (ii) the aggregate purchase price paid to all Lenders) of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such other Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.13 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. - 40 - SECTION 2.14. Use of Proceeds. The proceeds of the Advances and issuances of Letters of Credit shall be available (and the Borrower agrees that it shall use such proceeds and Letters of Credit) solely to (i) effect the Refinancing Transactions, (ii) furnish working capital, (iii) fund the Permitted Acquisitions and certain general corporate requirements of the Borrower and its Subsidiaries and (iv) pay transaction fees and expenses in connection with the transactions contemplated hereby. SECTION 2.15. Source of Funds. To the extent any Advance hereunder is made by or on behalf of an insurance company, bank, or an entity deemed to hold assets of any employee benefit plan subject to ERISA or other plan as defined in and subject to the prohibited transaction provisions of Section 4975 of the Internal Revenue Code pursuant to applicable Department of Labor regulations (the "Plan Asset Regulations"), or any such plan acting on its own behalf, such insurance company, bank, entity or plan warrants and represents that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by such insurance company, bank, entity or plan to make any Advance hereunder: (a) the Source consists of plan assets subject to the discretionary authority or control of an in-house asset manager as such term is defined in Section IV(a) of Prohibited Transaction Class Exemption 96-23 (issued April 10, 1996) ("PTCE 96-23"), and any Advance hereunder is exempt under the provisions of PTCE 96-23; or (b) the Source is an "insurance company general account" as such term is defined in section V(e) of Prohibited Transaction Class Exemption 95-60 (issued July 12, 1995) ("PTCE 95-60"), and any Advance hereunder is exempt under the provisions of PTCE 95-60; or (c) the Source is either (x) an insurance company pooled separate account, within the meaning of Prohibited Transaction Class Exemption 90-1 (issued January 29, 1990) ("PTCE 90-1") or (y) a bank collective investment fund, within the meaning of Prohibited Transaction Class Exemption 91-38 (issued July 12, 1991) ("PTCE 91-38") and, except as such insurance company or bank has disclosed to the Borrower in writing pursuant to this paragraph (c), no plan or group of plans maintained by the same employer or employee organization, beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; and, in either such case, all records necessary to establish the availability of each exemption by reason thereof will be maintained and made available as required by the terms of such exemption; or (d) the Source is an "investment fund" (within the meaning of Part V of Prohibited Transaction Class Exemption 84-14 (issued March 13, 1984) (the "QPAM Exemption") managed by a "qualified professional asset manager" ("QPAM") within the meaning of Part V of the QPAM exemption) which has been identified pursuant to this paragraph (d), such that the Advances by or on behalf of such investment fund are exempt from the application of the prohibited transaction rules of ERISA and Section 4975 of the Internal Revenue Code, provided that no party to the transactions described in this Credit Agreement and - 41 - no affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such party has, or at any time during the immediately preceding year exercised, the authority to appoint or terminate the identified QPAM as manager of the assets of any employee benefit plan that has an interest in such investment fund (which plans have been identified pursuant to this paragraph (d)) or to negotiate the terms of said QPAM's management agreement on behalf of any such identified plan; or (e) the Source is a "governmental plan" as defined in Title I, Section 3(32) of ERISA; or (f) the Source is one or more "employee benefit plans" (or other plan as defined in and subject to Section 4975 of the Internal Revenue Code) or a separate account, trust fund, or other entity comprising one or more such plans (determined after giving effect to the Plan Asset Regulations) each of which has been identified to the Borrower in writing pursuant to this paragraph (f); or (g) the Source does not include assets of any employee benefit plan or other plan, other than a plan exempt from coverage under ERISA and from the prohibited transactions of Section 4975 of the Internal Revenue Code. ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Conditions Precedent to Initial Extension of Credit. The obligation of each Lender to make an Advance or of the Issuing Bank to issue a Letter of Credit on the occasion of the Initial Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent before or concurrently with the Initial Extension of Credit: (a) The Lenders shall be satisfied with the corporate and legal structure and capitalization of Parent and the Loan Parties, including the terms and conditions of the charter, bylaws and each class of capital stock of Parent and the Loan Parties and of each agreement or instrument relating to such structure or capitalization. (b) There shall not have occurred (and the Lenders shall not have become aware of) any facts, conditions or other information not previously known which the Lenders shall determine has, or would reasonably be expected to have, (x) a material adverse effect on the rights or remedies of the Agent or the Lenders, or on the ability of Parent or any Loan Party to perform its obligations to the Agent and the Lenders or (y) a Material Adverse Effect. (c) All material governmental (domestic and foreign) and third party approvals and/or consents necessary in connection with the consummation of the Refinancing Transactions and the other transactions contemplated hereby shall have been (or will, - 42 - within the time frame required, be) obtained and remain in full effect, and 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 consummation of the Refinancing Transactions and the other transactions contemplated by this Agreement and the other Documents or otherwise referred to herein or therein. Additionally, there shall not exist any judgment, order, injunction or other restraint issued or filed by any court of competent jurisdiction or a hearing seeking injunctive relief or other legal restraint pending or notified in such court prohibiting or imposing materially adverse conditions upon the consummation of the transactions contemplated by this Agreement, the Notes or any other Documents. (d) There shall exist no action, suit, investigation, litigation or proceeding affecting Parent, any Loan Party or any of its properties or any Subsidiary of any Loan Party or any of their respective properties pending or threatened before any court, governmental agency or arbitrator that purports to affect the legality, validity or enforceability of this Agreement, the Notes, any other Document or the consummation of the transactions contemplated hereby or thereby or which the Agent shall determine has, or would reasonably be expected to have, a Material Adverse Effect. (e) (i) The Lenders shall have received evidence, in form, scope and substance satisfactory to them, that all Debt under the Existing Precise Credit Agreement and the Existing Precise Subordinated Notes has been or will be, simultaneously with the transactions contemplated herein, prepaid, redeemed or defeased in full or otherwise satisfied and extinguished, together with all interest thereon and all other amounts owing pursuant thereto. In addition, the creditors under the Existing Precise Credit Agreement and the Existing Precise Subordinated Notes shall have terminated and released all pledges of and security interests in and Liens (if any) on the stock, assets and properties owned by each Loan Party and any of its Subsidiaries and the Agent shall have received such releases of security interests in and Liens on the stock, assets and properties owned by each Loan Party and its Subsidiaries, which releases shall be in form, scope and substance satisfactory to the Agent. Without limiting the foregoing, there shall have been delivered (A) proper termination statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC of each jurisdiction where a financing statement (Form UCC-1 or the appropriate equivalent) was filed with respect to each Loan Party and its Subsidiaries in connection with the security interests created with respect to such Debt and the documentation related thereto, (B) terminations or assignments of any security interest in, or Lien on, any patents, trademarks, copyrights, or similar interests of each Loan Party or any of its Subsidiaries on which filings have been made and (C) terminations of all mortgages, leasehold mortgages and deeds of trust created with respect to the property of each Loan Party or any of its Subsidiaries, all of which shall be in form, scope and substance satisfactory to the Agent. All accrued fees and expenses of the Agent and the Lenders (including the accrued fees and expenses of counsel to the Agent and of local counsel to the Lenders) shall have been paid. - 43 - (ii) The Borrower shall or will simultaneously with the transactions contemplated herein have repurchased, retired or redeemed all of the outstanding Existing Precise Subordinated Notes in accordance with their terms, or on such other terms and conditions as may be satisfactory to the Agent and the Required Lenders and all securities and note purchase agreements pursuant to which the Existing Precise Subordinated Notes were issued shall have been terminated and be of no further force or effect. Notwithstanding anything to the contrary contained in the foregoing, the prepayment premium, if any, in connection with the repurchase, retirement or redemption of the Existing Precise Subordinated Notes shall not exceed, in the aggregate, $2,200,000. (iii) The Borrower shall or will simultaneously with the transactions contemplated herein have redeemed the Existing Precise Redeemable Preferred Stock for an aggregate principal amount not to exceed $8,300,000. (iv) The Borrower shall or will simultaneously with the transactions contemplated herein have repurchased 124 shares of common stock of the Borrower from Parent for an aggregate principal amount not to exceed $3,500,000. (v) The Borrower shall or will simultaneously with the transactions contemplated herein have made a distribution to Parent in an aggregate amount not to exceed $6,500,000. (vi) The Agent shall or will simultaneously with the transactions contemplated herein have received evidence, in form, scope and substance satisfactory to it, that the matters set forth in this Section 3.01(e) have been satisfied on such date. (f) (i) The Borrower shall or will simultaneously with the transactions contemplated herein have received gross cash proceeds in an aggregate principal amount of $75,000,000 from the issuance by the Borrower of a like principal amount of the Senior Subordinated Notes on terms substantially as set forth in the Senior Subordinated Notes Indenture. On the date of the Initial Extension of Credit, and concurrently with the incurrence of Advances on such date, the Borrower shall or will simultaneously with the transactions contemplated herein have utilized the net cash proceeds from the issuance of the Senior Subordinated Notes to effect, in part, the Refinancing Transactions. (ii) All terms of, and documentation for, the Senior Subordinated Notes and the other Senior Subordinated Note Documents (including, without limitation, amortization, maturities, interest rates, covenants, defaults, remedies, sinking fund provisions, subordination provisions and other terms) shall be required to be satisfactory in scope, form and substance to the Agent, it being understood and agreed that in any event the Senior Subordinated Notes shall be unsecured but - 44 - may be guaranteed on a senior subordinated basis by the Subsidiaries of the Borrower. On the date of the Initial Extension of Credit, there shall have been delivered to the Agent true and complete copies of all Senior Subordinated Note Documents. (g) The Agent shall have received on or before the day of the Initial Extension of Credit (unless otherwise specified) the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Agent (unless otherwise specified) and (except for the Notes) in sufficient copies for each Lender: (i) The Notes payable to the order of the Lenders. (ii) Certified copies of the resolutions of the Board of Directors of the Borrower, each Guarantor and each other Loan Party approving this Agreement, the Notes, the Mortgages and each other Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Notes and each other Document. (iii) A copy of a certificate of the Secretary of State of the jurisdiction of incorporation of the Borrower, each Guarantor and each other Loan Party, dated on or reasonably near the date of the Initial Extension of Credit, in each case listing the charter of such Person and each amendment thereto on file in his office and certifying that (A) such charter is a true and correct copy thereof, (B) such amendments are the only amendments to such charter on file in his office, (C) such Person has paid all franchise taxes to the date of such certificate and (D) such Person is duly incorporated and in good standing under the laws of the State of the jurisdiction of its incorporation. (iv) A copy of a certificate of the Secretary of State of the States of New York, Pennsylvania, Illinois, Indiana, Florida, Massachusetts and Missouri dated on or reasonably near the date of the Initial Extension of Credit, stating that each Loan Party that does business in such state is duly qualified and in good standing as a foreign corporation in such state and has filed all annual reports required to be filed to the date of such certificate. (v) A certificate of the Borrower, each Guarantor and each other Loan Party, signed on behalf of such Person by its President or Vice President and its Secretary or Assistant Secretary, dated the date of the Initial Extension of Credit (the statements made in which certificate shall be true on and as of the date of the Initial Extension of Credit), certifying as to (A) the absence of any amendments to the charter of such Person since the date of the Secretary of State's certificate referred to in Section 3.01(g)(iii), (B) a true and correct copy of the bylaws of such Person as in effect on the date of the Initial Extension of Credit, (C) the due incorporation and good standing of such Person as a corporation organized under - 45 - the laws of the jurisdiction of its incorporation and the absence of any proceeding for the dissolution or liquidation of such Person, (D) the completeness and accuracy of the representations and warranties contained in the Documents as though made on and as of the date of the Initial Extension of Credit and (E) the absence of any event occurring and continuing, or resulting from the Initial Extension of Credit, that constitutes a Default. (vi) A certificate of the Secretary or Assistant Secretary of the Borrower, each Guarantor and each other Loan Party certifying the names and true signatures of the officers of such Persons authorized to sign this Agreement, the Notes and each other Document to which they are or are to be parties and the other documents to be delivered hereunder and thereunder. (vii) (A) A pledge and security agreement in substantially the form of Exhibit D-1, duly executed by each Loan Party and (B) a pledge and security agreement in substantially the form of Exhibit D-2, duly executed by Parent (together with each other pledge and security agreement delivered pursuant to Section 5.01(m) or 5.01(n), in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms, collectively, the "Security Agreement"), together with: (1) certificates representing the Pledged Shares and the Pledged Debt referred to therein accompanied, in the case of the Pledged Shares, by undated stock powers executed in blank, (2) acknowledgment copies or stamped receipt copies of proper financing statements, to be duly filed on or within a short time after the day of the Initial Extension of Credit under the UCC of the States of New York, Pennsylvania, Illinois, Indiana, Delaware, Florida, Massachusetts and Missouri and all other jurisdictions that the Collateral Agent may deem necessary or desirable in order to perfect and protect the Liens created under the Collateral Documents, covering the Collateral described in the Security Agreement, (3) completed requests for information, dated on or before the date of the Initial Extension of Credit, listing the financing statements referred to in clause (2) next above and all other effective financing statements filed in the jurisdictions referred to in clause (2) next above that name each Loan Party as debtor, together with copies of such other financing statements, (4) duly executed copies in proper form to be filed of all recordings and filings of or with respect to the Security Agreement that the Collateral Agent may deem necessary or desirable in order to perfect and protect the Liens created thereby, - 46 - (5) evidence of the insurance required by the terms of the Security Agreement, (6) unless already provided pursuant to Section 3.01(e), executed termination statements (Form UCC-3 or a comparable form), in proper form to be duly filed on the date of the Initial Extension of Credit under the UCC of all jurisdictions that the Collateral Agent may deem desirable in order to terminate or amend existing Liens on the Collateral described in the Security Agreement except for Permitted Liens, and (7) evidence that all other action that the Collateral Agent may reasonably deem necessary or desirable in order to perfect and protect the Liens and security interests created under the Security Agreement has been taken. (viii) (A) fully executed counterparts of Mortgages in form and substance reasonably satisfactory to the Agent, which Mortgages shall cover such of the real property owned by any Loan Party as are designated as such on Schedule 4.01(dd) (each a "Mortgaged Property" and, collectively, the "Mortgaged Properties"), together with evidence that counterparts of the Mortgages have been delivered to the title insurance company insuring the lien of such Mortgages for recording in all places to the extent necessary or, in the reasonable opinion of the Agent desirable, to effectively create a valid and enforceable first priority mortgage lien on each Mortgaged Property (subject to only Permitted Liens) in favor of the Agent for the benefit of the Secured Parties, and (B) mortgage policies on each Mortgaged Property issued by such title insurers reasonably satisfactory to the Agent and in amounts satisfactory to the Agent assuring the Agent that the Mortgages on the Mortgaged Properties are valid and enforceable first priority mortgage liens on the respective Mortgaged Properties, free and clear of all defects, interests and encumbrances except Permitted Liens, and such Mortgage Policies shall otherwise be in form and substance reasonably satisfactory to the Agent (including all endorsements thereto), and shall include, as appropriate, an endorsement for future advances under this Agreement and the Notes and for any other matter that the Agent in its discretion may reasonably request, shall not include an exception for mechanics' liens or creditors' rights, and shall provide for affirmative insurance and such reinsurance as the Agent in its discretion may reasonably request. (ix) A guaranty in substantially the form of Exhibit F-1 (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Parent Guaranty"), duly executed by Parent. - 47 - (x) A guaranty in substantially the form of Exhibit F-2 (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Subsidiary Guaranty" and, together with the Parent Guaranty and with each other guaranty delivered pursuant to Section 5.01(m), in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Guaranties"), duly executed by each Subsidiary Guarantor. (xi) Such financial, business and other information regarding each Loan Party and its Subsidiaries as the Lenders shall have reasonably requested, including, without limitation, information as to possible contingent liabilities, tax matters, environmental matters, obligations under Plans, collective bargaining agreements and other arrangements with employees, audited annual financial statements for the years ended December 31, 1994, December 31, 1995 and December 31, 1996, interim financial statements for the three month period ended March 31, 1996 and March 31, 1997 and detailed forecasts prepared by management, in form and substance satisfactory to the Agent, of balance sheets, income statements and cash flow statements on a monthly basis for the first year following the day of the Initial Extension of Credit and on an annual basis for each year thereafter until the Final Maturity Date. (xii) A solvency opinion from Corporate Valuation Advisors, Inc. addressed to the Agent and each of the Lenders and dated the date of the Initial Extension of Credit and supporting the conclusions that, after giving effect to the consummation of the Refinancing Transactions, including the issuance of the Senior Subordinated Notes and the incurrence of all financings contemplated herein, each of the Borrower and its Subsidiaries taken as a whole are not insolvent and will not be rendered insolvent by the indebtedness incurred in connection herewith, will not be left with unreasonably small capital with which to engage in their respective businesses and will not have incurred debt beyond their ability to pay such debts as they mature and become due, which solvency opinion shall be in form and substance satisfactory to the Agent. (xiii) Environmental assessment reports, in form and substance satisfactory to the Lenders. (xiv) Evidence of insurance (including, without limitation, business interruption insurance) naming the Collateral Agent as additional insured and loss payee with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is reasonably satisfactory to the Collateral Agent. (xv) An intellectual property security agreement in substantially the form of Exhibit E (together with each other intellectual property security agreement delivered pursuant to Section 5.01(m) or Section 5.01(n), in each case as amended, supplemented or otherwise modified from time to time in accordance - 48 - with its terms, the "Intellectual Property Security Agreement"), duly executed by each Loan Party, together with evidence that all action that the Collateral Agent may deem necessary or desirable in order to perfect and protect the liens and security interests created under the Intellectual Property Security Agreement has been taken. (xvi) A favorable opinion of Winston & Strawn, counsel for the Borrower, in substantially the form of Exhibit G hereto. (xvii) A favorable opinion of (A) Karp & Genauer, P.A., Florida counsel to the Borrower and each Guarantor, (B) Winston & Strawn, Illinois counsel to the Borrower and each Guarantor, (C) Bose, McKinney & Evans, Indiana counsel to the Borrower and each Guarantor, (D) Goulston & Storrs, Massachusetts counsel to the Borrower and each Guarantor, (E) Gallop, Johnson & Neuman, L.C., Missouri counsel to the Borrower and each Guarantor, and (F) Klett, Lieber, Rooney & Schorling, Pennsylvania counsel to the Borrower and each Guarantor, each in form and substance acceptable to the Agent. (xviii) (A) all existing agreements entered into by any Loan Party governing the terms and relative rights of its capital stock and any agreements entered into by shareholders relating to any such entity with respect to its capital stock (collectively, the "Shareholders' Agreements"); (B) all existing Plans and Multiemployer Plans; (C) all agreements evidencing or relating to Debt (other than in respect of Obligations under Capitalized Leases) of any Loan Party if the outstanding principal amount thereof exceeds (or upon the utilization of any unused commitments may exceed) $100,000 (collectively, the "Debt Agreements"); (D) all existing management, consulting and similar agreements (other than employment agreements) entered into by each Loan Party with any of their respective Affiliates (including, without limitation, the - 49 - Mentmore Management Agreement) (collectively, the "Management Agreements"); (E) all existing tax sharing, all allocation and other similar agreements entered into by each Loan Party (collectively, the "Tax Sharing Agreements"); and (F) all existing agreements evidencing or relating to any Investments if the amount theretofore invested exceeded (or if any requirement to make additional investments would exceed) $100,000 (other than Cash Equivalents) (collectively, the "Investment Agreements"); all of which Shareholders' Agreements, Plans, Multiemployer Plans, Debt Agreements, Management Agreements, Tax Sharing Agreements and Investment Agreements shall be in form and substance reasonably satisfactory to the Agent and shall be in full force and effect on the date of the Initial Extension of Credit. SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance. The obligation of each Lender to make a Revolving Credit Advance on the occasion of each Borrowing (including the Initial Extension of Credit), and the obligation of the Issuing Bank to issue a Letter of Credit (including the initial issuance), shall be subject to the conditions precedent that on the date of such Borrowing or issuance (a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing, Notice of Issuance and the acceptance by the Borrower of the proceeds of such Borrowing or of such Letter of Credit shall constitute a representation and warranty by the Borrower that both on the date of such notice and on the date of such Borrowing or issuance such statements are true): (i) the representations and warranties contained in each Document are correct on and as of such date, before and after giving effect to such Borrowing or issuance and to the application of the proceeds therefrom, as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing or issuance, in which case as of such specific date; and (ii) no event has occurred and is continuing, or would result from such Borrowing or issuance or from the application of the proceeds therefrom, that constitutes a Default; and (b) the Agent shall have received such other approvals, opinions or documents as any Lender through the Agent may reasonably request. SECTION 3.03. Certain Requirements with respect to Permitted Acquisitions. Prior to the making of any Revolving Credit Advance the proceeds of which are to be used to acquire a Business or Businesses in accordance with the requirements of this Agreement, (i) the Lenders shall have received a certificate from an authorized financial officer of the Borrower - 50 - certifying the specific uses to be made of the proceeds thereof (broken down by Permitted Acquisition) which certificate shall be in form and detail reasonably satisfactory to the Agent, (ii) neither the Agent nor the Required Lenders shall have become aware of any negative facts, conditions or other information which would reasonably lead the Agent or the Required Lenders to believe that (A) the information provided in any Information Package with respect to any Permitted Acquisition is not true and accurate in all material respects (or was not true and accurate in all material respects at the time such Information Package was furnished pursuant to this Agreement) or is incomplete by omitting to state any fact necessary to make such information not misleading in any material respect (or was incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at the time such Information Package was furnished pursuant to this Agreement) and neither the Agent nor the Required Lenders shall have so informed the Borrower in writing thereof or (B) the representations and warranties made in any of Sections 4.01(t), 4.01(u), 4.01(v) and 4.01(jj) are (or were) untrue in any material respect at the time such representations and warranties are (or were) made or deemed made and neither the Agent nor the Required Lenders shall have so informed the Borrower in writing thereof, (iii) the Borrower shall have satisfied the relevant requirements of Sections 5.01(k) and 5.02(d)(iv) and (iv) the Borrower shall have delivered to the Agent evidence, in form and substance satisfactory to the Agent, demonstrating that all documentation necessary to maintain the priority and/or enforceability of the security interests in or Liens upon the Collateral for the benefit of the Collateral Agent and the Secured Parties with respect to the Business being acquired and the Revolving Credit Advance to be made and as may be necessary under applicable law to maintain the priority of the security interests in such Collateral. SECTION 3.04. Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Sections 3.01, 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 the Agent responsible for the transactions contemplated by the Documents shall have received notice from such Lender prior to the Initial Extension of Credit specifying its objection thereto and if the Initial Extension of Credit consists of a Borrowing, such Lender shall not have made available to the Agent such Lender's ratable portion of such Borrowing. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties. In order to induce the Lenders to enter into this Agreement and to make the Revolving Credit Advances, and issue (or participate in) the Letters of Credit as provided herein, each of Parent (but only to the extent each such representation or warranty applies specifically to Parent), the Borrower and each other Loan Party makes the following representations, warranties and agreements, in each case after giving effect to the Refinancing Transactions, all of which shall survive the execution and - 51 - delivery of this Agreement and the other Documents and the making of the Revolving Credit Advances and issuance of the Letters of Credit, with the occurrence of each Borrowing and issuance of a Letter of Credit on or after the date of the Initial Extension of Credit being deemed to constitute a representation and warranty that the matters specified in this Article IV are true and correct on and as of the date of the Initial Extension of Credit and on the date of each such Borrowing and issuance of a Letter of Credit (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). (a) Each of Parent and the Borrower (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or assets or in which the conduct of its business requires it to so qualify or be licensed, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and (iii) has all requisite corporate power and authority (including, without limitation, all material governmental licenses, permits and other approvals) to own or lease and operate its properties and assets and to carry on its business as now conducted and as presently proposes to be conducted. On the date of the Initial Extension of Credit and upon the completion of the Refinancing Transactions, the authorized capital stock of the Borrower consists of 1,000 shares of common stock, no par value per share, of which 1 (one) share is issued and outstanding. All of the outstanding capital stock of the Borrower has been validly issued free of pre-emptive rights, is fully paid and non-assessable and, is owned by Parent in the amounts and types specified in Schedule 4.01(a) free and clear of all Liens. Except as set forth on Schedule 4.01(a), the Borrower has no outstanding securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options or warrants for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. (b) Set forth on Schedule 4.01(b) hereto is a complete and accurate list, as of the date hereof, of all Subsidiaries of each of Parent and the Borrower, showing as of the date hereof (as to each such Subsidiary) the jurisdiction of its incorporation, the number of shares of each class of capital stock authorized, and the number outstanding, on the date hereof and the percentage of the outstanding shares of each such class owned (directly or indirectly) by each of Parent and the Borrower and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the date hereof. All of the outstanding capital stock of such Subsidiaries has been validly issued free of pre-emptive rights, is fully paid and non-assessable and is owned by the Borrower or one or more of its Subsidiaries free and clear of all Liens, except those created under the Loan Documents. Each such Subsidiary (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or assets or in - 52 - which the conduct of its business requires it to so qualify or be licensed, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and (iii) has all requisite corporate power and authority (including, without limitation, all material governmental licenses, permits and other approvals) to own or lease and operate its properties and assets and to carry on its business as now conducted and as presently proposes to be conducted. Except as set forth on Schedule 4.01(b), no Subsidiary of the Borrower or the Borrower has outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options or warrants for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. (c) The execution, delivery and performance by Parent and each Loan Party of this Agreement, the Notes and each other Document to which it is a party, the consummation of the transactions contemplated hereby and thereby and the compliance by it with the terms and provisions hereof and thereof, are within Parent's and such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene Parent's or any Loan Party's charter or bylaws (or equivalent organizational documentation), (ii) violate any law (including, without limitation, the Exchange Act and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any material contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting Parent or any Loan Party, any of their respective Subsidiaries or any of their respective properties or assets or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties or assets of Parent or any Loan Party or any of their Subsidiaries. Neither Parent nor any Loan Party nor any of their Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, in each case where such breach, requirement or imposition would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (d) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by Parent or any Loan Party of this Agreement, or any other Document to which it is a party, or for the consummation of the transactions contemplated hereby or thereby, (ii) the grant by Parent or any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents (including the first priority nature thereof) or (iv) the exercise by the Agent, the Collateral Agent or any Lender of its rights under the Loan Documents or the remedies - 53 - in respect of the Collateral pursuant to the Collateral Documents, except for the authorizations, approvals, actions, notices and filings listed on Schedule 4.01(d), all of which have been duly obtained, taken, given or made and are in full force and effect. All applicable waiting periods in connection with the transactions contemplated hereby have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse conditions upon the rights of Parent, the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties or assets now owned or hereafter acquired by any of them. (e) This Agreement has been, and each of the other Documents when delivered hereunder will have been, duly executed and delivered by Parent and each Loan Party thereto. This Agreement and each other Document is the legal, valid and binding obligation of Parent and each Loan Party that is a party thereto, enforceable against Parent and such Loan Party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or limiting creditors' rights or by equitable principles generally (regardless of whether enforcement is sought in equity or at law). (f) The Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 1994, December 31, 1995 and December 31, 1996, and the Consolidated related statements of income and cash flows and the notes thereto of the Borrower and its Subsidiaries for the Fiscal Year then ended, accompanied by an opinion of Ernst & Young LLP, independent public accountants, and the Consolidated balance sheets of TMP and its Subsidiaries as at December 31, 1994 and December 31, 1995, and the related Consolidated statements of income and cash flows and the notes thereto of TMP and its Subsidiaries for the Fiscal Year then ended, duly certified by the chief financial officer of the Borrower, copies of which have been furnished to each Lender, fairly present, the financial condition of the Borrower and its Subsidiaries and TMP and its Subsidiaries as at such dates and the results of the operations and cash flow of the Borrower and its Subsidiaries and TMP and its Subsidiaries for the periods ended on such dates, all in accordance with GAAP applied on a consistent basis, and since December 31, 1996 there has been no Material Adverse Change. Except as fully disclosed in such financial statements, there were as of the date of such balance sheets referred to in this Section 4.01(f) no liabilities or obligations with respect to any Loan Party or any of their respective Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, would reasonably be expected to have a Material Adverse Effect on such Loan Party or any of its Subsidiaries (other than any such liabilities or obligations which arise in the ordinary course of business in connection with contracts entered into by any such Person). As of such balance sheet date, no Loan Party knows of any basis for the assertion against it or any of its Subsidiaries of any liability or obligation of any nature whatsoever that is not fully disclosed in such financial statements which, either individually or in the aggregate, would be expected to have a Material Adverse Effect on such Loan Party or any of its Subsidiaries. All information contained in each - 54 - Information Package furnished to the Lenders pursuant to Section 5.01(k) (with respect to subsequently acquired Businesses) is, to the best knowledge of the Borrower, true and accurate in all material respects and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect. (g) The Consolidated and consolidating forecasted balance sheets, income statements and cash flows statements and the notes thereto of the Borrower and its Subsidiaries delivered to the Lenders pursuant to Section 3.01(g)(xi) or 5.03 were prepared in good faith on a basis consistent with the financial statements referred to in Section 4.01(f), and there are no statements or conclusions therein which are based upon or include information known to the Borrower to be misleading in any material respect or which fail to take into account material information regarding the matters reported therein. On the date of the Initial Extension of Credit, the Borrower believed that such forecasts were reasonable. (h) Any information, exhibit or report (including, without limitation, the Offering Memorandum and all information contained in the Documents but excluding any financial projections) prepared and furnished by Parent, any Loan Party or their respective agents to the Agent or any Lender for purposes of or in connection with this Agreement, the other Documents or any transaction contemplated hereby or thereby is, and all other such information hereafter prepared and furnished by or on behalf of Parent, any Loan Party or any of their respective Subsidiaries in writing to the Agent or any Lender, will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at such time in light of the circumstances under which such information was provided. (i) There is no action, suit, investigation, litigation or proceeding affecting Parent, any Loan Party or any of their Subsidiaries, including any Environmental Claim, pending or threatened before any court, governmental agency or arbitrator (i) that affects or purports to affect the legality, validity or enforceability of this Agreement or any other Document or the consummation of the transactions contemplated hereby or thereby, (ii) with respect to any material Debt of Parent, any Loan Party or any of their respective Subsidiaries or (iii) that would reasonably be expected to have a Material Adverse Effect. (j) No proceeds of any Advance or drawings under any Letter of Credit will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Exchange Act. (k) Neither Parent nor any Loan Party is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance or drawings under any Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. - 55 - (l) Set forth on Schedule 4.01(l) hereto is a complete and accurate list of all Plans and Multiemployer Plans. No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan or Multiemployer Plan. Each Plan and each Multiemployer Plan (i) is in substantial compliance with ERISA and the Internal Revenue Code, (ii) 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 (iii) has been maintained, where required, in good standing with applicable regulatory authorities. As of the last annual actuarial valuation date, the funded current liability percentage, as defined in Section 302(d)(8) of ERISA, of each Pension Plan is at least 90% and there has been no material adverse change in the funding status of any such Plan since such date. (m) To the best knowledge of the Borrower, Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) for each Plan (where applicable), copies of which have been filed with the Internal Revenue Service and furnished to the Lenders, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status. (n) Neither Parent nor any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan. Neither Parent nor any Loan Party nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no such Multiemployer Plan, to the best knowledge of the Borrower, is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA. (o) Neither Parent nor any Loan Party, nor any Plan, nor any trust created thereunder, nor any trustee or administrator thereof, has engaged in a transaction in connection with which any Loan Party, any Plan or, such trust, could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Internal Revenue Code. No Plan which is subject to Section 302 of ERISA or Section 412 of the Internal Revenue Code has incurred an "accumulated funding deficiency" as defined in either of such Sections, whether or not waived, nor has requested or obtained any extension of any applicable amortization period. No Plan is a plan described in Section 4063(a) of ERISA. (p) Neither Parent nor any of the Loan Parties have liability under any employee benefit plan, within the meaning of Section 3(3) of ERISA, other than plans maintained by the Loan Parties. Each Plan that is subject to Parts 1, 2 and 4 of Subtitle B of Title I of ERISA is "qualified" within the meaning of Section 401(a) of the Internal Revenue Code and has been determined by the Internal Revenue Service to be so qualified, the trusts maintained thereunder have been determined by the Internal Revenue Service to be exempt from taxation under Section 501(a) of the Internal Revenue Code, and all required submissions have been made to the Internal Revenue Service with respect - 56 - to maintaining the "qualified" status of each such Plan under Section 401(a) of the Internal Revenue Code. (q) Except as set forth in the financial statements referred to in this Section 4.01 and in Section 5.03, neither Parent nor any of the Loan Parties and their respective Subsidiaries have material liability with respect to "expected post retirement benefit obligations" within the meaning of Statement of Financial Accounting Standards No. 106, and no Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees or dependents thereof of Parent or any Loan Party beyond their retirement or other termination of service (other than (i) coverage mandated by applicable law, (ii) death benefits or retirement benefits under any Pension Plan, (iii) deferred compensation benefits accrued as liabilities on the books of Parent or any Loan Party or (iv) benefits the full cost of which is borne by the current or former employee (or his or her dependents or beneficiaries)). All reports, notices and other disclosure relating to Plans required to be filed with, or furnished to, government entities, plan participants or plan beneficiaries have been timely filed and furnished in all material respects in accordance with applicable law. With respect to each applicable Plan, Parent, the Loan Parties and all ERISA Affiliates have complied in all material respects with the provisions of Section 4980B(f) of the Internal Revenue Code. (r) Neither Parent nor any of the Loan Parties have received or are aware of any material actions, claims (other than routine claims for benefits), lawsuits or arbitrations pending or, threatened with respect to any Plan or against any fiduciary of any Plan, and neither Parent nor the Loan Parties have knowledge of any facts that could give rise to any such actions, claims, lawsuits or arbitrations. Neither Parent nor any Loan Party nor any ERISA Affiliate has ever contributed to, or withdrawn in a partial or complete withdrawal (within the meaning of Sections 4205 or 4203 of ERISA, respec tively) from, any Multiemployer Plan or has any fixed or contingent liability under Section 4204 of ERISA. (s) The use of the proceeds of any Advance or drawings under any Letter of Credit will not be a prohibited transaction within the meaning of Section 406 of ERISA. (t) The operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws, and each Loan Party and each of its Subsidiaries have obtained, maintain and comply with all material Environmental Permits necessary for their respective businesses, operations and properties, all past Environmental Claims have been resolved without ongoing material obligations or costs, and no facts or circumstances exist that would (i) form the basis of an Environmental Claim against any Loan Party or any of its Subsidiaries or any of their respective properties, (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law, or (iii) give rise to Environmental Costs and Liabilities, except for such of the - 57 - foregoing which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (u) No Loan Party nor any of its Subsidiaries has received (i) any notice or claim to the effect that it is or may be liable to any Person or Governmental Authority as a result of or in connection with any Hazardous Materials or (ii) any letter or request for information under CERCLA or comparable state laws, and, none of the current or former operations of the Loan Party or any of its Subsidiaries is the subject of any Federal or state investigation relating to or in connection with any Hazardous Materials or Environmental Claims at any location, except for such of the foregoing which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (v) No Loan Party nor any of its Subsidiaries nor any of their respective facilities or operations are subject to any outstanding written order or agreement with any Governmental Authority or private party relating to (i) any actual or potential violation of or liability under Environmental Laws or (ii) any Environmental Claims, except for such of the foregoing which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (w) (i) The provisions of the Collateral Documents are effective to create in favor of the Collateral Agent for the benefit of the Secured Parties a legal, valid and enforceable security interest in all right, title and interest of each Loan Party and Parent in the Collateral, and the Collateral Documents, upon the filing of Form UCC-1 financing statements or the appropriate equivalent (which filings, if this representation and warranty is made on or after the tenth day after the date of the Initial Extension of Credit, have been made), creates a fully perfected first priority lien on, and security interest in, all right, title and interest in all of the Collateral, subject to no other Liens (other than Permitted Liens). Each of Parent and each Loan Party to the Collateral Documents has good and valid title to all Collateral owned by it, free and clear of all Liens except Permitted Liens. (ii) The Mortgages create, upon recording thereof, as security for the obligations to be secured thereby, a valid and enforceable first priority perfected security interest in and mortgage lien on all of the Mortgaged Properties in favor of the Collateral Agent for the benefit of the Secured Parties and subject to no other Liens (other than Permitted Liens). Each Loan Party has good and marketable title to all fee-owned Mortgaged Properties owned by such Loan Party free and clear of all leases, occupancy interests and all Liens except Permitted Liens. (x) Parent, each Loan Party and each of their respective Subsidiaries has filed, has caused to be filed or has been included in all tax returns (Federal, state, local and foreign) required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties on or before the due dates thereof. - 58 - (y) Set forth on Schedule 4.01(y) hereto is a complete and accurate list, as of the date hereof, of each taxable year of Parent, each Loan Party and each of their respective Subsidiaries and Affiliates for which Federal income tax returns have been filed and for which the expiration of the applicable statute of limitations for assessment or collection has not occurred by reason of extension or otherwise (an "Open Year"). (z) There is no unpaid amount, as of the date hereof, of adjustments to the Federal income tax liability of Parent, each Loan Party and each of their respective Subsidiaries proposed by the Internal Revenue Service with respect to Open Years. No issues have been raised by the Internal Revenue Service in respect of Open Years that, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. There is no unpaid amount, as of the date hereof, of adjustments to the state, local and foreign tax liability of Parent, each Loan Party and their respective Subsidiaries and Affiliates proposed by all state, local and foreign taxing authorities (other than amounts arising from adjustments to Federal income tax returns, if any that, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect). No issues have been raised by such taxing authorities that, could have a Material Adverse Effect. (aa) Neither Parent nor any Loan Party nor any of their respective Subsidiaries is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated hereby, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (bb) The Borrower and its Subsidiaries (taken as a whole) are, and after the consummation of the Refinancing Transactions and the transactions contemplated by this Agreement and the other Documents and receipt and application by the Borrower of the proceeds of the Borrowings in accordance with the terms of this Agreement will be, Solvent. (cc) (i) Set forth on Schedule 4.01(cc) hereto is a complete and accurate list, as of the date hereof, of all Debt of, each of Parent, each Loan Party and each of their respective Subsidiaries which is to remain outstanding after giving effect to the Refinancing Transactions and the other transactions contemplated herein (excluding the Advances and the Letters of Credit, collectively, the "Existing Debt") in each case showing the aggregate principal amount thereof and the name of the respective borrower and Parent or any Loan Party or any of its Subsidiaries or any other entity which directly or indirectly guaranteed such debt. (ii) Neither Parent nor any Loan Party nor any of their respective Subsidiaries is liable for any Debt or other obligations of any nature whatsoever - 59 - (whether absolute, accrued, contingent or otherwise and whether or not due) of any Non-Precise Subsidiaries, but excluding such obligations in which Parent, the Borrower and its Subsidiaries are jointly and severally liable as a matter of law. (iii) The subordination provisions contained in the Senior Subordinated Notes and the other Senior Subordinated Note Documents are enforceable against the Borrower and its Subsidiaries, the respective guarantors thereunder and the holders of the Senior Subordinated Notes, and all Obligations of Parent and the Loan Parties under the Loan Documents are the within the definition of "Senior Debt" included in such subordination provisions. (iv) At the time of consummation thereof, the issuance of the Senior Subordinated Notes shall have been consummated, and all actions taken by Parent, each Loan Party or any of their respective Subsidiaries pursuant to or in furtherance of the issuance of the Senior Subordinated Notes shall have been taken, in accordance with the terms of the Senior Subordinated Note Documents and all applicable United States and other laws. At the time of consummation thereof, all consents, approvals of and permits for, and filings and registrations with, and all other actions in respect of, all Governmental Agencies, authorities or instrumentalities required in order to make or consummate the issuance of the Senior Subordinated Notes have been (or will, within the time frame required, be) obtained, given, filed or taken and are or will be in full force and effect (or effective judicial relief with respect thereto has been obtained). Any applicable waiting periods with respect to the issuance of the Senior Subordinated Notes shall have expired without any action being taken by any competent authority which restrains, prevents or imposes material adverse conditions upon the issuance of the Senior Subordinated Notes. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the issuance of the Senior Subordinated Notes or the occurrence of any Borrowing or the performance by Parent, any Loan Party or any of their respective Subsidiaries of their obligations under the respective Documents. (dd) Set forth on Schedule 4.01(dd) hereto is a complete and accurate list of all real property as of the date hereof owned by any Loan Party or any of its Subsidiaries, showing the street address, county or other relevant jurisdiction, state, record owner and book and fair value thereof. Each Loan Party or such Subsidiary has good, marketable and insurable fee simple title to such real property, free and clear of all Liens, other than Permitted Liens. (ee) Set forth on Schedule 4.01(ee) hereto is a complete and accurate list of all leases as of the date hereof of real property under which any Loan Party or any of its Subsidiaries is the lessee, showing the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof. Each such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms. - 60 - (ff) Set forth on Schedule 4.01(ff) hereto is a complete and accurate list of all Investments as of the date hereof held by any Loan Party or any of its Subsidiaries having a fair market value in excess of $50,000, showing the amount, obligor or issuer and maturity, if any, thereof. Parent has no Subsidiaries other than those Subsidiaries of Parent listed on Schedule 4.01(b) hereto. The Borrower has no Subsidiaries other than those Subsidiaries of the Borrower listed on Schedule 4.01(b) hereto. (gg) Set forth on Schedule 4.01(gg) hereto is a complete and accurate list as of the date hereof of all patents, trademarks, trade names, service marks and copyrights, and all applications therefor and licenses thereof, of each Loan Party or any of its Subsidiaries, showing as of the date hereof the jurisdiction in which registered, the registration number, the date of registration and the expiration date. (hh) Each Loan Party and each of its Subsidiaries has good, marketable and valid title to all assets owned by it, including, without limitation, all property reflected as owned by it in the balance sheets of each Loan Party referred to in Section 4.01(f) (except as sold or otherwise disposed of since the date of such balance sheets pursuant to any transactions not prohibited under this Agreement), free and clear of all Liens, other than (i) as referred to in the balance sheets or in the notes thereto or (ii) Permitted Liens. (ii) Neither Parent nor any Loan Party nor any Subsidiary of any Loan Party is (A) engaged in any unfair labor practice that would reasonably be expected to have a Material Adverse Effect or (B) a party to a collective bargaining agreement as of the date hereof, except as set forth in Schedule 4.01(ii). The Loan Parties and Parent are in compliance in all material respects with all applicable laws, agreements and contracts relating to employment, employment practices, wages, hours and terms and conditions of employment, including, but not limited to, employee compensation matters. There is (i) no unfair labor practice complaint or unlawful employment practice charge pending against Parent, any Loan Party or any Subsidiary of any Loan Party or, to the best of Parent's, the Borrower's and each other Loan Party's knowledge, threatened against any of them, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against Parent, any Loan Party or any Subsidiary of any Loan Party or, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against Parent, any Loan Party or any Subsidiary of any Loan Party or, to the best of Parent's, the Borrower's and each other Loan Party's knowledge, threatened against any of them, (iii) no union representation proceeding pending with respect to the employees of Parent, any Loan Party or any Subsidiary of any Loan Party and (iv) neither Parent nor any Loan Party nor any Subsidiary of any Loan Party has received notice of the intent of any Federal, state, local or foreign agency responsible for the enforcement of labor or employment laws to conduct an investigation with respect to or relating to Parent, any Loan Party or any Subsidiary of any Loan Party and no such investigation is in progress except (with respect to any matter specified in clause (i), (ii), (iii) or (iv) above, either individually or in the aggregate) such as would not reasonably be expected to have a Material Adverse Effect. - 61 - (jj) Each of Parent, each Loan Party and each of their respective Subsidiaries is in compliance with all applicable statues, laws, ordinances, codes, rules, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property and assets (including applicable statues, regulations, orders and restrictions relating to environmental standards and controls) to the extent required as of the date of the Initial Extension of Credit, except such instances of noncompliance as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the business nor the properties of any Loan Party or any of its Subsidiaries is affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that would reasonably be expected to have a Material Adverse Effect. (kk) Neither Parent, any Loan Party nor any of its Subsidiaries is in default under any contract, document or agreement to which it is a party, and no event, condition or occurrence currently exists, or will result from the execution, delivery and performance by Parent or such Loan Party of this Agreement or any of the Documents to which it is a party and the transactions contemplated hereby and thereby, which, after notice or lapse of time, or both, will constitute such a default by Parent or such Loan Party under any contract, document or agreement to which its a party, in each case which, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. (ll) On the date of the Initial Extension of Credit, all representations and warranties made by Parent and any Loan Party in the Senior Subordinated Note Documents were true and correct in all material respects as at the time as of which such representations and warranties were made (or deemed made). On the date of the Initial Extension of Credit, all representations and warranties contained in the other Loan Documents shall be true and correct in all material respects as if made on such date. ARTICLE V COVENANTS SECTION 5.01. Affirmative Covenants. So long as any Advance, any fees or any other Obligations owing hereunder shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, each Loan Party, and, to the extent expressly made applicable, Parent will: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, and Parent will comply, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control - 62 - Act of 1970, except for such instances of non-compliance as would not reasonably be expected to have a Material Adverse Effect. (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, and Parent will pay and discharge, before the same shall become delinquent, (i) all Taxes, assessments and governmental charges or levies imposed upon it or upon its property that, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property that, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; provided, however, that each Loan Party shall not be required to pay or discharge any such Tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. (c) Compliance with Environmental Laws. Comply, and cause each of its Subsidiaries to comply, and will use its best efforts to cause all lessees and other Persons operating or occupying its owned and leased properties to comply with all applicable Environmental Laws and Environmental Permits; obtain and renew, and cause each of its Subsidiaries to obtain and renew, all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws, except for such instances of non-compliance as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (d) Maintenance of Properties and Assets; Insurance. Each Loan Party will, and cause each of its Subsidiaries to, (i) keep all property and assets necessary in its business in good working order and condition (ordinary wear and tear excepted), (ii) maintain insurance against loss or damage of the kinds customarily insured against by corporations similarly situated and owning properties and engaged in like businesses, with reputable insurers or with the government of the United States of America or any agency or instrumentality thereof, in such amounts (giving effect to self insurance) with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry, (iii) maintain public liability insurance with financially sound and reputable insurance companies in such amounts and coverage as determined in good faith by senior management of each Loan Party to be appropriate for each Loan Party and their respective Subsidiaries and (iv) maintain workers' compensation insurance with financially sound and reputable insurance companies as statutorily required by each applicable locale. (e) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, and Parent will preserve and - 63 - maintain its corporate existence, rights (charter and statutory), and its material permits, licenses, approvals, privileges and franchises except as otherwise permitted under Section 5.02(c). (f) Visitation Rights. At any reasonable time and from time to time upon prior notice and at the Borrower's expense permit the Agent or any of the Lenders or any agents or representatives thereof, to (i) examine, audit and make copies of and abstracts from the records and books of account of, (ii) visit the properties of, any Loan Party or any of its Subsidiaries, and (iii) discuss the affairs, finances and accounts of any Loan Party or any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants; it being understood however that, unless an Event of Default has occurred or is continuing, each Lender shall bear its own cost with respect to the exercise of its visitation rights under this Section 5.01(f) in excess of one such visit per annum. (g) Preparation of Environmental Reports. At the request of the Agent at the following times: (i) upon the receipt of a notice under Section 5.03(q) of this Agreement, (ii) upon the acquisition of real property by any Loan Party or any of its Subsidiaries and (iii) upon the occurrence or continuance of an Event of Default arising from any environmental matters connected with any property owned, leased or operated by any Loan Party, provide to the Lenders within 60 days after such request, at the expense of the Borrower, a Phase I environmental site assessment report for any of its properties described in such request, prepared by a nationally recognized environmental consulting firm (and, if based upon the reasonable recommendation of such environmental consulting firm, a Phase II environmental site assessment report) indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action required under applicable Environmental Law or by any Governmental Authority in connection with any Hazardous Materials on such properties. Such Phase I environmental assessment report shall have been dated within: (A) six months of the date of the event described in (i) or (iii), above, or, in the case of an acquisition described in (ii) above, the earlier of the date of a purchase agreement entered into with respect to such acquisition or the date of any Information Package delivered to the Agent in connection therewith; or (B) twelve months of the applicable date described in (A) if supplemented with a review report prepared by a nationally recognized environmental consulting firm. (h) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which true, full and correct entries shall be made of all financial dealings and transactions and the assets and business of each Loan Party and each of its Subsidiaries sufficient to enable financial statements for each Loan Party to be prepared in accordance with generally accepted accounting principles. (i) Compliance with Terms of Leaseholds. Make all payments and otherwise perform all obligations in respect of all leases of real property to which any Loan Party or any of its Subsidiaries is a party, keep such leases in full force and effect and not - 64 - allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, notify the Agent of any material default by any party with respect to such leases and cooperate with the Agent in all respects to cure any such default, except for such instances of noncompliance with this clause (i) as would not reasonably be expected to have a Material Adverse Effect. (j) Performance of Obligations. Perform, and cause each of its Subsidiaries to perform, and Parent will perform, all of its obligations under the terms of each mortgage, indenture, security agreement, loan agreement, credit agreement or any other agreement, contract or instrument by which it is bound, except such non-performance as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. In addition to the requirements of the immediately preceding sentence, the Borrower will perform all of its obligations under the terms of the Senior Subordinated Note Documents and the Mentmore Management Agreement. (k) Certain Requirements with respect to Permitted Acquisitions. Unless the Required Lenders otherwise agree in writing with respect to any Business acquired after the Effective Date, prior to (and within any time requirements specified below) any acquisition (or concurrently with the consummation thereof as specified below) by the Borrower or any of its Wholly-Owned Subsidiaries of a Business, the Borrower shall furnish to the Agent (with sufficient copies for each of the Lenders, and the Agent will promptly forward to each of the Lenders): (i) at least twenty (20) Business Days prior to the acquisition of the respective Business, the Information Package relating to such Business; (ii) concurrently with the acquisition of such Business and to the extent required by the Agent, fully executed counterparts of a Mortgage, in form and substance reasonably satisfactory to the Agent, which Mortgage shall cover the owned property of the Business to be acquired, together with evidence that counterparts of such Mortgage have been delivered to the title insurance company insuring the lien on such property for recording in all places to the extent necessary or, in the reasonable opinion of the Agent, desirable to effectively create a valid and enforceable first priority mortgage lien on such property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Parties; (iii) concurrently with the acquisition of such Business and to the extent required by the Agent, a Mortgage Policy on the owned real property associated with such Business issued by title insurers reasonably satisfactory to the Agent in amounts reasonably satisfactory to the Agent assuring the Agent that the Mortgage on such property is a valid and enforceable first priority mortgage lien on such property, free and clear of all defects and encumbrances except Permitted Liens and such Mortgage Policy shall otherwise be in form and substance reasonably satisfactory to the Agent; - 65 - (iv) in the case of any property that is a leasehold, concurrently with the acquisition of such property and to the extent required by the Agent, a true and correct copy of the lease for such property; (v) concurrently with the acquisition of such Business, an opinion of local counsel reasonably satisfactory to the Agent, which shall cover the perfection of the security interests granted pursuant to such Mortgage and such other matters incident to the transaction contemplated thereby as the Agent may reasonably request; and (vi) an officer's certificate of the Borrower certifying the proposed sources and uses of funds contemplated in connection with the acquisition of the respective Business. (l) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are fair and reasonable and no less favorable to such Loan Party or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate; provided that, so long as no Default or Event of Default exists or would result therefrom, the foregoing restriction shall not apply to (i) any payments under the Tax Sharing Agreement permitted by Section 5.02(f) hereof and (ii) the payment by the Borrower of management fees to Mentmore under the Mentmore Management Agreement in an aggregate amount not to exceed amounts permitted under the Senior Subordinated Notes Indenture; provided, further, that the payment of any such fees in excess of $300,000 per annum would be permitted under Section 5.04 hereof. (m) Covenant to Give Security. In addition to the requirements of Section 5.01(n), upon the request of the Collateral Agent following the occurrence and during the continuance of an Event of Default, and at the expense of the Borrower, (i) within 10 days after such request, furnish to the Collateral Agent a description of the real and personal properties of each Loan Party and each of its Subsidiaries in detail satisfactory to the Collateral Agent, (ii) within 15 days after such request, duly execute and deliver to the Collateral Agent mortgages, pledges, assignments and other security agreements, as specified by and in form and substance satisfactory to the Collateral Agent, securing payment of all the Obligations of each Loan Party under the Loan Documents and constituting Liens on all such properties, (iii) within 30 days after such request, take whatever action (including, without limitation, the recording of mortgages, the filing of UCC financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary or advisable in the opinion of the Collateral Agent to vest in the Collateral Agent (or in any representative of the Agent designated by it) valid and subsisting Liens on the properties purported to be subject to the security agreements delivered pursuant to this Section 5.01(m), enforceable against all third parties in accordance with their terms, (iv) within 60 days after such request, deliver to the Collateral Agent a signed copy of a favorable opinion, addressed to the Collateral Agent, of counsel for the Borrower acceptable to the Collateral Agent as to the matters contained - 66 - in clauses (i), (ii) and (iii) of this Section 5.01(m), as to such security agreements being legal, valid and binding obligations of each Loan Party enforceable in accordance with their terms and as to such other matters as the Collateral Agent may request and (v) at any time and from time to time, promptly execute and deliver any and all further instruments and documents and take all such other action as the Collateral Agent may deem desirable in obtaining the full benefits of, or in preserving the Liens of, such security agreements. (n) Additional Loan Parties. Cause any newly organized or acquired direct or indirect Subsidiary of the Borrower to execute and deliver to the Agent as promptly as practicable and in any event within 30 days after the organization or acquisition of such Subsidiary (A) a security agreement supplement in the form of Exhibit A to the Security Agreement, (B) a guaranty in form and substance satisfactory to the Agent and (C) such other documents, agreements, certificates or instruments as the Agent may reasonably request, in each case in form and substance satisfactory to the Agent, and to take all such other actions that may be necessary or that the Agent may deem desirable in order to perfect and protect any pledge, assignment or security interest granted by such security agreement (granting a security interest in the receivables, inventory, deposit accounts, equipment, intellectual property and other assets of such Subsidiary) of such Subsidiary to the Agent for the benefit of the Lenders or to enable the Agent to exercise and enforce its rights and remedies thereunder. (o) Transfer of Blocked Accounts. The Borrower will notify all of its account debtors of the transfer of all of the Existing Accounts to Fleet and will arrange to have all amounts owing by such account debtors to the Borrower to be paid into the blocked accounts to be maintained by the Borrower with Fleet as soon as practicable after the Effective Date but in any event no later than six months from the Effective Date. SECTION 5.02. Negative Covenants. So long as any Advance, together with interest, fees and all other Obligations incurred hereunder and under the Notes shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, each of Parent (to the extent expressly made applicable) and each Loan Party covenants and agrees that it will not, at any time: (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, or Parent will not create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist under the UCC of any jurisdiction, a financing statement that names any Loan Party or any of its Subsidiaries as debtor, or sign or suffer to exist any security agreement authorizing any secured party thereunder to file such financing statement, or assign any accounts or other right to receive income, excluding, however, from the operation of the foregoing restrictions the following: (i) Liens created under the Loan Documents; - 67 - (ii) Permitted Liens; (iii) Liens existing on the Effective Date and described on Schedule 5.02(a)(iii) hereto; (iv) Liens arising in connection with Capitalized Leases permitted under Section 5.02(b)(ii); provided that no such Lien shall extend to or cover any Collateral or assets other than the assets subject to such Capitalized Leases; (v) purchase money Liens upon or in real property or equipment acquired or held by the Borrower in the ordinary course of business to secure the purchase price of such real property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition of any such real property or equipment to be subject to such Liens, or Liens existing on any such real property or equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, however, that no such Lien shall extend to or cover any property other than the property or equipment being acquired, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and provided further that the aggregate principal amount of the Debt secured by Liens permitted by this clause (v) shall not exceed the amount permitted under Section 5.02(b)(iii) at any time outstanding and that any such Debt shall not otherwise be prohibited by the terms of the Loan Documents; (vi) the filing of financing statements solely as a precautionary measure in connection with operating leases; (vii) the replacement, extension or renewal of any Lien permitted by clause (iii) of this Section 5.02(a) upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby; and (viii) Liens of the Borrower permitted under the terms of the Senior Subordinated Notes Indenture. (b) Debt. Create, incur or assume, or permit any of its Subsidiaries to create, incur or assume, or Parent will not create, incur or assume, any Debt other than: (i) Debt in respect of Hedge Agreements designed to hedge against fluctuations in interest rates or foreign exchange rates incurred in the ordinary course of business and consistent with prudent business practice; - 68 - (ii) Obligations under Capitalized Leases so long as the aggregate principal amount of such Obligations shall not exceed the aggregate principal amount of Capitalized Leases outstanding on the Effective Date plus $15,000,000 at any time outstanding; (iii) Debt secured by Liens permitted by Section 5.02(a)(v) and clause (b) of the definition of "Permitted Liens" and Debt (other than subordinated Debt incurred pursuant to Section 5.02(b)(vi)) assumed or acquired in connection with a Permitted Acquisition as permitted under this Agreement, so long as the aggregate principal amount of all such Debt shall not exceed $25,000,000 at any time outstanding; (iv) Debt of the Borrower pursuant to the Senior Subordinated Notes in an aggregate principal amount not to exceed $75,000,000; (v) Debt under the Loan Documents; (vi) unsecured subordinated Debt of the Borrower (the "New Subordinated Notes") so long as (1) the aggregate outstanding principal amount thereof does not exceed $25,000,000, (2) at least twenty (20) Business Days prior to the issuance thereof, the Borrower shall have delivered to each of the Lenders substantially final drafts of the documents pursuant to which the New Subordinated Notes are to be issued and with any changes thereto made after the initial delivery of such documents to be delivered to the Agent and with any significant changes thereto made after such initial delivery to be delivered to each of the Lenders at least five (5) Business Days prior to the issuance of such New Subordinated Notes, (3) the final maturity date thereof is at least one year beyond the Final Maturity Date, (4) there are no required amortization, mandatory redemption or sinking fund provisions prior to the one-year anniversary of the Final Maturity Date, (5) all other terms and conditions thereof (excluding interest rates but including, without limitation, covenants, defaults, remedies and subordination provisions) are no less favorable to the Agent than the Senior Subordinated Notes, and the Required Lenders have not informed the Borrower in writing prior to the end of such twenty (20) Business Days that the terms of the New Subordinated Notes are not reasonably acceptable to them, (6) no Default or Event of Default then exists or would result therefrom, (7) based on calculations made by the Borrower on a Pro Forma Basis as if the incurrence of such Debt had occurred on the first day of the respective Calculation Period relating to such incurrence, no Default or Event of Default will exist under, or would have existed during the period beginning on the first day of the respective Calculation Period and ended on the Determination Date under, the financial covenants contained in Section 5.04, (8) based on good faith projections prepared by the Borrower for the period from the date of the Debt to the date which is one year thereafter, the level of financial performance measured by the covenants set forth in Section 5.04, shall be better than or equal to such level as would be - 69 - required to provide that no Default or Event of Default will exist under the financial covenants contained in Section 5.04, as compliance with such covenants will be required through the date which is one year from the date of the incurrence of such Debt, (9) the Borrower shall have delivered to the Agent an officer's certificate executed by an authorized financial officer of the Borrower, certifying to the best of such officer's knowledge, compliance with the requirements of this Section 5.02(b)(vi) and containing the calculations required by the preceding clauses (7) and (8), (10) the net cash proceeds thereof shall be used (A) for the same purposes as Revolving Credit Advances or (B) to make a voluntary prepayment of Advances and (11) until such proceeds are so used, the Borrower shall deposit such proceeds with the Agent pursuant to a cash collateral arrangement reasonably satisfactory to the Agent whereby such proceeds shall be disbursed to the Borrower from time to time for the purposes described in clause (A) or (B) of the immediately preceding clause (10), with such proceeds to be so disbursed to the Borrower upon (x) written certification by an authorized officer of the Borrower that no Default or Event of Default then exists or would result from the use of such proceeds and as to the intended use of such proceeds and (y) compliance by the Borrower with the applicable terms of this Agreement with respect to the use of such proceeds, provided that at any time while an Event of Default has occurred and is continuing, the Required Lenders may direct the Agent (in which case the Agent shall, and is hereby authorized by the Borrower to, follow said directions) to apply any or all proceeds then on deposit in such cash collateral account to the repayment of Obligations hereunder; (vii) indorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (viii) Existing Debt to the extent the same is listed on Schedule 4.01(cc), and refinancings or renewals of such Existing Debt shall be permitted so long as (A) such refinancings and renewals shall not be in excess of the respective amounts set forth on Schedule 4.01(cc) and (B) any such renewal or extension does not encumber any additional assets or properties of the Borrower or any of its Subsidiaries; (ix) intercompany Debt among the Borrower and its Wholly-Owned Subsidiaries to the extent permitted by Section 5.02(e)(xi); (x) Debt of the Borrower and its Subsidiaries consisting of accrued expenses and trade payables incurred in the ordinary course of business; and (xi) Debt of the Borrower and its Subsidiaries not otherwise permitted under this Section 5.02(b) in an aggregate principal amount not to exceed $2,000,000 at any one time outstanding. - 70 - (c) Mergers, Etc. Merge into or consolidate with any Person or permit any Person to merge into it, or permit any of its Subsidiaries to do so, except (A) so long as no Default or Event of Default then exists or would result therefrom, the Borrower or any Wholly-Owned Subsidiary of the Borrower may be merged into or consolidated with the Borrower (so long as the Borrower is the surviving corporation of such merger) or any other Wholly-Owned Subsidiary of the Borrower and (B) the Borrower and its Wholly-Owned Subsidiaries shall be permitted to merge with another Person (so long as such Borrower or Subsidiary is the surviving corporation) and so long as such merger is used to effect a Permitted Acquisition in compliance with Section 5.02(d)(iv). (d) Purchases, Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, any property or assets, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets of any Person, or grant any option or other right to purchase, lease or otherwise acquire any property or assets (other than purchases or other acquisitions of Inventory and materials in the ordinary course of its business) or permit any of its Subsidiaries to do so, except: (i) (A) sales of Inventory, (B) proceeds from condemnation, casualty losses and other similar dispositions and (C) sales of Inventory and other assets which, in the reasonable opinion of the Borrower, are obsolete, uneconomic or no longer useful in the conduct of its business, in each case in the ordinary course of its business consistent with past practices; (ii) sales of equipment to a customer of the Borrower or any of its Subsidiaries approved by the Agent pursuant to terms that are (x) ancillary to an agreement to supply such customer with products of the Borrower or any such Subsidiary which is entered into after the date hereof on an arm's-length basis and (y) commercially reasonable in the context of such supply agreement, so long as (a) the equipment sold is used in the production of such products for such customer and (b) the fair market value of all equipment disposed of pursuant to this clause (ii) after the date hereof does not exceed $1,500,000 in the aggregate; (iii) sales of other assets for cash and for fair market value in an aggregate amount for all Loan Parties not to exceed $2,000,000 in any Fiscal Year; and (iv) the Borrower and each of its Wholly-Owned Subsidiaries may make Permitted Acquisitions so long as (1) as a result of the respective Permitted Acquisition, such Businesses are wholly-owned by the Borrower or such Wholly-Owned Subsidiary, (2) such Businesses are located in the United States or such other location satisfactory to the Agent, (3) the Collateral Agent is able to obtain a first priority perfected security interest in and lien upon the assets and properties of such Businesses so acquired with rights and remedies of the Lenders comparable to those available in this Agreement (subject only to Permitted Liens) and the Borrower or such Subsidiary shall have taken all of the actions specified - 71 - in Section 5.01(k) with respect thereto, (4) at least twenty (20) Business Days prior to the consummation of any Permitted Acquisition of any Business, the Borrower shall have delivered to each of the Lenders the Information Package for the respective Business or Businesses and the certificate required pursuant to Section 5.01(k), (5) any Permitted Acquisition of (x) any one Business in which the total consideration exceeds $20,000,000 or (y) any Businesses in which the total consideration exceeds $40,000,000, shall be subject to the prior written consent of the Agent and the Required Lenders and (6) the Borrower shall have delivered to the Agent an officer's certificate executed by an authorized financial officer of the Borrower, certifying (i) that based on calculations made by the Borrower on a Pro Forma Basis after giving effect to the respective Permitted Acquisition, no Default or Event of Default will exist under, or would have existed during the period of four consecutive fiscal quarters last reported (or required to be reported pursuant to Section 5.03(c) or (d), as the case may be) prior to the date of the respective Permitted Acquisition, the financial covenants contained in Section 5.04, and (ii) to the best of such officer's knowledge, compliance with the requirements of preceding causes (1) through (5). Notwithstanding anything contained in this Section 5.02(d) to the contrary, Capital Expenditures shall be permitted to the extent such Capital Expenditures are not in violation of Section 5.04(e). (e) Investments in Other Persons. Make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person other than: (i) loans and advances by the Borrower to its employees in the ordinary course of its business as presently conducted in an aggregate principal amount (determined without regard to any writedowns or write-offs of such loans or advances) not to exceed $250,000 at any time outstanding; (ii) Investments by the Borrower and its Subsidiaries in cash and Cash Equivalents; (iii) Investments by the Borrower in Hedge Agreements permitted under Section 5.02(b)(i); (iv) Investments existing on the Effective Date and described on Schedule 4.01(ff) hereto; (v) Parent, the Borrower and the Borrower's Wholly-Owned Subsidiaries may hold the stock in their respective Wholly-Owned Subsidiaries; (vi) extensions of trade credit in the ordinary course of business and payable or dischargeable in accordance with customary terms; - 72 - (vii) the Borrower and its Subsidiaries may acquire and own investments (including notes or other debt obligations or securities) received in connection with the bankruptcy or reorganization of their suppliers and customers and in settlement of delinquent obligations of, or disputes with, their customers or suppliers in the ordinary course of business; (viii) Investments in the Borrower or in a Wholly-Owned Subsidiary of the Borrower provided such Wholly-Owned Subsidiary has delivered a Guarantee in form and substance satisfactory to the Agent; (ix) any Investment by any Loan Party in a Person, if as a result of such Investment (A) such Person becomes a Wholly-Owned Subsidiary of such Loan Party and a Subsidiary Guarantor or (B) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, such Loan Party or a Wholly-Owned Subsidiary of such Loan Party provided such Wholly-Owned Subsidiary has delivered a Guarantee in form and substance satisfactory to the Agent; (x) Investments made as a result of the receipt of non-cash consideration from an asset sale that was made pursuant to and in compliance with Section 5.02(d) hereof; (xi) any Subsidiary of the Borrower may make intercompany loans to the Borrower or to any Wholly-Owned Subsidiary of the Borrower, and the Borrower may make intercompany loans to its Wholly-Owned Subsidiaries; (xii) any acquisition of assets solely in exchange for the issuance of capital stock, or warrants, options and other rights to acquire capital stock (but excluding any debt security that is convertible into, or exchangeable for, capital stock), of any Loan Party or any of its Subsidiaries; and (xiii) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (xiii) that are at any time outstanding, not to exceed $1,000,000 in the aggregate. (f) Dividends, Etc. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its, or its direct or indirect parent corporation's, capital stock or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding, return any capital to its stockholders as such, make any distribution of assets, capital stock, warrants, rights, options, obligations or securities to its stockholders as such or issue or sell any capital stock or any warrants, rights or options to acquire such capital stock, or permit its Subsidiaries to do any of the foregoing, except that any Subsidiary of the Borrower may pay Dividends to the - 73 - Borrower or any Wholly-Owned Subsidiary of the Borrower. Notwithstanding the foregoing, so long as there shall exist no Default or Event of Default (both before and after giving effect to the payment thereof), (i) the Borrower may make any payment required to be made under any Tax Sharing Agreement, (ii) the Borrower may pay cash Dividends to Sunderland at the times and in the amounts necessary to enable Sunderland to repurchase outstanding shares of Sunderland's common stock following the death, disability or termination of employment of John R. Weeks, Michael M. Farrell or any other eligible participant (who was a regular, full-time employee of Borrower at the time of his or her death, disability or termination of employment) pursuant to and in accordance with the Stock Option Plan, provided that the aggregate amount of cash Dividends paid by the Borrower to Sunderland pursuant to this clause (ii) shall not exceed $1,000,000 in any Fiscal Year of the Borrower and Sunderland immediately uses such Dividends to make such payments and (iii) the Borrower may pay cash Dividends to Parent at the times and in the amounts necessary to enable Parent to make the Warrant Payments so long as (A) Parent immediately uses such proceeds to make such payments, (B) if, after giving pro forma effect to any Warrant Payments by the Borrower, the Interest Coverage Ratio for the Borrower's most recently ended four full fiscal quarters for which financial statements are available immediately preceding the date of on which such Warrant Payments are made is greater than 3.25 to 1 and (C) the Borrower is in pro forma compliance with the covenants set forth in Section 5.04. (g) Change in Nature of Business. Make, or permit any of its Subsidiaries to make, any change in the nature of its business as carried on at the Effective Date. Notwithstanding anything to the contrary contained in this Agreement, (i) Parent will not engage in any business, will have no material assets other than its ownership interest in the Borrower and its Subsidiaries and will have no significant liabilities other than those in connection with this Agreement and the other Loan Documents and (ii) each of the Borrower and each Subsidiary Guarantor will not engage in any business other than the business in which the Borrower and such Subsidiary Guarantor is engaged on the Effective Date. Parent will at all times own 100% of the capital stock of the Borrower. (h) Amendments to Charter and Certain Other Agreements. Amend, modify or change, or permit any of its Subsidiaries to amend, modify or change, or Parent will not amend, modify or change, (i) its charter, certificate of incorporation (including, without limitation, by the filing or modification of any certificate of designation) or bylaws (or equivalent organizational documentation) (except as necessary in connection with a transaction permitted under Section 5.02(c) so long as any such amendment, modification or change is not materially adverse in any respect to the interests of the Lenders and is not otherwise prohibited by the terms of this Agreement), (ii) any agreement entered into by it with respect to its capital stock, or enter into any new agreement with respect to its capital stock (including, but not limited to, the Parent Shareholders Agreement), and any provision of the Mentmore Management Agreement or the Warrant Agreement, other than amendments, modifications or changes thereto or to such new agreements which are not materially adverse in any respect to the interests of the Lenders and are not otherwise prohibited by the terms of this Agreement (in the - 74 - case of each of clauses (i) and (ii) other than in connection with any issuance of any capital stock not prohibited by the terms of this Agreement), (iii) any provision of any Tax Sharing Agreement, or enter into any new tax sharing agreement (except where the entry into a new tax sharing agreement would not reasonably be expected to have a Material Adverse Effect and the terms of which would not be materially adverse in any respect to the interests of the Lenders, and would not otherwise be prohibited by the terms of this Agreement), or (iv) any of the covenants contained in the Senior Subordinated Notes Indenture, the Senior Subordinated Notes Guaranty or the documentation relating to the New Subordinated Notes or any of the subordination provisions (including any definition referred to therein) of the Senior Subordinated Notes Indenture, the Senior Subordinated Notes Guaranty or the documentation relating to the New Subordinated Notes or add any additional covenants by the Borrower in the Senior Subordinated Notes Indenture or by Parent or any guarantor in the Senior Subordinated Notes Guaranty or otherwise amend or modify any of the Senior Subordinated Note Documents (including, but not limited to, the Registration Rights Agreement) or any documentation relating to the New Subordinated Notes in a manner that the Agent reasonably deems material. (i) Limitation on Certain Restrictions on Subsidiaries. Create or otherwise cause or suffer to exist or become effective, or permit any of its Subsidiaries to create or otherwise cause or suffer to exist or become effective, directly or indirectly, any encumbrance or restriction on the ability of any Subsidiary of the Borrower to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any of its Subsidiaries, or pay any Debt owed to the Borrower or any Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any Subsidiary of the Borrower or (c) transfer any of its properties or assets to the Borrower, except in each case for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Subsidiary of the Borrower, (iv) customary provisions restricting assignment of any licensing agreement entered into by the Borrower or any Subsidiary of the Borrower in the ordinary course of business, (v) customary provisions restricting the transfer of assets subject to Liens permitted under Section 5.02(a)(v) or (vi), (vi) Existing Debt, (vii) any instrument governing Debt or capital stock of a Person acquired by such Loan Party or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Debt was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties of any Person, other than the Person, or property or assets of the Person (including any Subsidiary of the Person), so acquired, provided that, in the case of Debt, such Debt was permitted by the terms of this Agreement to be incurred, (viii) refinancings or renewals of Existing Debt permitted under Section 5.02(b)(viii) hereof, (ix) customary restrictions in Capitalized Leases, security agreements or mortgages securing Debt of such Loan Party or any of its Subsidiaries to the extent such restrictions restrict the transfer of the property subject to such Capitalized Lease, security agreement or mortgage, (x) customary restrictions with - 75 - respect to an agreement that has been entered into for the sale or disposition of assets or capital stock held by such Loan Party or any of its Subsidiaries, (xi) customary restrictions contained in any agreements or documentation governing Debt permitted under Section 5.02(b)(xi) hereof or governing the issuance of Preferred Stock permitted under Section 5.02(m) hereof, and (xii) (A) the Warrant Agreement, as amended, and (B) the Parent Shareholder Agreement, as amended. (j) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in (i) accounting policies or reporting practices, except as required by generally accepted accounting principles or (ii) Fiscal Year. (k) Prepayments, Etc. of Debt. Make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any change of control or similar event of, including, in each case without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due, or make any payment in violation of any subordination terms of, any Debt the aggregate principal amount of which is in excess of $100,000 at any one time outstanding, other than (i) the prepayment of the Advances in accordance with the terms of this Agreement or (ii) any refinancing or renewal of Debt as permitted by Sections 5.02(b)(i), (ii), (iii), (vii), (viii), (ix), (x) and (xi), or permit any of its Subsidiaries to do any of the foregoing. (l) Creation of Subsidiaries. Establish, create or acquire, or permit any of its Subsidiaries to establish, create or acquire, or Parent shall not establish, create or acquire, any Subsidiaries after the Effective Date without the prior written consent of the Agent in its sole discretion, except for the creation by the Borrower of a Wholly-Owned Subsidiary of the Borrower in connection with a Permitted Acquisition if (i) 100% of the assets and capital stock of such new Subsidiary are pledged in a first priority basis to the Collateral Agent pursuant to the Security Agreement and the certificates representing such stock, together with stock powers duly executed in blank, are delivered to the Collateral Agent and (ii) such new Subsidiary executes and delivers to the Agent a counterpart of the Subsidiary Guaranty and the Security Agreement. In addition, each new Subsidiary shall execute and deliver all other relevant documentation of the type described in Article III hereof as such new Subsidiary would have had to deliver if such new Subsidiary were a Subsidiary and/or a Subsidiary Guarantor on the Effective Date. (m) Issuance of Capital Stock. Issue after the date hereof, or permit any of its Subsidiaries to issue after the date hereof (i) any class of capital stock with mandatory redemption rights maturing earlier than June 30, 2003 or (ii) options or warrants to purchase or securities convertible into, capital stock of the type described in clause (i) above, except (w) options, registration rights or repurchase obligations under the Shareholders Agreement to the extent permitted under this Agreement, (x) transfers and replacements of then outstanding shares of capital stock, (y) stock splits, stock dividends and similar issuances of shares of common stock which do not decrease the percentage - 76 - ownership of any Loan Party or any of its Subsidiaries in any class of the capital stock of such Subsidiary and (z) to qualify directors to the extent required by applicable law. (n) Negative Pledge. Enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets other than (i) in favor of the Secured Parties or (ii) in connection with (A) the Senior Subordinated Notes or (B) any Debt secured by purchase money Liens and Capitalized Leases, in each case, to the extent permitted under Sections 5.02(b)(ii) and (iii), respectively. Parent will not create, incur, assume or suffer any Lien upon, or with respect to, the capital stock of the Borrower, and will not sell, transfer, assign, pledge, hypothecate or otherwise convey any interest in the capital stock of the Borrower to any Person. (o) Partnerships. Become a general partner in any general or limited partnership or joint venture, or permit any of its Subsidiaries to do so. (p) Other Transactions. Engage, or permit any of its Subsidiaries to engage, in any transaction involving commodity options or futures contracts or any similar speculative transactions (including, without limitation, take-or-pay contracts) except for Hedge Agreements permitted under Section 5.02(b)(i). (q) Hazardous Material. (i) Operate in violation of or allow any of its Subsidiaries or any Person occupying any of the property owned or leased by any Loan Party or any of its Subsidiaries to operate in violation of, any Environmental Law, or (ii) store, manage or dispose of, or permit or allow, or permit any of its Subsidiaries to permit or allow, any Person operating or occupying any of its properties to store, manage or dispose of, any Hazardous Material at, on, in, under or near any such property in violation of any Environmental Law, except where such instances of non-compliance with this Section 5.02(q) would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (r) ERISA. Directly or indirectly: (i) engage in any transaction, or permit any of its ERISA Affiliates to engage in any transaction, in connection with which the Borrower could be subject to either a tax imposed by Section 4975(a) of the Internal Revenue Code or the corresponding civil penalty assessed pursuant to Section 502(i) of ERISA, which penalties and taxes for all such transactions could be expected to have, in the aggregate, a Material Adverse Effect; (ii) permit to exist, or permit any of its ERISA Affiliates to permit to exist, any accumulated funding deficiency, for which a waiver has not been obtained from the Internal Revenue Service, with respect to any Pension Plan; - 77 - (iii) permit to exist, or permit any of its ERISA Affiliates to permit to exist, any failure to make contributions or any unfunded benefits liability which creates, or with the passage of time and any failure to make contributions would create, a statutory lien or requirement to provide security under ERISA or the Internal Revenue Code in favor of the PBGC or any Pension Plan, Multiemployer Plan or other entity; (iv) permit, or permit any of its ERISA Affiliates to permit, the sum of the amount of unfunded benefit liabilities (determined in accordance with Statement of Financial Accounting Standards No. 87) under all Pension Plans (excluding each Pension Plan with an amount of unfunded benefit liabilities of zero or less) to exceed $500,000; (v) fail to make any payment, or permit any of its ERISA Affiliates to fail to make any payment, to any Multiemployer Plan that it or any if its ERISA Affiliates may be required to make under such Multiemployer Plan, any agreement relating to such Multiemployer Plan, or any law pertaining thereto that could reasonably be expected to have, in the aggregate, a Material Adverse Effect; or (vi) withdraw, or permit any of its ERISA Affiliates to withdraw, from any Multiemployer Plan where such withdrawal is likely to result in any liability which could be expected to have, in the aggregate, a Material Adverse Effect. SECTION 5.03. Reporting Requirements. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, each Loan Party will furnish to the Lenders, to the extent the following provisions are applicable: (a) Default Notice. As soon as possible and in any event within two (2) days after any Loan Party obtains knowledge of the occurrence of each Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect continuing on the date of such statement, a statement of the chief financial officer of the Borrower setting forth details of such Default, event, development or occurrence and the action that the Borrower has taken and proposes to take with respect thereto. (b) Monthly Financials. As soon as available and in any event within thirty (30) days after the end of each month, a Consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such month and Consolidated and consolidating statements of income and Consolidated statements of cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous month and ending with the end of such month and Consolidated and consolidating statements of income and Consolidated statements of cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding month of the preceding Fiscal Year, all in reasonable detail and duly certified by the chief financial officer of the Borrower, - 78 - together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto, (ii) a schedule in form satisfactory to the Agent of the computations used by the Borrower in determining compliance with the covenants contained in Sections 5.04(a) through (d) and, (iii) in the event of any change from GAAP in the generally accepted accounting principles used in the preparation of such financial statements, a statement of reconciliation conforming such financial statements to GAAP. (c) Quarterly Financials. As soon as available and in any event within forty-five (45) days after the end of each of the first three quarters of each Fiscal Year, Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such quarter and Consolidated and consolidating statements of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and Consolidated and consolidating statements of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to year-end audit adjustments) by the chief financial officer of the Borrower as having been prepared in accordance with generally accepted accounting principles consistent with those applied in the most recent annual audit, together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto, (ii) a schedule in form satisfactory to the Agent of the computations used by the Borrower in determining compliance with the covenants contained in Sections 5.04(a) through (d) and (iii) in the event of any change from GAAP in the generally accepted accounting principles used in the preparation of such financial statements, a statement of reconciliation conforming such financial statements to GAAP. (d) Annual Financials. As soon as available and in any event within ninety (90) days after the end of each Fiscal Year, a copy of the annual audit report for such year for Parent and its Subsidiaries, including therein Consolidated and consolidating balance sheets of Parent and its Subsidiaries as of the end of such Fiscal Year and Consolidated and consolidating statements of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for such Fiscal Year, in each case accompanied by an opinion acceptable to the Required Lenders of Ernst & Young LLP or other independent public accountants of recognized standing acceptable to the Required Lenders, together with (i) a certificate of such accounting firm to the Lenders stating that in the course of the regular audit of the business of the Borrower and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default has occurred and is continuing, or if, in the opinion of such accounting firm, a - 79 - Default has occurred and is continuing, a statement as to the nature thereof, (ii) a schedule in form satisfactory to the Agent of the computations used by such accountants in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Sections 5.04(a) through (d), (iii) a certificate of the chief financial officer of the Borrower stating that no Default has occurred and is continuing or, if a default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto and (iv) in the event of any change from GAAP in the generally accepted accounting principles used in the preparation of such financial statements, a statement of reconciliation conforming such financial statements to GAAP. (e) Forecasts. As soon as available and in any event no later than fifteen (15) days after the end of each Fiscal Year, forecasts prepared by management of the Borrower and each Subsidiary of the Borrower, in form and detail satisfactory to the Agent, of balance sheets, income statements and cash flow statements on a monthly basis for the Fiscal Year following such Fiscal Year then ended and on an annual basis for each Fiscal Year thereafter until the Final Maturity Date. (f) Plan Adoptions, Etc. Promptly after (i) the adoption or formal commitment to the adoption thereof, a copy of any new Plan or Multiemployer Plan of any Loan Party or ERISA Affiliate and (ii) any amendment or formal commitment to any amendment thereof, a copy of such amendment to any Plan or Multiemployer Plan of any Loan Party or ERISA Affiliate. (g) ERISA Events and ERISA Reports. (i) Promptly and in any event within ten (10) days after any Loan Party or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a statement of the chief financial officer of the Borrower describing such ERISA Event and the action, if any, that such Loan Party or such ERISA Affiliate has taken and proposes to take with respect thereto and (ii) on the date any records, documents or other information must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA, a copy of such records, documents and information. (h) Plan Terminations. Promptly and in any event within two (2) days after receipt thereof by any Loan Party or any ERISA Affiliate, copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan. (i) Actuarial Reports. Promptly upon receipt thereof by any Loan Party or any ERISA Affiliate, a copy of the annual actuarial valuation report of each Plan the funded current liability percentage (as defined in Section 302(d)(8) of ERISA) of which is less than 100%. (j) Plan Annual Reports. Promptly and in any event within thirty (30) days after the filing thereof with the Internal Revenue Service, copies of each Schedule B - 80 - (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan. (k) Multiemployer Plan Notices. Promptly and in any event within five (5) days after receipt thereof by any Loan Party or any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice concerning (i) the imposition of Withdrawal Liability by any such Multiemployer Plan, (ii) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the amount of liability incurred, or that may be incurred, by such Loan Party or any ERISA Affiliate in connection with any event described in clause (i) or (ii). (l) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting Parent, any Loan Party or any of their respective Subsidiaries of the type described in Section 4.01(i). (m) Securities Reports. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that any Loan Party or any of their respective Subsidiaries sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements, that any Loan Party or any of their respective Subsidiaries files with the Securities and Exchange Commission or any Governmental Authority that may be substituted therefor, or with any national securities exchange. (n) Creditor Reports. Promptly after the furnishing thereof, copies of any statement or report furnished to the holders of the Senior Subordinated Notes or to any other holder of the securities of any Loan Party or of any of its Subsidiaries pursuant to the terms of any indenture, loan, credit or similar agreement and not otherwise required to be furnished to the Lenders pursuant to any other clause of this Section 5.03. (o) Agreement Notices. Promptly upon receipt thereof, copies of all notices, requests and other documents received by Parent, any Loan Party or any of their respective Subsidiaries under or pursuant to any indenture, loan, credit or similar agreement regarding or related to any breach or default by any party thereto or any other event that could materially impair the value of the interests or the rights of Parent, any Loan Party or any of their respective Subsidiaries or otherwise have a Material Adverse Effect and copies of any amendment, modification or waiver of any provision of any indenture, loan, credit or similar agreement as the Agent may reasonably request. (p) Tax Certificates. Within thirty days after the Borrower (or the common parent corporation of the affiliated group (within the meaning of Section 1504(a)(1) of the Internal Revenue Code) of which the Borrower is a member) has filed its final Federal income tax return in respect of a taxable year, a certificate, signed by the President or the chief financial officer of the Borrower (or the common parent - 81 - corporation), stating that the common parent corporation has filed its Federal income tax return and paid the full amount of taxes reported thereon as being due by such affiliated group. (q) Environmental Conditions. Promptly, and in no event more than three (3) days, after the assertion or occurrence thereof, notice of any Environmental Claim against or of any condition or occurrence on any property of any Loan Party or any of its Subsidiaries that (i) could be reasonably expected to result in Environmental Costs and Liabilities equal to or in excess of $500,000 in the aggregate or (ii) causes such property to be subject to any restrictions on the ownership, occupancy, use or transferability by any Loan Party of such property under any Environmental Law. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and such Loan Party's response thereto. In addition, such Loan Party will provide the Lenders with copies of all written communications with any government or governmental agency relating to material capital expenditures required under Environmental Law or with any Person relating to any Environmental Claim of which notice is required to be given pursuant to this Section 5.03(q), and such detailed reports of any such Environmental Claim as may be requested by the Agent; provided that in any event such Persons shall deliver to each Lender all notices received by them from any government or governmental agency under, or pursuant to, CERCLA. (r) Real Property. As soon as available and in any event within thirty (30) days after the end of each Fiscal Year, a report supplementing Schedules 4.01(dd) and 4.01(ee) hereto, including an identification of all real and leased property disposed of by the Borrower during such Fiscal Year, a list and description (including the street address, county or other relevant jurisdiction, state, record owner, book value thereof, and in the case of leases of property, lessor, lessee, expiration date and annual rental cost thereof) of all real property acquired or leased during such Fiscal Year and a description of such other changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete. (s) Insurance. As soon as available, and in any event within thirty (30) days after the end of each Fiscal Year, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for each Loan Party and containing such additional information as any Lender (through the Agent) may reasonably specify. (t) Other Information. Such other information respecting the assets, business, condition (financial or otherwise), operations, performance or properties of Parent, any Loan Party or any of their respective Subsidiaries as any Lender (through the Agent) may from time to time request. SECTION 5.04. Financial Covenants. So long as any Advance or any other Obligations hereunder or under any Note shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, the Borrower and its Subsidiaries (on a Consolidated basis) will: - 82 - (a) (i) Total Leverage Ratio. Maintain a Total Leverage Ratio for each period set forth below of not more than the amount set forth below for such period: Fiscal Quarter Ending Ratio --------------------- ----- 03/31/1998 5.625:1 06/30/1998 5.25:1 09/30/1998 5.00:1 12/31/1998 4.75:1 03/31/1999 4.60:1 06/30/1999 4.40:1 09/30/1999 4.30:1 12/31/1999 4.05:1 03/31/2000 4.05:1 06/30/2000 4.05:1 09/30/2000 4.05:1 12/31/2000 3.35:1 03/31/2001 3.35:1 06/30/2001 3.35:1 09/30/2001 3.35:1 12/31/2001 3.00:1 and thereafter (ii) Senior Leverage Ratio. Maintain a Senior Leverage Ratio at September 30, 1997 and December 31, 1997 of 1.80:1. (b) Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio for each Rolling Period set forth below of not less than the amount set forth below for such Rolling Period: Rolling Period Ending Ratio --------------------- ----- 09/30/1997 1.05:1 12/31/1997 1.05:1 03/31/1998 1.05:1 06/30/1998 1.05:1 09/30/1998 1.15:1 12/31/1998 1.15:1 03/31/1999 1.25:1 - 83 - 06/30/1999 1.30:1 09/30/1999 1.35:1 12/31/1999 1.40:1 03/31/2000 1.40:1 06/30/2000 1.40:1 09/30/2000 1.40:1 12/31/2000 1.50:1 and thereafter (c) Interest Coverage Ratio. Maintain an Interest Coverage Ratio for each Rolling Period set forth below of not less than the amount set forth below for such Rolling Period: Rolling Period Ending Ratio 09/30/1997 1.60:1 12/31/1997 1.60:1 03/31/1998 1.60:1 06/30/1998 1.60:1 09/30/1998 1.60:1 12/31/1998 1.90:1 03/31/1999 1.90:1 06/30/1999 1.90:1 09/30/1999 1.90:1 12/31/1999 2.20:1 03/31/2000 2.20:1 06/30/2000 2.20:1 09/30/2000 2.20:1 12/31/2000 2.60:1 03/31/2001 2.60:1 06/30/2001 2.60:1 09/30/2001 2.60:1 12/31/2001 3.00:1 and thereafter (d) Minimum Net Worth. Maintain at all times an excess of total assets over total liabilities (excluding all subordinated Debt of the Borrower and its Subsidiaries), in each case, of the Borrower and its Subsidiaries (on a Consolidated basis) not less than an aggregate amount of $54,000,000 on the date of Initial Extension of Credit, which amount is subject to increase at a rate of 80% of Consolidated net income of the Borrower and its Subsidiaries. - 84 - (e) Capital Expenditures. Not make any Capital Expenditures that would cause the aggregate of all such Capital Expenditures made by the Borrower in any Fiscal Year set forth below to exceed the amount set forth below for such Fiscal Year: Fiscal Year Amount ----------- ------ 1997 $5,000,000 1998 $5,000,000 1999 $2,000,000 2000 $2,000,000 2001 $2,000,000 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) the Borrower shall fail to pay any principal of, or interest on, any Advance, or Parent or any Loan Party shall fail to make any other payment under any Loan Document, in each case when the same becomes due and payable and such default with respect to a payment of interest shall continue unremedied for a period of four days; or (b) any representation or warranty made by Parent or any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) Parent, the Borrower or any other Loan Party shall fail to perform or observe any term, covenant or agreement contained in Sections 2.14, 5.01(e), (k), (m) or (n), 5.02 or 5.04; or (d) Parent or any Loan Party shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 15 Business Days after the earlier of the date on which (A) a Responsible Officer of the Borrower becomes aware of such failure or (B) written notice thereof shall have been given to the Borrower by the Agent or any Lender; or (e) Parent or any Loan Party or any of their respective Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Debt that is outstanding in a principal or notional amount of at least $1,500,000 either individually or in the aggregate (but excluding Debt outstanding hereunder) of - 85 - Parent, such Loan Party or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the holder thereof (or a trustee with respect thereto) to cause, such Debt to mature; or any such Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (f) Parent, any Loan Party or any of their respective Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Parent, any Loan Party or any of their respective Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or Parent, any Loan Party or any of their respective Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or (g) any judgment or order for the payment of money in excess of $500,000 (to the extent not fully paid or discharged) shall be rendered against Parent, any Loan Party or any of their respective Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (h) any non-monetary judgment or order that would reasonably be expected to have a Material Adverse Effect shall be rendered against Parent, any Loan Party or any of their respective Subsidiaries, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or - 86 - (i) any provision of any Loan Document after delivery thereof pursuant to Section 3.01 or 5.01(m) shall for any reason cease to be in full force and effect and cease to be valid and binding on or enforceable against Parent or any Loan Party party to it, or any such Loan Party shall so state in writing; or (j) any Collateral Document after delivery thereof pursuant to Section 3.01 or 5.01(m) shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority lien on and security interest in any portion of Collateral purported to be covered thereby; or (k) any ERISA Event shall have occurred with respect to a Pension Plan or a Multiemployer Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Pension Plans and Multiemployer Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of Parent, the Loan Parties and the ERISA Affiliates related to such ERISA Event) exceeds $500,000; or (l) Parent, any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by Parent, the Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $500,000; or (m) Parent, any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of Parent, the Loan Parties and the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $250,000 in the aggregate; or (n) a Change of Control shall occur; then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Appropriate Lender to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c)) and of each Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest - 87 - or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Loan Party or any of its Subsidiaries under the Federal Bankruptcy Code, (x) the obligation of each Lender to make Advances (other than Letter of Credit Advances by the Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c)) and of the Issuing Bank to issue Letters of Credit shall automatically be terminated and (y) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. SECTION 6.02. Actions in Respect of the Letters of Credit upon Default. If any Event of Default shall have occurred and be continuing, the Agent may, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the Agent on behalf of the Lenders in same day funds at the Agent's office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding. If at any time the Agent determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Agent and the Lenders or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Agent, pay to the Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Agent determines to be free and clear of any such right and claim. ARTICLE VII THE AGENT SECTION 7.01. Authorization and Action. Each Lender (in its capacities as a Lender, the Issuing Bank (if applicable) and a potential Hedge Bank) hereby appoints and authorizes the Agent (for purposes of this Article VII, the term "Agent" shall include Fleet (and/or any of its affiliates) in its capacity as Collateral Agent pursuant to any of the Collateral Documents where it at any time acts as such) to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement or - 88 - applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (a) may treat the payee of any Note as the holder thereof until the Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (b) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party or to inspect the property (including the books and records) of any Loan Party; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any Lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (f) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. Fleet and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, Fleet (and any successor Agent) shall have the same rights and powers under the Loan Documents as any other Lender and may exercise the same as though it were not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Fleet in its individual capacity. Fleet and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any of its Subsidiaries, any of their respective Affiliates and any Person who may do business with or own securities of any Loan Party or any such Subsidiary, all as if Fleet were not the Agent and without any duty to account therefor to the Lenders. SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other 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 has and will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, has made and will continue to make its own credit decisions in entering - 89 - into this Agreement and the other Loan Documents and in taking or not taking action under this Agreement or under the other Loan Documents. SECTION 7.05. Indemnification. (a) Each Lender severally agrees to indemnify the Agent (to the extent not promptly reimbursed by the Borrower) from and against such Lender's ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, fees and expenses of counsel) that may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by the Agent under the Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 8.04, to the extent that the Agent is not promptly reimbursed for such costs and expenses by the Borrower. For purposes of this Section 7.05, the Lenders' respective ratable shares of any amount shall be determined, at any time, according to the sum of (a) the aggregate principal amount of the Advances outstanding at such time and owing to the respective Lenders, (b) their respective Pro Rata Shares of the aggregate Available Amount of all Letters of Credit outstanding at such time and (c) their respective Unused Revolving Credit Commitments at such time. The failure of any Lender to reimburse the Agent promptly upon demand for its ratable share of any amount required to be paid by the Lender to the Agent as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse the Agent for its ratable share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse the Agent for such other Lender's ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender hereunder, the agreement and obligations of each Lender contained in this Section 7.05(a) shall survive the payment in full of principal, interest, fees and all other amounts payable hereunder and under the other Loan Documents. (b) Each Lender severally agrees to indemnify the Issuing Bank (to the extent not promptly reimbursed by the Borrower) from and against such Lender's ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, fees and expenses of counsel) that may be imposed on, incurred by, or asserted against the Issuing Bank in any way relating to or arising out of the Loan Documents or any action taken or omitted by the Issuing Bank under the Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Issuing Bank's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Issuing Bank promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 8.04, to the extent that the Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrower. For purposes of this - 90 - Section 7.05(b), the Lenders' respective ratable shares of any amount shall be determined, at any time, according to the sum of (a) the aggregate principal amount of the Advances outstanding at such time and owing to the respective Lenders, (b) their respective Pro Rata Shares of the aggregate Available Amount of all Letters of Credit outstanding at such time and (c) their respective Unused Revolving Credit Commitments at such time. The failure of any Lender to reimburse the Issuing Bank promptly upon demand for its ratable share of any amount required to be paid by the Lenders to the Issuing Bank as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse the Issuing Bank for its ratable share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse the Issuing Bank for such other Lender's ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender hereunder, the agreement and obligations of each Lender contained in this Section 7.05(b) shall survive the payment in full of principal, interest, fees and all other amounts payable hereunder and under the other Loan Documents. SECTION 7.06. Successor Agents. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent and upon the execution and filing or recording of such financing statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment, forbearance or waiver of any provision of this Agreement or the Notes or any other Loan Document, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed (or, in the case of the Collateral Documents, consented to) by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (a) no amendment, waiver or - 91 - consent shall, unless in writing and signed by all of the Lenders, do any of the following at any time: (i) waive any of the conditions specified in Section 3.01 or 3.02 or, in the case of the Initial Extension of Credit, Section 3.03, (ii) change the number of Lenders or the percentage of (x) the Commitments, (y) the aggregate unpaid principal amount of the Advances or (z) the aggregate Available Amount of outstanding Letters of Credit that, in each case, shall be required for the Lenders or any of them to take any action hereunder, (iii) release a substantial part of the Collateral in any transaction or series of related transactions or permit the creation, incurrence, assumption or existence of any Lien on all or substantially all of the Collateral in any transaction or series of related transactions to secure any Obligations other than Obligations owing to the Secured Parties under the Loan Documents or (iv) amend this Section 8.01 and (b) no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders if affected by such amendment, waiver or consent, (i) increase the Commitments of such Lender or subject such Lender to any additional obligations, (ii) reduce the principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender, (iii) postpone any date fixed for any payment of principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender or (iv) change the order of application of any prepayment set forth in Section 2.06 in any manner that materially affects such Lender; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Issuing Bank, in addition to the Lenders required above to take such action, affect the rights or obligations of the Issuing Bank under this Agreement; and provided further that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement. SECTION 8.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy or telex communication) and mailed, telegraphed, telecopied, telexed or delivered, if to Parent or the Borrower, at its address at 501 Mosside Boulevard, North Versailles, PA 15137, Attention: John R. Weeks, telecopier number (412) 823-4110, with copies to (a) Mentmore Holdings Corporation, 1430 Broadway, 13th Floor, New York, NY 10018-3308, Attention: William L. Remley, telecopier number (212) 391-1393 and (b) Winston & Strawn, 200 Park Avenue, New York, NY 10166, Attention: Robert Ericson, telecopier number (212) 294-4700; if to any Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; and if to the Agent or the Issuing Bank, at its address at 56 East 42nd Street, New York, New York 10017, Attention: Paul Tarantino, telecopier number (212) 346-4806; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telegraphed, telecopied or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively, except that notices and communications to the Agent pursuant to Article II, III or VII shall not be effective until received by the Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. - 92 - SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on demand (i) all reasonable costs and expenses of the Agent in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and out-of-pocket expenses and (B) the reasonable fees and expenses of counsel for the Agent with respect thereto, with respect to advising the Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto) and (ii) all reasonable costs and expenses of the Agent and the Lenders in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally (including, without limitation, the reasonable fees and expenses of counsel for the Agent (which fees and expenses shall include, without limitation, support staff costs and amounts expended in litigation preparation and computerized research, telephone and telefax expenses, mileage, depositions, postage, photocopies, process service, video tapes and each Lender with respect thereto). (b) The Borrower agrees to indemnify and hold harmless the Agent, each Lender and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated hereby or thereby or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or any of its Subsidiaries or any Environmental Claim relating in any way to any Loan Party or any of its Subsidiaries, in each case whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated, except to the extent such claim, damage, loss, liability or expense is proven to have resulted solely from such Indemnified Party's gross negligence or willful misconduct. The Borrower also agrees not to assert any claim against the Agent, any Lender or any of their Affiliates, or any of their respective officers, directors, employees, attorneys and - 93 - agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated thereby. (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason or by an Eligible Assignee to a Lender other than on the last day of the Interest Period for such Advance upon an assignment of rights and obligations under this Agreement pursuant to Section 8.07 as a result of a demand by the Borrower pursuant to Section 8.07(a), the Borrower shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Agent or any Lender, in its sole discretion. (e) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section 8.04 shall survive the indefeasible and irrevocable payment in full of principal, interest, fees and all other amounts payable hereunder and under any of the other Loan Documents. SECTION 8.05. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender and each of its respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Affiliate to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower now or hereafter existing under this Agreement and the Note or Notes (if any) held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement or such Note or Notes and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its respective Affiliates under this Section are in - 94 - addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its respective Affiliates may have. SECTION 8.06. Binding Effect. This Agreement shall become effective on the date (the "Effective Date") on which each of Parent, the Borrower and the Agent have signed a counterpart hereof (whether the same or different counterparts) and Parent and the Borrower shall have delivered the same to the Agent and thereafter shall be binding upon and inure to the benefit of Parent, the Borrower and the Agent and their respective successors and assigns, except that neither Parent nor the Borrower shall have the right to assign their respective rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 8.07. Assignments and Participations. (a) Each Lender may and, if demanded by the Borrower (following a demand by such Lender pursuant to Section 2.10 or 2.12) upon at least 5 Business Days' notice to such Lender and the Agent, shall assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a uniform, and not a varying, percentage of all rights and obligations under and in respect of one or more Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than the lesser of (x) $5,000,000 in the aggregate and (y) the total amount of such assigning Lender's Commitment hereunder, (iii) each such assignment shall be to an Eligible Assignee, (iv) each such assignment made as a result of a demand by the Borrower pursuant to this Section 8.07(a) shall be arranged by the Borrower after consultation with the Agent, shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement and shall be to one or more Eligible Assignees that are not then claiming the amounts demanded by the assigning Lender under Section 2.10 or 2.11, (v) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section 8.07(a) unless and until such Lender shall have received one or more payments from either the Borrower or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement, (vi) no such assignments to any Person that is not a Lender or an Affiliate of a Lender shall be permitted without the consent of the Agent (until the Agent shall have notified the Lenders that syndication of the Commitments hereunder has been completed) and the Borrower (such consent of the Borrower shall not be unreasonably withheld or delayed) provided that no consent of the Borrower shall be required upon the occurrence and the continuance of an Event of Default, and (vii) the parties to each such assignment shall execute and deliver to the Agent, for its - 95 - acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and a processing and recordation fee of $3,500. (b) The Issuing Bank may assign to an Eligible Assignee all of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) each such assignment shall be to an Eligible Assignee and (ii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500. (c) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender or the Issuing Bank, as the case may be, hereunder and (y) the Lender or the Issuing Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's or the Issuing Bank's rights and obligations under this Agreement, such Lender or the Issuing Bank shall cease to be a party hereto). (d) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, this Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any other Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, make and continue to make its own credit decisions entering into such Assignment and Acceptance and thereafter in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such - 96 - assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Loan Documents are required to be performed by it as a Lender or Issuing Bank, as the case may be. (e) The Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (f) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, together with any Note or Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. In the case of any assignment by a Lender, within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it under a Facility pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder under such Facility, a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto, as the case may be. (g) Each Lender may sell participations in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes (if any) held by it) to any Person other than any Loan Party or any Subsidiary or Affiliate of a Loan Party (subject to the consent of the Borrower, such consent not to be unreasonably withheld or delayed); provided, however, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such - 97 - participation, postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or release all or substantially all of the Collateral. (h) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided, however, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information received by it from such Lender. (i) Notwithstanding any other provision contained in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. SECTION 8.08. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 8.09. No Liability of the Issuing Bank. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) the Issuing Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. - 98 - SECTION 8.10. Confidentiality. Neither the Agent nor any Lender shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (a) to the Agent's or such Lender's Affiliates and their respective officers, directors, employees, agents and advisors and to actual or prospective Eligible Assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process and (c) as requested or required by any state, Federal or foreign authority or examiner regulating banks or banking. SECTION 8.11. Jurisdiction, Etc. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH SUCH PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURT LACKS PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT SUCH COURT LACK PERSONAL JURISDICTION OVER SUCH PARTY. EACH SUCH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 8.02 OR ON SCHEDULE I, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH SUCH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY LOAN DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, THE COLLATERAL AGENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN ANY OTHER JURISDICTION. (b) EACH PARTY TO THIS AGREEMENT HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW ANY OBJECTION WHICH IT MAY NOW - 99 - OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. - 100 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. PRECISE HOLDING CORPORATION By /s/ William L. Remley ------------------------------------ Name: William L. Remley Title: Vice President PRECISE TECHNOLOGY, INC. By /s/ William L. Remley ------------------------------------ Name: William L. Remley Title: Vice President PRECISE TECHNOLOGY OF DELAWARE, INC. By /s/ William L. Remley ------------------------------------ Name: William L. Remley Title: Vice President PRECISE TECHNOLOGY OF ILLINOIS, INC. By /s/ William L. Remley Name: William L. Remley ------------------------------------ Title: Vice President PRECISE TMP, INC. By /s/ William L. Remley ------------------------------------ Name: William L. Remley Title: Vice President [Signature Page to the Credit Agreement] PRECISE POLESTAR, INC. By /s/ William L. Remley ------------------------------------ Name: William L. Remley Title: Vice President MASSIE TOOL, MOLD & DIE, INC. By /s/ William L. Remley ------------------------------------ Name: William L. Remley Title: Vice President FLEET NATIONAL BANK, as Agent and as Issuing Bank By /s/ John E. Duncan ------------------------------------ Name: John E. Duncan Title: Managing Director [Signature Page to the Credit Agreement] LENDERS: FLEET NATIONAL BANK By /s/ John E. Duncan ------------------------------------ Name: John E. Duncan Title: Managing Director CREDITANSTALT-BANKVEREIN By /s/ Gregory F. Mathis ------------------------------------ Name: Gregory F. Mathis Title: Vice President By /s/ Clifford L. Wells ------------------------------------ Name: Clifford L. Wells Title: Vice President SCHEDULE I COMMITMENTS AND APPLICABLE LENDING OFFICES
Letter of Domestic Eurodollar Name of Initial Revolving Credit Credit Lending Lending Lender Commitment Commitment Office Office Fleet National Bank $15,000,000 $2,000,000 Credit Matters Credit Matters -------------- -------------- 56 East 42nd Street 56 East 42nd Street New York, NY 10017 New York, NY 10017 Tel: (212) 907-5191 Tel: (212)907-5191 Fax: (212) 907-5637 Fax: (212) 907-5637 Attn: Jed Duncan Attn: Jed Duncan One Federal Street One Federal Street Boston, MA 02110 Boston, MA 02110 Tel: (617) 346-4453 Tel: (617) 346-4453 Fax: (617) 346-4806 Fax: (617) 346-4806 Attn: Eric VanderMel Attn: Eric VanderMel Operations Operations ---------- ---------- One Federal Street One Federal Street Boston, MA 02110 Boston, MA 02110 Tel: (617) 346-4401 Tel: (617) 346-4401 Fax: (617) 346-4806 Fax: (617) 346-4806 Attn: Paul Taratino Attn: Paul Taratino Payments Payments -------- -------- One Federal Street One Federal Street Boston, MA 02110 Boston, MA 02110 Tel: (617) 346-4401 Tel: (617) 346-4401 Fax: (617) 346-4806 Fax: (617) 346-4806 Attn: Paul Taratino Attn: Paul Taratino ABA No.: 011-000-138 ABA No.: 011-000-138 Acct. No.: Acct. No.: 151035103156 151035103156 Reference: Precise Reference: Precise Technology, Inc. Technology, Inc.
Letter of Domestic Eurodollar Name of Initial Revolving Credit Credit Lending Lending Lender Commitment Commitment Office Office Creditanstalt $15,000,000 $0 Credit Matters Credit Matters Corporate Finance, -------------- -------------- Inc. Two Greenwich Plaza Two Greenwich Plaza Greenwich, CT 06830 Greenwich, CT 06830 Tel: (203) 861-6590 Tel: (203) 861-6590 Attn: Fiona McKone Attn: Fiona McKone Tel: (203) 861-6581 Tel: (203) 861-6581 Attn: Gregory F. Attn: Gregory F. Mathis Mathis Fax: (203) 861-1475 Fax: (203) 861-1475 Operations Operations ---------- ---------- Two Greenwich Plaza Two Greenwich Plaza Greenwich, CT 06820 Greenwich, CT 06820 Tel: (203) 861-6421 Tel: (203) 861-6421 Attn: Jennifer Attn: Jennifer Poccia Poccia Fax: (203) 861-6594 Fax: (203) 861-6594 Payments Payments -------- -------- Two Greenwich Plaza Two Greenwich Plaza Greenwich, CT 06830 Greenwich, CT 06830 Tel: (203) 861-6421 Tel: (203) 861-6421 Attn: Kim Newsome Attn: Kim Newsome Tel: (203) 861-6423 Tel: (203) 861-6423 Attn: Jennifer Attn: Jennifer Poccia Poccia ABA No.: 021 000 021 ABA No.: 021 000 021 Acct. No.: 544-7- Acct. No.: 544-7- 73095 73095 Reference: Precise Reference: Precise Technology, Inc. Technology, Inc. Total $30,000,000 $2,000,000
SCHEDULE II EXISTING ACCOUNTS
Account # Account Title/Address Bank Purpose ABA # - --------- --------------------- ---- ------- ----- Name/Address ------------ Corp. - ----- Accounts - -------- 0101199488 Precise Technology, Inc. Nationsbank Controlled Disb A/C 061112788 Attn John Pesarsick Charlotte, NC Precise Technology, Inc. 501 Mosside Boulevard North Versailles, PA 15137 3750637364 Precise Technology, Inc. Nationsbank TMP & Polestar Lockbox A/C, 111000012 Attn John Pesarsick Atlanta, GA Precise EFT Customers & 501 Mosside Boulevard Master Account (Wire Trfs, North Versailles, PA 15137 Controlled Disb Funding) 029-6411 Precise Technology, Inc. for Mellon Bank (West) Lockbox A/C 043000261 Nationsbank N.A. as Agent Pittsburgh, PA (Opened 4/01/96) 501 Mosside Boulevard North Versailles, PA 15137 170-4149 Precise Technology, Inc. Mellon Bank, N.A. Pittsburgh Hourly Payroll 043000261 Hourly Payroll 3 Mellon Bank Center 501 Mosside Boulevard Room 153-3502 North Versailles, PA 15137 PGH, PA 15259-0001 032-8022 Precise Technology, Inc. Mellon Bank, N.A. PGH Tool Shop Hourly Payroll 043000261 Tool Shop Hourly Payroll 3 Mellon Bank Center 501 Mosside Boulevard Room 153-3502 North Versailles, PA 15137 PGH, PA 15259-0001 576-80994-2 Precise Technology, Inc. Marine Midland Bank Rochester Hourly Payroll 021001088 455 Rochester Street 68 Genesee Street Avon, NY 14414-9504 Avon, NY 14414 094-2516 Precise Technology, Inc. Mellon Bank, N.A. Layayette Hourly Payroll 043000261 4750 Swisher Road 3 Mellon Bank Center West Lafayette, IN 47906 Room 153-3502 PGH, PA 15259-0001 170-4288 Precise Technology, Inc. Mellon Bank, N.A. Salary Payroll-Precise 043000261 Attn John Pesarsick 3 Mellon Bank Center Technology, Inc. 501 Mosside Boulevard Room 153-3502 North Versailles, PA 15137 PGH, PA 15259-0001 140-6512 Precise Technology, Inc. Mellon Bank, N.A. Corporate Petty Cash A/C 043000261 Petty Cash Fund 3 Mellon Bank Center 501 Mosside Boulevard Room 153-3502 North Versailles, PA 15137 PGH, PA 15259-0001 576-81207-2 Precise Technology, Inc. Marine Midland Bank Misc. (P/R Corrections, C.O.D., 021001088 Special Account 68 Genesee Street Etc.) 455 Rochester Street Avon, NY 14414 Avon, NY 14414
Account # Account Title/Address Bank Purpose ABA # - --------- --------------------- ---- ------- ----- Name/Address ------------ 3750067358 Precise Technology, Inc. Nationsbank PGH Plant Petty Cash 111000013 501 Mosside Boulevard Charlotte, NC North Versailles, PA 15137 Attn: Diane Thomas 3750067361 Precise Technology, Inc. Nationsbank Lafayette Petty Cash 111000012 4750 Swisher Road Charlotte, NC West Lafayette, IN 47906 Attn: Tammy Metzinger Delaware - -------- Acct: - ----- 0101199496 Precise Technology of DE Inc. Nationsbank Controlled Disb A/C 061112788 Attn John Pesarsick Charlotte, NC Precise Technology of 501 Mosside Boulevard Delaware, Inc. North Versailles, PA 15137 145-3010 Precise Technology of DE Inc. Mellon Bank, N.A. Delaware Hourly Payroll 043000261 Salary/Hourly Payroll AC 3 Mellon Bank Center (Hourly & Salary) 501 Mosside Boulevard Room 153-3502 North Versailles, PA 15137 PGH, PA 15259-0001 3750805497 Precise Technology of DE Inc. Nationsbank Delaware Petty Cash 111000012 Petty Cash Account Charlotte, NC 220 Lake Drive Newark, DE 19702-3319 Unity Acct: - ----------- 0101199504 Precise Technology of DE Inc. Nationsbank Controlled Disb A/C 061112788 Attn John Pesarsick Charlotte, NC Precise Technology of Illinois, 501 Mosside Boulevard Inc. North Versailles, PA 15137 005-67925 Precise Tech of Illinois, Inc. Mellon Bank, N.A. Unity Payroll 043000261 70 East Rawls Road 3 Mellon Bank Center (Hourly & Salary) Des Plaines, IL 60018-1327 Room 153-3502 (Opened 7/01/96) Attn: Judy Chang PGH, PA 15259-0001 3750067345 Precise Tech of Illinois, Inc. Nationsbank Unity Petty Cash 111000012 70 East Rawls Road Charlotte, NC Des Plaines, IL 60018-1327 Attn: Judy Chang TMP Acct: - --------- 3750054824 Precise TMP, Inc. Nationsbank Precise TMP, Inc. 111000012 Attn John Pesarsick Charlotte, NC Salary Payroll 501 Mosside Boulevard North Versailles, PA 15137
Account # Account Title/Address Bank Purpose ABA # - --------- --------------------- ---- ------- ----- Name/Address ------------ 3750054811 Precise TMP, Inc. Nationsbank Hourly Payroll 111000012 2701 75th Street North Charlotte, NC St. Pete Mold St. Petersburg, FL 33710 3750054808 Precise TMP, Inc. Nationsbank Hourly Payroll 111000012 2701 75th Street North Charlotte, NC St Pete Tool St. Petersburg, FL 33710 44846330 Precise TMP, Inc. Bay Bank Hourly Payroll 011001742 134 Ferry Street Shrewsberry, MA South Grafton South Grafton, MA 01560 280154004192 Precise TMP, Inc. Boatmen's 1st Nat'l Hourly Payroll 101000035 1701 Johnson Industrial Drive Bank of Kansas City Excelsior Springs Excelsior Springs, MO 64021 Excelsior Springs, MO 0101199512 Precise TMP, Inc. Nationsbank Controlled Disb A/C 061112788 Attn John Pesarsick Charlotte, NC Precise TMP, Inc. 501 Mosside Boulevard North Versailles, PA 15137 3750067374 Precise TMP, Inc. Nationsbank Excelsior Springs 111000012 1701 Johnson Industrial Drive Charlotte, NC Petty Cash Excelsior Springs, MO 640?? Attn: Al Surabian 3750067390 Precise TMP, Inc. Nationsbank South Grafton 111000012 134 Ferry Street Charlotte, NC Petty Cash South Grafton, MA 01560 Attn: Linda Kubiak 3750067400 Precise TMP, Inc. Nationsbank St. Pete Molding 111000012 2701 75th Street North Charlotte, NC Petty Cash St. Petersburg, FL 33710 Attn: Dean Riordan 3750067413 Precise TMP, Inc. Nationsbank Massie Petty Cash 111000012 2701 75th Street North Charlotte, NC St. Petersburg, FL 33710 Attn: Dean Riordan Polestar Acct: - -------------- 0101199520 Precise Polestar, Inc. Nationsbank Controlled Disb A/C 061112788 Attn: John Pesarsick Charlotte, NC Precise Polestar, Inc. 501 Mosside Boulevard North Versailles, PA 15137 005-6741 Precise Polestar, Inc. Mellon Bank, N.A. Polestar Payroll 043000261 3110 Research Drive 3 Mellon Bank Center (Hourly & Salary) State College, PA 16801 Room 153-3502 (Opened 7/01/96) Attn: Craig McMullen PGH, PA 15259-0001
Account # Account Title/Address Bank Purpose ABA # - --------- --------------------- ---- ------- ----- Name/Address ------------ 3750067332 Precise Polestar, Inc. Nationsbank Polestar Petty Cash 111000012 3110 Research Drive Charlotte, NC State College, PA 16801 Attn: Craig McMullen
SCHEDULE 4.01(a) SHARE OWNERSHIP Borrower's Capital Stock owned by Parent: - ----------------------------------------- o 1,000 shares of Common Stock authorized, no par value, of which 1 share is issued and outstanding. SCHEDULE 4.01(b) SUBSIDIARIES OF PARENT AND BORROWER
Jurisdiction No. Of Shares ------------ ------------- Subsidiary of Incorporation Authorized Outstanding Ownership Rights - ---------- ---------------- ---------- ----------- --------- ------ Borrower - -------- Precise Technology Delaware 3,000 1000 100% by Borrower None of Delaware, Inc. Precise Technology Delaware 1,500 100 100% by Borrower None of Illinois, Inc. Precise TMP, Inc. Virginia 4,500(1) 1,000(2) 100% by Borrower None Precise Polestar, Inc. Virginia 100 10 100% by Precise TMP None Massie Tool, Mold Florida 100 10 100% by Precise TMP None & Die, Inc. Parent - ------ Borrower Delaware 1,500(3) 1(4) 100% by Parent None
(1) 2,000 shares of Common Stock and 2,500 shares of Serial Preferred Stock (2) 1,000 shares of Common Stock (3) 1,000 shares of Common Stock and 500 shares of 9-1/2% Preferred Stock (4) 1 share of Common Stock SCHEDULE 4.01(d) AUTHORIZATIONS, APPROVALS, ACTIONS, NOTICES AND FILINGS
UCC-1 Financing Statements: - --------------------------- Company Filing Locations - ------- ---------------- Precise Technology, Inc. Delaware Secretary of State New Castle County, DE Florida Secretary of State Pinellas County, FL Illinois Secretary of State Cook County, IL Massachusetts Secretary of the Commonwealth Town of Grafton, MA Missouri Secretary of State Clay County, MO Pennsylvania Secretary of the Commonwealth Allegheny County (PA) Prothonotary Centre County (PA) Prothonotary Indiana Secretary of State Tippecanoe County, IN New York Secretary of State New York County, NY Precise TMP, Inc. Florida Secretary of State Pinellas County, FL Massachusetts Secretary of the Commonwealth Worcester District, MA Town of Grafton, MA Northbridge (MA) Town Clerk Clay County, MO Clay County Recorder, MO Virginia State Corporation Commission Chesterfield County, VA Missouri Secretary of State Virginia Secretary of State City of Richmond, VA Precise Technology of Delaware, Inc. Delaware Secretary of State New Castle County, DE
Company Filing Locations - ------- ---------------- Precise Technology of Illinois, Inc. Delaware Secretary of State New Castle County, DE Illinois Secretary of State Cook County, IL Precise Polestar, Inc. Pennsylvania Secretary of the Commonwealth Centre County (PA) Prothonotary Virginia Secretary of State City of Richmond, VA Massie Tool, Mold & Die, Inc. Florida Secretary of State Pinellas County, FL Precise Holding Corporation Delaware Secretary of State New Castle County, DE New York Secretary of State New York County, NY UCC-3 Termination Statements: - ----------------------------- Company Filing Locations - ------- ---------------- Precise Technology, Inc. Pennsylvania Secretary of the Commonwealth Allegheny County (PA) Prothonotary Allegheny County (PA) Recorder Indiana Secretary of State Tippecanoe County, IN New York Secretary of State Livingston County, NY Precise TMP, Inc. Pennsylvania Secretary of the Commonwealth Allegheny County (PA) Prothonotary Florida Secretary of State Pinellas County, FL Massachusetts Secretary of the Commonwealth Worcester Count (Worcester District), MA Grafton (MA) Town Clerk Northbridge (MA) Town Clerk Missouri Secretary of State Clay County, MO Clay County Recorder, MO North Carolina Secretary of State
Company Filing Locations - ------- ---------------- Precise TMP, Inc. Alamance County, NC Virginia State Corporation Commission Chesterfield County, VA Ohio Secretary of State Precise Technology of Delaware, Inc. Pennsylvania Secretary of the Commonwealth Allegheny County (PA) Prothonotary Delaware Secretary of State New Castle County, DE Precise Technology of Illinois, Inc. Pennsylvania Secretary of the Commonwealth Allegheny County (PA) Prothonotary Precise Polestar, Inc. Pennsylvania Secretary of the Commonwealth Allegheny County (PA) Prothonotary Centre County (PA) Prothonotary Centre County (PA) Recorder Massie Tool, Mold & Die, Inc. Pennsylvania Secretary of the Commonwealth Allegheny County (PA) Prothonotary Unity Mold Corporation Illinois Secretary of State Cook County, IL Pennsylvania Secretary of the Commonwealth Allegheny County (PA) Prothonotary Precise Holding Corporation New York Secretary of State New York County, NY Mortgage Filings: - ----------------- Company Filing Locations - ------- ---------------- Precise TMP, Inc. Clerk of the Circuit Court of Pinellas County, Fla. Worcester County (Worcester District) Registry of Deeds Worcester County (Worcester District) Registry District of the Land Court Recorder of Deeds of Clay County, MO Unity Mold Corporation The Office of the Recorder of Deeds of Cook County, IL Precise Technology, Inc. Livingston County Clerk
Company Filing Locations - ------- ---------------- Precise Technology, Inc. Recorder of Deeds of Allegheny County, Pennsylvania Recorder of Deeds of Centre County, Pennsylvania Office of the Recorder for Tippecanoe County, IN Mortgage Releases: - ------------------ See Mortgage Filings
SCHEDULE 4.01(l) PLANS AND MULTIEMPLOYER PLANS 1. Precise Technology, Inc. Employee Retirement Benefit Plan 2. Precise Technology, Inc. Pension Plan U.E. 3. Precise TMP/Unity Savings Plan 4. Sunderland Industrial Holdings Corporation 1997 Key Employee Nonqualified Stock Option Plan SCHEDULE 4.01(y) OPEN YEARS*/ 1. Sunderland Industrial Holdings Corp. & Subs., 1995. 2. Sunderland Industrial Holding Corp. & Subs., 1994. 3. Precise Technology, Inc. & Subsidiary, 1993. 4. Precise Technology, Inc. (Formerly Precise Plastic Products, Inc.), 1992. 5. Precise Plastics Products, Inc. c/o Sunderland Industrial Holding Corp., 1991. - -------- */Year references are to calendar years. SCHEDULE 4.01(cc) EXISTING DEBT 1. 11 1/8% Senior Subordinated Notes due 2007 $75,000,000 2. Amounts owed under that certain Equipment Lease Agreement dated March 17, 1993 by and between Heller Financial Leasing, Inc. and Borrower as amended, pursuant to: Rental Schedule No. 1 dated March 17, 1993 in the original $57,285* amount of $180,880.00 in connection with the purchase of one Nissei FS360S100ASE Injection Molding Machine, Serial No. S36NO20. Rental Schedule No. 2 dated March 17, 1993 in the original $70,088* amount of $180,880.00 in connection with the purchase of one Nissei FS360S100ASE Injection Molding Machine, Serial No. S36NO38. Rental Schedule No. 3 dated March 17, 1993 in the original $67,143* amount of $173,280.00 in connection with the purchase of one Nissei FS360S100ASE Injection Molding Machine, Serial No. S36NO37. Rental Schedule No. 4 dated March 17, 1993 in the original $67,143* amount of $173,280.00 in connection with the purchase of one Nissei FS360S100ASE Injection Molding Machine, Serial No. S36NO32. Rental Schedule No. 5 dated March 17, 1993 in the original $53,449* amount of $137,940.00 in connection with the purchase of one Nissei FS260S71ASE Injection Molding Machine, Serial No. S26NO39. Rental Schedule No. 6 dated March 17, 1993 in the original $53,449* amount of $137,940.00 in connection with the purchase of one Nissei FS260S71ASE Injection Molding Machine, Serial No. S26NO40. Rental Schedule No. 7 dated March 17, 1993 in the original $48,222* amount of $124,450.00 in connection with the purchase of one Nissei FS210S50ASE Injection Molding Machine, Serial No. S21NO26. Rental Schedule No. 8 dated March 17, 1993 in the original $48,222* amount of $124,450.00 in connection with the purchase of one Nissei FS210S50ASE Injection Molding Machine, Serial No. S21NO27. Rental Schedule No. 9 dated March 17, 1993 in the original $48,222* amount of $124,450.00 in connection with the purchase of one Nissei FS210S50ASE Injection Molding Machine, Serial No. S21NO31. Rental Schedule No. 10 dated March 17, 1993 in the original $48,222* amount of $124,450.00 in connection with the purchase of one Nissei FS210S50ASE Injection Molding Machine, Serial No. S21NO32. Rental Schedule No. 11 dated March 17, 1993 in the original $48,222* amount of $124,450.00 in connection with the purchase of one Nissei FS210S50ASE Injection Molding Machine, Serial No. S21NO33. Rental Schedule No. 12 dated March 17, 1993 in the original $48,222* amount of $124,450.00 in connection with the purchase of one Nissei FS210S50ASE Injection Molding Machine, Serial No. S21NO35. Rental Schedule No. 13 dated March 17, 1993 in the original $48,222* amount of $124,450.00 in connection with the purchase of one Nissei FS210S50ASE Injection Molding Machine, Serial No. S21NO36. Rental Schedule No. 14 dated September 15, 1995, in the original $71,897* amount of $115,884.00 in connection with the purchase of one Nissei FS160S36ASE Injection Molding Machine, Serial No.S16Q044. 3. Amounts owed under that certain Master Equipment Lease dated July 17, $40,081* 1995 by and between Iron and Glass Bank and Borrower in the original amount of $98,885.00 in connection with the purchase of software and related items. 4. Amounts owed under that certain Lease No. 5293 dated March 11, 1994 by $186,928* and between P.C. Leasing, a division of Phoenixcor, Inc. and Precise Technology of Delaware, Inc. in the original amount of $314,427.00 in connection with the purchase of one Netstal model HP3500/1650 Injection Molding Machine, Serial No. 9N93309 (Guaranteed by Borrower). 5. Amounts owed under that certain Lease No. 5163 dated December 17, 1993 $147,459* by and between P.C. leasing, a division of Phoenixcor, Inc. and Precise Technology of Delaware, Inc. in the original amount of $265,660.00 in connection with the purchase of one HP2400/870 Injection Molding Machine, Serial No. 93303 (Guaranteed by Borrower). 6. Amounts owed under that certain Lease No. 4814 dated March 12, 1994 by $142,398* and between P.C. Leasing, a division of Phoenixcor, Inc. and Precise Technology of Delaware, Inc. in the original amount of $265,660.00 in connection with the purchase of one Netstal model HP2400/870 Injection Molding Machine, Serial No. 93304 (Guaranteed by Borrower). 7. Amounts owed under that certain Lease No. 5104 dated December 20, 1993 $168,539* by and between P.C. Leasing, a division of Phoenixcor, Inc. and Precise Technology of Delaware, Inc. in the original amount of $314,427.00 in connection with the purchase of one HP3500/1650 Injection Molding Machine, Serial No. 93306 (Guaranteed by Borrower). 8. Amounts owed under that certain Lease No. 4812 dated March 10, 1994 by $174,530* and between P.C. Leasing, a division of Phoenixcor, Inc. and Precise Technology of Delaware, Inc. in the original amount of $314,427.00 in connection with the purchase of one Netstal model HP3500/1650 Injection Molding Machine, Serial No. 93307 (Guaranteed by Borrower). 9. Amounts owed under that certain Lease No. 4813 dated December 21, 1993 $180,895* by and between P.C. Leasing, a division of Phoenixcor, Inc. and Precise Technology of Delaware, Inc. in the original amount of $314,427.00 in connection with the purchase of one HP3500/1650 Injection Molding Machine, Serial No. 93308 (Guaranteed by Borrower). 10. Amounts owed under that certain Lease No. 5911 dated December 19, 1995 $183,489* by and between P.C. Leasing, a division of Phoenixcor, Inc. and Precise Technology of Delaware, Inc. in the original amount of $276,888.20 in connection with the purchase of one Netstal HP4000/1650 Sycap Injection Molding Machine, Serial No. 9N95193 (Guaranteed by Borrower). 11. Amounts owed under that certain lease dated December 22, 1993 by and $81,293* between P.C. Leasing, a division of Phoenixcor, Inc. And Borrower in the original amount of $271,105.00 in connection with the purchase of various equipment including two special hot stamping systems. 12. Amounts owed under that certain Lease Agreement dated January 6, 1995 by $3,032* and between Vision Financial Group, Inc. and Borrower in the original amount of $16,250.00 in connection with the purchase of one Hyster Spacesaver model S50XL2 Fork Lift Truck, Serial No. C187V10385R. 13. Amounts owed under that certain Loan and Security Agreement dated as of $112,604* December 1, 1994 by and among The Delaware Economic Development Authority, Precise Technology of Delaware, Inc. And Borrower (as guarantor) in the original amount of $200,000.00 in connection with the purchase of certain machinery and equipment 14. Amounts owed under that certain Master Equipment Lease dated January 6, $21,000* 1996 by and between Tredegar and Iron and Glass Bank in the original amount of $30,000.00 in connection with the purchase of software. 15. Amounts owed under that certain Promissory Note by Borrower to Concord $186,296* Commercial, Division of Marine Midland Business Loans, Inc. ("Concord") dated March 26, 1996 and that certain Security Agreement by and between Borrower and Concord dated March 26, 1996 in the original amount of $272,040.00 in connection with the purchase of one Charmilles Roboform Model 2000 EDM Machining Center, Serial No. 125129 and one Roboform Model C200 EDM Machining Center, Serial No. 26155. 16. Amounts owed under that certain Equipment Lease No. 2464 by and between $1,144,669* Borrower and Toshiba Machine Company, America dated as of March 22, 1996 in the original amount of $1,460,060 in connection with the purchase of eight Toshiba Plastic Injection Molding Machines. 17. Amounts owed under that certain Equipment Lease No. 2470 by and between $129,627* Borrower and Toshiba Machine Company, America dated as of May 29, 1996 in the original amount or $145,035 in connection with the purchase of a Toshiba Plastic Injection Molding Machine, Serial #625102. 18. Amounts owed under that certain Equipment Lease No. 2503 by and between $134,847* Borrower and Toshiba Machine Company, America dated as of July 30, 1996 in the original amount or $144,810 in connection with the purchase of a Toshiba Plastic Injection Molding Machine, Serial # 625303. 19. Amounts owed under that certain Equipment Lease No. 2518 by and between $134,989* Borrower and Toshiba Machine Company, America dated as of July 30, 1996 in the original amount or $144,810 in connection with the purchase of a Toshiba Plastic Injection Molding Machine, Serial # 625202. 20. Amounts owed under that certain Equipment Lease No. 2537 by and between $130,492* Borrower and Toshiba Machine Company, America dated as of September 30, 996 in the original amount or $144,810 in connection with the purchase of a Toshiba Plastic Injection Molding Machine, Serial # 627404. 21. Amounts owed under that certain Equipment Lease No. 2552 by and between $132,798* Borrower and Toshiba Machine Company, America dated as of October 31, 1996 in the original amount of $144,810 in connection with the purchase of a Toshiba Plastic Injection Molding Machine, Serial # 627604. 22. Amounts owed under that certain Equipment Lease No. 2553 by and between $132,798* Borrower and Toshiba Machine Company, America dated as of October 31, 1996 in the original amount of $144,810 in connection with the purchase of a Toshiba Plastic Injection Molding Machine, Serial # 628204. 23. Amounts owed under that certain Equipment Lease No. 2561 by and between $131,826* Borrower and Toshiba Machine Company, America dated as of December 31, 1996 in the original amount of $144,810 in connection with the purchase of a Toshiba Plastic Injection Molding Machine, Serial # 636610. 24. Amounts owed under that certain Equipment Lease No. 2570 by and between $125,675* Borrower and Toshiba Machine Company, America dated as of January 31, 1997 in the original amount of $144,810 in connection with the purchase of a Toshiba Plastic Injection Molding Machine, Serial # 628304. 25. Amounts owed under that certain Equipment Lease No. 2574 by and between $188,842* Borrower and Toshiba Machine Company, America dated as of January 31, 1997 in the original amount of $217,575 in connection with the purchase of a Toshiba Plastic Injection Molding Machine, Serial # 521309. 26. Amounts owed under that certain Equipment Lease No. 2589 by and between $133,042* Borrower and Toshiba Machine Company, America dated as of March 31, 1997 in the original amount of $144,810 in connection with the purchase of a Toshiba Plastic Injection Molding Machine, Serial # 641212. 27. Amounts owed under that certain Promissory Note (A/C #28470-3) by and $171,942* between Precise TMP, Inc. and Concord Commercial Corp., dated as of May 2, 1996 in the original amount of $215,000 in connection with the purchase of a Charmilles Roboform EDM Machine, Serial #600452. 28. Amounts owed under that Certain Lease Agreement #28470-4 by and $225,710* between Precise TMP, Inc. and Concord Commercial Corp., dated as of August 29, 1996 in the original amount of $269,300 in connection with the purchase of a Sumitomo Plastic Injection Molding Machine, Serial # MOEN0012. 29. Amounts owed under that certain Lease Agreement #28470-7 by and between $182,607* Precise TMP, Inc. and Concord Commercial Corp., dated as of November 15, 1996 in the original amount of $204,550 in connection with the purchase of a Sumitomo Plastic Injection Molding Machine, Serial #MOEQ0080. 30. Amounts owed under that certain Lease Agreement #28470-8 by and between $271,015* Borrower and Concord Commercial Corp., dated as of December 2, 1996 in the original amount of $354,019 in connection with the purchase of various equipment including a Special Robotics System for Tobacco, a Fork Truck, an Optical Measuring Machine and Pro-Engineer Software and a Workstation. 31. Amounts owed under that certain Lease Agreement #28470-10 by and $60,357* between Borrower and Concord Commercial Corp., dated as of February 11, 1997 in the original amount of $68,268 in connection with the purchase of a Okamoto Automatic Surface Grinder, Serial #75003. 32. Amounts owed under that certain Lease Agreement #28470-11 by and $151,623* between Borrower and Concord Commercial Corp., dated as of March 18, 1997 in the original amount of $164,300 in connection with the purchase of a Bostomatic CNC Milling and Drilling Machine, Serial #32-311. 33. Amounts owed under that certain Lease Agreement #28470-12 by and $123,886* between Precise Technology of Illinois, Inc. and Concord Commercial Corp., dated as of April 9, 1997 in the original amount of $128,798 in connection with the purchase of a Charmilles Roboform EDM Machine, Serial #DD3008. 34. Amounts owed under that certain Lease Agreement #28470-13 by and $223,410* between Precise TMP, Inc. and Concord Commercial Corp., dated as of May 28, 1997 in the original amount of $223,410 in connection with the purchase of a Okamoto Surface Grinding Machine, Serial #S8121. 35. Amounts owed under that certain Lease Agreement #16113-12470 by and $382,965* between Precise Polestar, Inc. and U.S. Bancorp Leasing & Financial, dated as of June 3, 1996 in the original amount of $470,000 in connection with the purchase of (3) Sumitomo Plastic Injection Molding Machines.
*Outstanding as of May 31, 1997 SCHEDULE 4.01(dd) OWNED REAL PROPERTY
Owned Properties Book Value Fair Market Value ---------------- ---------- ----------------- 1. 2701 75th Street North $2,320,113 $2,200,000(1) 2600 72nd Street North St. Petersburg, Florida 33710 Parcel 3A and 3B, CTIC Policy FL5097 107 20701 County: Pinellas County Owner: Precise TMP, Inc. 2. 2401 72nd Street North $1,245,833 $1,917,100(2) St. Petersburg, Florida 33710 Parcel 1, CTIC Policy FL5097 107 20701 County: Pinellas County Owner: Precise TMP, Inc. 3. Anvil Street Parking Lot Amount included in $80,000(2) St. Petersburg, Florida 33710 book value of No. 2 Parcel 2, CTIC Policy FL5097 107 20701 County: Pinellas County Owner: Precise TMP, Inc. 4. 132-134 Ferry Street $869,667 $1,200,000(1) South Grafton, Massachusetts 01560 CTIC Policy 9751-00428 County: Worcester District Owner: Precise TMP, Inc. 5. 1701 Johnson Industrial Drive $1,207,708 $843,100(2) Excelsior Springs, Missouri 64021 CTIC Policy 26-908-107-9720391 County: Clay County Owner: Precise TMP, Inc. 6. 501 Mosside Boulevard $1,695,629 $2,000,000(3) North Versailles, Pennsylvania 15137-2553 CTIC Policy 97-418 County: Allegheny County Owner: Borrower Owned Properties Book Value Fair Market Value ---------------- ---------- ----------------- 7. 4750 Swisher Road $1,337,425 $940,000(3) West Lafayette, Indiana 47906-9766 CTIC Commitment 97-1273 County: Tippecanoe County Owner: Borrower 8. 70 East Rawls Road $679,478 $600,000(4) Des Plaines, Illinois 60018 CTIC Policy 1401 007661779 D1 County: Cook County Owner: Precise Technology of Illinois, Inc.
- ----------------------------- (1) Based on appraisals received in 1996. (2) Based on tax values of each property. (3) Based on appraisals received in 1992. (4) Based on appraisals received in 1995. SCHEDULE 4.01(ee) LEASED REAL PROPERTY
Leased Properties Expiration Date Annual Rental ----------------- --------------- ------------- 1. One Main Street June 30, 1998 $144,000 Northbridge, Massachusetts 01588 County: Worcester District Lessee: Precise TMP, Inc. Lessor: Sidney Covich, Trustee of Whitinsville Redevelopment Trust 2. Industrial Drive June 2001; $183,750 Holden, Massachusetts one 2-year renewal option County: Worcester County Lessee: Precise TMP, Inc. Lessor: Michael A. Gaffin, Trustee of Jarrell Realty Trust 3. 3110 Research Drive July 30, 2003; $217,000 State College, Pennsylvania 16801 two 5-year renewal options County: Centre County Lessee: Precise Polestar, Inc. Lessor: Partners Plus 4. Moshannon Valley Enterprise Center April 1, 2002 $68,351 North Philipsburg, Pennsylvania 16866 option for additional County: Centre County 5 year term at Lessee: Precise Polestar, Inc. negotiated rent Lessor: Moshannon Valley Economic Development Partnership, Inc. 5. 220 Lake Drive, Suite 300 December 31, 1999 $192,264 Newark, Delaware 19702-3319 2 five year County: New Castle County renewal options Lessee: Precise Technology of Delaware, Inc. Lessor: Pencader Hundred-OP&F, Inc. Leased Properties Expiration Date Annual Rental ----------------- --------------- ------------- 6. 50/60 East Rawls Road July 31, 1997; currently $79,416.96 plus Des Plaines, Illinois 60018 negotiating 2-year extension CPI adjustment County: Cook County Lessee: Precise Technology of Illinois, Inc. Lessor: Water Saver Faucet Co. 7. 11260 Chester Road, Suite 225 July 31, 1997 $30,959 Cincinnati, Ohio Vacant and will County: Hamilton County not be renewed Lessee: Precise TMP, Inc. Lessor: Spectrum Office Tower 8. Richmond Sales Office April 1998 $16,125 4825 Radford Avenue Suite 101 Richmond, VA 23230 County: Independent City Lessee: Precise Technology, Inc. Lessor: H.S.K. Associates, Inc. 9. 1225 Jay Lane December 2005 $237,200.04 Riverbend Industrial Park Graham, North Carolina 27253 County: Alamance County Lessee: Precise TMP, Inc. Lessor: Riverbend Associates 10. 2601 75th Street North October 31, 1997 $112,000 St. Petersburg, Florida 33710 County: Pinellas County Lessee: Precise TMP, Inc. Lessor: Ram Industries, Inc.
SCHEDULE 4.01(ff) INVESTMENTS
Amount Obligor/Issuer Maturity ------ -------------- -------- Borrower: - --------- 1,000 shares of Common Stock Precise Technology of Delaware, Inc. N/A 100 shares of Common Stock Precise Technology of Illinois, Inc. N/A 1,000 shares of Common Stock Precise TMP, Inc. N/A Parent: - ------- 1 share of Common Stock Borrower N/A Subsidiary Guarantors: - ---------------------- 10 shares of Common Stock Precise Polestar, Inc. N/A held by Precise TMP, Inc. 10 shares of Common Stock Massie Tool, Mold & Die, Inc. N/A held by Precise TMP, Inc.
SCHEDULE 4.01(gg) INTELLECTUAL PROPERTY
Jurisdiction Registration Date of Expiration Date ------------ ------------ ------- --------------- Number Registration Patents - ------- Precise TMP, Inc. - ----------------- Squeeze Bottle Atomizer U.S. Patent & 4,223,842 9/23/80 9/23/97 Trademark Office Squeeze Bottle Dispenser U.S. Patent & 4,226,367 10/7/80 10/7/97 Trademark Office Dispenser U.S. Patent & 4,235,557 11/25/80 11/25/97 Trademark Office Tablet Dispenser U.S. Patent & 5,275,291 1/4/94 1/4/11 Trademark Office Precise Technology, Inc. - ------------------------ Hand-Held Cap Opener U.S. Patent & 4,770,069 9/13/88 9/13/05 for Child Resistant Containers Trademark Office Trademarks - ---------- Precise TMP, Inc. - ----------------- For aerosol and spray pump U.S. Patent & 1,123,729 8/7/79 8/7/99 actuators and valves, all being Trademark Office parts and fittings for containers.
SCHEDULE 4.01(ii) LABOR MATTERS 1. Precise Technology, Inc. and United Electrical, Radio and Machine Workers of America (U.E.) and Local 645, United Electrical, Radio and Machine Workers of America (U.E.). SCHEDULE 5.02(iii) EXISTING LIENS Uniform Commercial Code Filings: None, Except: Precise Technology, Inc.
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Heller Financial, Inc. S/S Pennsylvania 4/5/93 21801581 Thirteen (13) Leased Nissei Equipment Injection Molding Machines Concord Commercial S/S Pennsylvania 5/13/93 21930269 One (1) Leased Nissei Corporation Injection Molding Machine Siemens Credit S/S Pennsylvania 5/20/93 21950740 One (1) Leased Corporation ROLM 9200 Phone and Phonemail System Copelco Credit S/S Pennsylvania 8/9/93 22281608 Leased Copier Corporation (assignee of Equipment Van Dyk Business Systems) P.C. Leasing, a Division S/S Pennsylvania 1/27/94 22791021 Two (2) Leased USI of Phoenixcor, Inc. Hot Stamping Systems and one (1) Zellerbach Heat Tunnel Citicorp Dealer Finance S/S Pennsylvania 5/24/94 23160818 One (1) 530XL (assignee of Equipco, Forklift bearing serial Division Phillips Corp.) no. B010B9223P Citicorp Dealer Finance S/S Pennsylvania 7/11/94 23310056 One (1) 530XL (assignee of Equipco, Forklift bearing serial Division Phillips Corp.) no. B010B09582R Vision Financial Group, S/S Pennsylvania 2/2/95 23960465 One (1) Hyster Fork Inc. Truck bearing serial no. C187V10385R Siemens Credit S/S Pennsylvania 2/28/95 24031158 One (1) Leased Corporation ROLM 9600 Phone and Phonemail System
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral The DuPont Merck S/S Pennsylvania 2/28/95 24040299 DuPont Pharmaceutical Company Merck/DuPont Parts bearing supplier identification nos. 4280, 4284, 4281, 4283, 4341, 4342 and 4282 EI DuPont De Nemours S/S Pennsylvania 2/28/95 24040301 DuPont Medical Product Division Merck/DuPont Parts bearing supplier identification nos. 4352B, 4352A, 4350, 4351, 4373, 4340, 4438, 4377, 4377A, 4375, 4376, 4374, 4378, 4348, 4373, 4344, 4343, 4337, 4338 and 4429 Iron and Glass Bank S/S Pennsylvania 7/7/95 24450799 Computer Software and Demonstration Station Heller Financial Leasing, S/S Pennsylvania 9/22/95 24690963 One (1) Nessei Inc. Injection Molding Machine Toshiba Machine S/S Pennsylvania 11/6/95 24831054 One (1) Toshiba Company, America Plastic Injection Molding Machine bearing serial no. 509707 Business Credit Leasing S/S Pennsylvania 3/4/96 25211497 Equipment under Lease no. 564472 TM Acceptance Corp. S/S Pennsylvania 3/25/96 25281420 One (1) Toshiba Plastic Injection Molding Machine bearing serial no. 620301
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Concord Commercial, a S/S Pennsylvania 4/21/92 20730254 One (1) Roboform 1) Amendment division of HSBC Model C200 EDM filing - 5/13/93 - Business Loans, Inc. Machining Center change of name of (assignee of Concord the Debtor from Commercial Corporation) Precise Plastic Products, Inc. to Precise Technology, Inc. 2) Assignment filing to Concord Commercial: 4/1/96 3) Continuation filing: 1/17/97 Concord Commercial, a S/S Pennsylvania 4/1/96 25310583 One (1) Charmilles division of HSBC Roboform Model Business Loans, Inc. 2000 EDM Machining (assignee of Concord Center Commercial Corporation) Heller Financial, Inc. S/S Pennsylvania 4/17/96 25361129 One (1) Toshiba Assignment Filing (assignee of TM Plastic Injection to Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/26/96 625102 U.S. Bancorp Leasing & S/S Pennsylvania 6/18/96 25570326 Three (3) Sumitomo Financial - Machine Tool Plastic Injection Finance Group Molding Machines with all accessories and attachments Heller Financial Leasing, S/S Pennsylvania 1/12/96 25060183 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/26/96 509707 Heller Financial Leasing, S/S Pennsylvania 1/12/96 25060184 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/26/96 517811 Heller Financial Leasing, S/S Pennsylvania 3/18/96 25260389 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/26/96 520507
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Heller Financial Leasing, S/S Pennsylvania 3/27/96 25300089 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/26/96 620301 Heller Financial Leasing, S/S Pennsylvania 2/7/96 25140369 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/28/96 519211 Heller Financial Leasing, S/S Pennsylvania 2/20/96 25171277 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/28/96 517706 Heller Financial Leasing, S/S Pennsylvania 2/20/96 25171278 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/28/96 517205 Heller Financial Leasing, S/S Pennsylvania 3/18/96 25260390 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/28/96 520807 Heller Financial Leasing, S/S Pennsylvania 7/3/96 25620444 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 9/30/96 625303 Heller Financial Leasing, S/S Pennsylvania 11/6/95 24831053 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 7/10/96 509707 Heller Financial Leasing, S/S Pennsylvania 7/24/96 25690165 One (1) Toshiba Assignment filing to Inc. (assignee of TM Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 9/30/96 625202
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Heller Financial Leasing, S/S Pennsylvania 9/19/96 25870479 One (1) Toshiba Inc. (assignee of TM Plastic Injection Acceptance Corp.) Molding Machine bearing serial no. 521309 Heller Financial Leasing, S/S Pennsylvania 9/19/96 25870480 One (1) Toshiba Inc. (assignee of TM Plastic Injection Acceptance Corp.) Molding Machine bearing serial no. 627404 TM Acceptance Corp. S/S Pennsylvania 10/28/96 26000485 One (1) Toshiba Plastic Injection Molding Machine bearing serial no. 628204 TM Acceptance Corp. S/S Pennsylvania 10/28/96 26000486 One (1) Toshiba Plastic Injection Molding Machine bearing serial no. 627604 Concord Commercial, a S/S Pennsylvania 11/8/96 26050111 One (1) Charmilles division of HSBC Robofil Injection Business Loans, Inc. Molding Machine TM Acceptance Corp. S/S Pennsylvania 11/26/96 26101263 One (1) Toshiba Plastic Injection Molding Machine bearing serial no. 628304 Concord Commercial, a S/S Pennsylvania 11/27/96 26110311 One (1) each model division of HSBC L290 Special System Business Loans, Inc. for Tobacco, Optical Measuring Machine and Pro Engineer and Workstation including attachments and accessories Siemens Credit S/S Pennsylvania 12/18/96 26180018 Two Siemens 9230 Corporation Phone Systems TM Acceptance Corp. S/S Pennsylvania 12/24/96 26201145 One (1) Toshiba Plastic Injection Molding Machine bearing serial no. 636610
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Concord Commercial, S/S Pennsylvania 2/21/97 26390180 One (1) Okamoto division of HSBC Automatic Surface Business Loans, Inc. Grinder TM Acceptance Corp. S/S Pennsylvania 2/24/97 26400298 One (1) Toshiba Plastic Injection Molding Machine bearing serial no. 641212 Concord Commercial, S/S Pennsylvania 3/11/97 26450152 One (1) Bostomatic division of HSBC CNC Bed Type Business Loans, Inc. Precision Milling, Drilling, Boring and Container Machine General Electric Capital Allegheny County 2/15/91 91-01467 Machine Tools to 1) Amendment Corporation (Prothonotary), PA include One (1) filing - 10/25/93 - Cincinnati Milacron change of name of bearing serial no. Debtor from Precise 4036A61/91-26 Plastic Products, Inc. to Precise Technology, Inc. 2) Continuation Filing: 10/2/95 Concord Commercial, Allegheny County 4/21/92 92-02883 One (1) Roboform 1) Amendment division of HSBC (Prothonotary), PA C200 EDM filing - 5/7/93 - Business Loans, Inc. Machining Center change of name of (assignee of Concord Debtor from Precise Commercial Corporation) Plastic Products, Inc. to Precise Technology, Inc. 2) Assignment filing to HSBC: 4/8/96 3) Continuation Filing: 1/24/97 Concord Commercial, Allegheny County 4/2/96 96-2213 One (1) Charmilles division of HSBC (Prothonotary), PA Roboform EDM Business Loans, Inc. Machining Center Heller Financial, Inc. Allegheny County 4/5/93 02252 Thirteen (13) Leased (Prothonotary), PA Nissei Equipment Injection Molding Machines Concord Commercial Allegheny County 5/7/93 03072 One (1) Leased Nissei Corporation (Prothonotary), PA Model FS260S71ASE Injection Molding Machine with NC- 90006 Controls
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Siemens Credit Allegheny County 5/19/93 03339 One (1) Leased Corporation (Prothonotary), PA ROLM 9200 Model 230 Phone and Phonemail System Copelco Capital, Inc. Allegheny County 8/10/93 05379 Leased Copier Amendment filing- (assignee of Van Dyk (Prothonotary), PA Equipment 4/8/96 - change Business Systems) name of secured party from Copelco Credit Corporation to Copelco Credit, Inc. P.C. Leasing, a Division Allegheny County 1/27/94 00470 Two (2) Leased USI of Phoenixcor, Inc. (Prothonotary), PA Hot Stamping Systems and one (1) Zellerbach Heat Tunnel Citicorp Dealer Finance Allegheny County 5/23/94 03371 One (1) 530XL (assignee of Equipco, (Prothonotary), PA Forklift bearing serial Division Phillips Corp.) no. B010B9223P Citicorp Dealer Finance Allegheny County 7/8/94 04570-94 One (1) 530XL (assignee of Equipco, (Prothonotary), PA Forklift bearing serial Division Phillips Corp.) no. B010B09582R Vision Financial Group, Allegheny County 2/2/95 95-00756 One (1) Hyster Fork Inc. (Prothonotary), PA Truck bearing serial no. C187V10385R Siemens Credit Allegheny County 2/28/95 95-001325 One (1) Leased Corporation (Prothonotary), PA ROLM 9600 Model 210 Phone and Phonemail System Heller Financial, Inc. Allegheny County 4/17/96 002694 One (1) Toshiba Assignment filing to (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/26/96 625102 Heller Financial Leasing, Allegheny County 1/16/96 96-00317 One (1) Toshiba Assignment filing to Inc. (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/26/96 509707
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Heller Financial Leasing, Allegheny County 1/16/96 96-318 One (1) Toshiba Assignment filing to Inc. (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/26/96 517811 Iron and Glass Bank Allegheny County 7/10/95 95-04538 Computer Software (Prothonotary), PA and Demonstration Station Heller Financial Leasing, Allegheny County 9/22/95 95-06371 One (1) Nessei Inc. (Prothonotary), PA Injection Molding Machine TM Acceptance Corp. Allegheny County 11/21/95 95-07568 One (1) Toshiba (Prothonotary), PA Plastic Injection Molding Machine bearing serial no. 509707 Heller Financial Leasing, Allegheny County 3/27/96 96-002113 One (1) Toshiba Assignment filing to Inc. (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/26/96 620301 TM Acceptance Corp. Allegheny County 4/2/96 002270 One (1) Toshiba (Prothonotary), PA Plastic Injection Molding Machine bearing serial no. 620301 Heller Financial Leasing, Allegheny County 2/9/96 96-000960 One (1) Toshiba Assignment filing to Inc. (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: 7/2/96 bearing serial no. 519211 Heller Financial Leasing, Allegheny County 2/20/96 96-001190 One (1) Toshiba Assignment filing to Inc. (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: 7/2/96 bearing serial no. 517205 Heller Financial Leasing, Allegheny County 2/20/96 96-001191 One (1) Toshiba Assignment filing to Inc. (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: 7/2/96 bearing serial no. 517706
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Heller Financial Leasing, Allegheny County 3/20/96 96-001926 One (1) Toshiba Assignment filing to Inc. (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: 7/2/96 bearing serial no. 520807 Heller Financial Leasing, Allegheny County 3/20/96 96-1928 One (1) Toshiba Assignment filing to Inc. (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 6/26/96 520507 Heller Financial Leasing, Allegheny County 7/16/96 96-5081 One (1) Toshiba Assignment filing to Inc. (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 10/1/96 625303 Heller Financial Leasing, Allegheny County 7/29/96 96-5407 One (1) Toshiba Assignment filing to Inc. (assignee of TM (Prothonotary), PA Plastic Injection Heller Financial Acceptance Corp.) Molding Machine Leasing, Inc.: bearing serial no. 10/1/96 625202 TM Acceptance Corp. Allegheny County 9/23/96 96-006788 One (1) Toshiba (Prothonotary), PA Plastic Injection Molding Machine bearing serial no. 521309 TM Acceptance Corp. Allegheny County 9/23/96 96-6789 One (1) Toshiba (Prothonotary), PA Plastic Injection Molding Machine bearing serial no. 627404 Concord Commercial, a Allegheny County 11/14/96 96-8109 One (1) Charmilles division of HSBC (Prothonotary), PA Robofil Injection Business Loans, Inc. Molding Machine TM Acceptance Corp. Allegheny County 12/4/96 96-8624 One (1) Toshiba (Prothonotary), PA Plastic Injection Molding Machine bearing serial no. 628304 Siemens Credit Allegheny County 12/27/96 96-9346 Two Siemens 9230 Corporation (Prothonotary), PA Phone Systems
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral TM Acceptance Corp. Allegheny County 12/30/96 96-9366 One (1) Toshiba (Prothonotary), PA Plastic Injection Molding Machine bearing serial no. 636610 Concord Commercial, Allegheny County 2/21/97 97-001198 One (1) Okamoto division of HSBC (Prothonotary), PA Automatic Surface Business Loans, Inc. Grinder Concord Commercial, Allegheny County 3/11/97 97-001715 One (1) Bostomatic division of HSBC (Prothonotary), PA Model 32 CNE Bed Business Loans, Inc. Type Precision Milling, Drilling, Boring and Contouring Machine General Electric Capital Allegheny County 2/15/91 45473 Machine Tools to 1) Amendment Corporation (Real Estate Records), include One (1) filing - 10/25/93 - PA Cincinnati Milacron change of name of bearing serial no. Debtor from Precise 4036A61/91-26 Plastic Products, Inc. to Precise Technology, Inc. 2) Continuation Filing: 9/27/95 Concord Commercial, Allegheny County 4/30/92 47557 One (1) Roboform 1) Amendment division of HSBC (Real Estate Records), EDM Machining filing - 5/13/93 - Business Loans, Inc. PA Center change of name of (assignee of Concord Debtor from Precise Commercial Corporation) Plastic Products, Inc. to Precise Technology, Inc. 2) Assignment filing to HSBC: 4/1/96 3) Continuation filing: 2/3/97 Concord Commercial Allegheny County 5/13/93 49199 One (1) Nissei Corporation (Real Estate Records), Injection Molding PA Machine Concord Commercial Allegheny County 11/8/93 49746 One (1) Nissei Corporation (Real Estate Records), Injection Molding PA Machine Concord Commercial, Allegheny County 4/1/96 52494 One (1) Charmilles division of HSBC (Real Estate Records), Roboform EDM Business Loans, Inc. PA Machining Center
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral TM Acceptance Corp. Allegheny County 11/6/96 53266 One (1) Toshiba (Real Estate Records), Plastic Injection PA Molding Machine bearing serial no. 628204 TM Acceptance Corp. Allegheny County 11/6/96 53267 One (1) Toshiba (Real Estate Records), Plastic Injection PA Molding Machine bearing serial no. 627604 U.S. Bancorp Leasing & Centre County 6/17/96 96-575 Three (3) Sumitomo Financial - Machine Tool (Prothonotary), PA Plastic Injection Finance Group Molding Machine and all accessories and attachments Citicorp Dealer Finance S/S Delaware 5/23/94 9406975 One (1) S30XL (assignee of Equipco, Forklift bearing serial Division of Phillips Corp.) no. B010B9223P Citicorp Dealer Finance S/S Delaware 7/12/94 9409357 One (1) S30XL (assignee of Equipco, Forklift bearing serial Division of Phillips Corp.) no. B010B9582R Ashland Chemical S/S Delaware 6/10/96 96-15916 Purchase Money Company Security Interest in plastic resin Montell Polypropylene SD 242 Business Credit Leasing S/S Florida 6/3/96 960000114220 One (1) Leased Sharp (assignee of Van Dyk Copier bearing serial Business Systems) no. 66200431 Siemens Credit S/S Florida 12/18/96 960000264312 One (1) Siemen 9230 Corporation Phone System Heller Financial, Inc. S/S Indiana 4/5/93 1837987 Thirteen (13) Leased Nissei Injection Molding Machines P.C., Leasing, a division S/S Indiana 3/18/94 1901496 Two USI Special Hot of Phoenixcor, Inc. Stamping Systems bearing serial nos. 12994507931 and 12994507932 and one (1) Zellerbach Hanagata Auto L- Sealer
Precise Technology, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral American National Bank S/S Indiana 9/16/94 1937693 All molds of Outer and Trust Company of Circle Products, Ltd. Chicago (assignee of delivered to, and used Outer Circle Products, by, Precise Ltd.) Technology, Inc. Siemens Credit S/S Indiana 4/1/95 1970345 One (1) Rolm 9200 Corporation Phone and Phonemail System Heller Financial Leasing, S/S Indiana 9/26/95 2010880 One (1) Nissei Inc. Injection Molding Machine Associates Leasing Inc. S/S New York 6/20/94 126101 One (1) Hyster (assignee of Liftech Forklift bearing serial Handling Inc.) no. B010B09573R The DuPont Merek S/S New York 3/1/95 042367 DuPont Merek/ Pharmaceutical Company DuPont parts bearing supplier identification no. 4339 Ashland Chemical S/S New York 5/24/96 104773 Purchase Money Company Security Interest in plastic resin - Montell Polypropane SD 242
B. Precise Technology of Delaware, Inc.
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral P.C. Leasing, a division S/S Delaware 2/9/94 9401759 One (1) HP Amended: 10/11/94 of Phoenixcor, Inc. 3500/1650 Injection Molding Machine P.C. Leasing, a division S/S Delaware 2/9/94 9401760 One (1) HP 2900/870 Amended: 10/11/94 of Phoenixcor, Inc. Injection Molding Machine P.C. Leasing, a division S/S Delaware 2/9/94 9401761 One (1) HP of Phoenixcor, Inc. 3500/1650 Injection Molding Machine P.C. Leasing, a division S/S Delaware 3/25/94 9404060 One (1) Netstal of Phoenixcor, Inc. Model HP 3500/1650 Injection Molding Machine P.C. Leasing, a division S/S Delaware 3/25/94 9404061 One (1) Netstal Amended: 10/11/94 of Phoenixcor, Inc. Model HP 3500/1650 Injection Molding Machine P.C. Leasing, a division S/S Delaware 3/25/94 9404062 One (1) Netstal of Phoenixcor, Inc. Model HP 3500/1650 Injection Molding Machine P.C. Leasing, a division S/S Delaware 3/25/94 9404063 One (1) Netstal Amendment filing- of Phoenixcor, Inc. Model HP 3500/1650 8/31/94 - addition Injection Molding of serial no. Machine bearing serial no. 93304
Precise Technology of Delaware, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Delaware Economic S/S Delaware 1/3/95 25904 Various equipment to Development Authority include Seven (7) Conveyor Systems bearing serial nos. 2385, 2384, 2366, 2387, 2386, 2383 and 2367; and one (1) Five-Ton Bridge Crane bearing serial no. 9406116B; and Air Compressor bearing serial no. F9417U94054; one (1) Dryer bearing serial no. 941TM711; one (1) Granulator bearing serial no. 120-1414; and BRP/Rico Equipment Pallet Truck bearing serial no. 11588
Precise Technology of Delaware, Inc. (cont'd)
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Phoenixcor, Inc. S/S Delaware 1/11/96 96-00859 One (1) Netstal HP 4000/1650 Sycap Injection Molding Machine Delaware Economic New Castle, DE 1/3/95 9500025 Various equipment to Development Authority include Seven (7) Conveyor Systems bearing serial nos. 2385, 2384, 2366, 2387, 2386, 2383 and 2367; and one (1) Five-Ton Bridge Crane bearing serial no. 9406116B; and Air Compressor bearing serial no. F9417U94054; one (1) Dryer bearing serial no. 941TM711; one (1) Granulator bearing serial no. 120-1414; and BRP/Rico Equipment Pallet Truck bearing serial no. 11588
C. Precise Technology of Illinois, Inc.
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Concord Commercial, S/S Illinois 4/15/97 3677416 One Roboform division of HSBC Injection Molding Business Loans, Inc. Machine
D. Precise TMP, Inc.
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral Concord Commercial, S/S Florida 11/8/96 960000236395 One (1) CMS division of HSBC Machining Center Business Loans, Inc. Concord Commercial, S/S Florida 7/9/96 960000141962 One (1) Charmilles division of HSBC Roboform 40 Die Business Loans, Inc. Sinking EDM Machine Concord Commercial, Pinellas County, FL 6/28/96 96-177096 One (1) Charmilles division of HSBC Book 9387 Roboform 40 Die Business Loans, Inc. Page 526 Sinking EDM Machine Concord Commercial, S/S Massachusetts 8/26/96 412714 One (1) Sumitomo division of HSBC Injection Molding Business Loans, Inc. Machine Toyota Motor Credit S/S Massachusetts 9/30/96 419637 One (1) Toyota Corp. (assignee of Brodie, Forklift bearing serial Inc.) no. 65664 Concord Commercial, S/S Massachusetts 11/20/96 430911 One (1) Sumitomo division of HSBC Injection Molding Business Loans, Inc. Machine Concord Commercial, Town of Grafton, MA 8/27/96 8047 One (1) Sumitomo division of HSBC Injection Molding Business Loans, Inc. Machine Toyota Motor Credit Town of Grafton, MA 10/1/96 8056 One (1) Toyota Corp. (assignee of Brodie, Forklift bearing serial Inc.) no. 65664 Concord Commercial, Town of Grafton, MA 11/21/96 8069 One (1) Sumitomo division of HSBC Injection Molding Business Loans, Inc. Machine
E. Precise Polestar, Inc.
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral U.S. Bancorp Leasing & S/S Pennsylvania 6/18/96 25570328 Three (3) Sumitomo Financial - Machine Tool Plastic Injection Finance Group Molding Machines Ethicon-Endo-Surgery, S/S Pennsylvania 12/19/96 26180869 Equipment of Secured Inc. Party (the "Owner") supplied to Debtor U.S. Bancorp Leasing & Centre County 6/17/96 96-574 Three (3) Sumitomo Financial - Machine Tool (Prothonotary), PA Plastic Injection Finance Group Molding Machines Ethicon-Endo-Surgery, Centre County 12/18/96 96-1214 Equipment of Secured Inc. (Prothonotary, PA), Party (the "Owner") PA supplied to Debtor
F. Massie Mold, Tool & Die, Inc.
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral NONE
G. Precise Holding Corporation
Filing Filing Filing Description Comments Secured Party Location Date Number of Collateral NONE
EXHIBIT A TO THE CREDIT AGREEMENT REVOLVING CREDIT NOTE New York, New York $____________ Dated:____________ FOR VALUE RECEIVED, the undersigned, PRECISE TECHNOLOGY, INC., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of ____________________ or its registered assigns (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) the aggregate principal amount of the Revolving Credit Advances (as defined below) owing to the Lender by the Borrower pursuant to the Credit Agreement dated as of June 13, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"; terms defined therein being used herein as therein defined) among Precise Holding Corporation, the Borrower, certain subsidiaries of the Borrower, the lenders from time to time party thereto (including the Lender) and Fleet National Bank, as Agent for the Lender and such other lenders on the Final Maturity Date. The Borrower promises to pay interest on the unpaid principal amount of each Revolving Credit Advance from the date of such Revolving Credit Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Fleet National Bank, as Agent, at Fleet National Bank, ABA No. 011-000-138, for further credit to Account No. 151035103156, in same day funds. Each Revolving Credit Advance owing to the Lender by the Borrower and the maturity thereof, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto, which is part of this Note. This Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of advances (the "Revolving Credit Advances") by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Revolving Credit Advance being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal KL2:197205.2 2 hereof prior to the maturity hereof upon the terms and conditions therein specified. The obligations of the Borrower under this Note, and the obligations of the other Loan Parties under the Loan Documents, are secured by the Collateral as provided in the Loan Documents. All payments made by the Borrower under this Note shall be made without relief from valuation and appraisement laws. The Borrower waives presentment, protest and demand, and also notice of protest, of demand, of nonpayment, of dishonor and of maturity. No single or partial exercise of any power hereunder shall preclude other or further exercise thereof or the exercise of any other power. This Note may not be changed orally, but only by an agreement in writing which is signed by the party or parties against which enforcement of any waiver, change, modification or discharge is sought. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS NOTE, THE BORROWER IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER THE BORROWER. THE BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE BROUGHT IN ANY OF THE AFORESAID COURTS. THE BORROWER WAIVES TRIAL BY JURY AND ALL OTHER NOTICES OR DEMANDS IN CONNECTION WITH THE DELIVERY, ACCEPTANCE, PERFORMANCE, DEFAULT OR ENFORCEMENT OF PAYMENT OF THIS NOTE. PRECISE TECHNOLOGY, INC. By____________________________________ Name: Title: KL2:197205.2 3 ADVANCES AND PAYMENTS OF PRINCIPAL ================================================================================ Amount of Revolving Amount of Unpaid Credit Principal Paid Principal Notation Date Advance or Prepaid Balance Made By ================================================================================ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ EXHIBIT B TO THE CREDIT AGREEMENT NOTICE OF BORROWING Fleet National Bank, as Agent under the Credit Agreement referred to below 56 East 42nd Street New York, New York New York, NY 10017 [Date] Attention: Ladies and Gentlemen: The undersigned, PRECISE TECHNOLOGY, INC., a Delaware corporation (the "Borrower"), refers to the Credit Agreement, dated as of June 13, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined) among Precise Holding Corporation, the Borrower, certain subsidiaries of the Borrower, the lenders from time to time party thereto (including the Lender) and Fleet National Bank, as Agent for the Lender, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the Borrower hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement: (i) The Business Day of the Proposed Borrowing is _________ __, ____. (ii) The Type of Advances comprising the Proposed Borrowing is [Base Rate Advances] [Eurodollar Rate Advances]. (iii) The aggregate amount of the Proposed Borrowing is $__________. (iv) The initial Interest Period for each Eurodollar Rate Advance made as part of the Proposed Borrowing is __________ month[s]. KL2:197646.4 The Borrower hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in each Document are true and correct on and as of such date, before and after giving effect to such Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing, in which case as of such specific date; and (B) no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Default. Very truly yours, PRECISE TECHNOLOGY, INC. By:___________________________________ Name: Title: KL2:197646.4 EXHIBIT C TO THE CREDIT AGREEMENT FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of June 13, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement") among Precise Holding Corporation, Precise Technology, Inc. (the "Borrower"), certain subsidiaries of the Borrower, the Lenders (as defined in the Credit Agreement) and Fleet National Bank, as agent for the Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule 1 hereto hereby agree as follows: 1. The Assignor hereby sells, assigns and delivers to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement Facility specified on Schedule 1 hereto. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the Advances owing to the Assignee will be as set forth on Schedule 1 hereto. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim placed thereon by the Assignor; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, the Loan Documents or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Parent, the Borrower or any other Loan Party or the performance or observance by Parent, the Borrower or any other Loan Party of any of their respective obligations under any Loan Document to which they are a party or any other instrument or document furnished pursuant thereto; and (iv) attaches the Note held by the Assignor and requests that the Agent exchange such Note for a new Note payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto or new Note payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and to the order of the KL2:201527.1 Assignor in an amount equal to the Commitment retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01(f) thereof, the other Loan Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it has and will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it has deemed or shall deem appropriate at the time, make and continue to make its own credit decisions in entering into this Assignment and Acceptance and in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; [and] (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement and the other Loan Documents are required to be performed by it as a Lender[; and (vi) to the extent legally entitled to do so, attaches the U.S. Internal Revenue Service forms required under Section 2.12(e) of the Credit Agreement]. 4. Following the execution of this Assignment and Acceptance by the Assignor and Assignee, an executed original hereof (together with attachments) will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance (the "Assignment Effective Date") shall be the date of acceptance hereof by the Agent and the receipt by the Agent of the processing and recordation fee referred to in Section 8.07(a) of the Credit Agreement, unless otherwise specified on Schedule 1 hereto. 5. Upon such acceptance and recording by the Agent, as of the Assignment Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the other Loan Documents, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement and the other Loan Documents. 6. Upon such acceptance and recording by the Agent, from and after the Assignment Effective Date, the Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Assignment Effective Date directly between themselves. - -------- (1) Include if the Assignee is organized under the laws of a jurisdiction outside of the United States. 7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. KL2:201527.1 SCHEDULE 1 to ASSIGNMENT AND ACCEPTANCE As to the Revolving Credit Facility in respect of which an interest is being assigned: Percentage interest assigned: _______% Assignee's Commitment: $_______ [Assignor's Retained Commitment: $_______] Aggregate outstanding principal amount of Advances assigned: $_______ Principal amount of _________Note payable to Assignee: $_______ Principal amount of _________Note payable to Assignor: $_______ Assignment Effective Date (if other than date of acceptance by Agent): _________ __, ____ Payment Instructions: ASSIGNOR: _______________ _______________ _______________ Attention: Reference: ASSIGNEE: _______________ _______________ _______________ Attention: Reference: KL2:201527.1 Domestic Lending Office of Assignee: Eurodollar Lending Office of Assignee: ___________________________________ ______________________________________ Attention: Attention: Tel.: Tel.: Fax: Fax: [NAME OF ASSIGNOR], as Assignor By____________________________________ Name: Title: Dated: ______________________ , ____ [NAME OF ASSIGNEE], as Assignee By____________________________________ Name: Title: Dated: ______________________ , ____ KL2:201527.1 Accepted and Approved this ____ day of ___________, FLEET NATIONAL BANK, as Agent By_____________________________ Name: Title: EXHIBIT D-1 TO THE CREDIT AGREEMENT PLEDGE AND SECURITY AGREEMENT Dated June 13, 1997 From PRECISE TECHNOLOGY, INC., and VARIOUS SUBSIDIARIES OF PRECISE TECHNOLOGY, INC., as Grantors, to FLEET NATIONAL BANK, as Collateral Agent T A B L E O F C O N T E N T S Section Page 1. Grant and Pledge of Security ........................................... 2 2. Security for Obligations ............................................... 5 3. Grantors Remain Liable ................................................. 5 4. Delivery of Security Collateral and Account Collateral ................. 5 5. Maintaining the L/C Cash Collateral Account ............................ 6 6. Maintaining the Blocked Accounts ....................................... 6 7. Investing of Amounts in the L/C Cash Collateral Account ................ 7 8. Representations, Warranties and Covenants .............................. 7 9. Further Assurances ..................................................... 9 10. As to Plant and Equipment and Inventory ............................... 10 11. Insurance ............................................................. 11 12. Place of Perfection; Records; Collection of Receivables ............... 12 13. Voting Rights; Dividends; Etc. ........................................ 13 14. [Intentionally Omitted] ............................................... 14 15. [Intentionally Omitted] ............................................... 14 16. Transfer and Other Liens; Additional Shares ........................... 14 17. Collateral Agent Appointed Attorney-in-Fact ........................... 14 18. Collateral Agent May Perform .......................................... 15 19. Remedies .............................................................. 15 20. Registration Rights ................................................... 17 Section Page 21. Collateral Agent ...................................................... 18 22. Indemnity and Expenses ................................................ 22 23. Security Interest Absolute ............................................ 22 24. Amendments; Waivers; Etc. ............................................. 23 25. Addresses for Notices ................................................. 24 26. Continuing Security Interest; Assignments under the Credit Agreement .. 24 27. Release and Termination ............................................... 24 28. Jurisdiction, Etc. .................................................... 25 Schedule I - Pledged Shares and Pledged Debt Schedule II - Assigned Agreements Schedule III - Locations of Plant and Equipment and Inventory Schedule IV - Inventory Schedule for Section 8(d) Schedule V - Blocked Accounts Schedule VI - Trade Names Exhibit A - Form of Blocked Account Letter Exhibit B - Form of Pledge and Security Agreement Supplement Exhibit C - Form of Consent and Agreement PLEDGE AND SECURITY AGREEMENT PLEDGE AND SECURITY AGREEMENT (as amended, supplemented or otherwise modified from time to time, this "Agreement"), dated June 13, 1997, made by and among PRECISE TECHNOLOGY, INC., a Delaware corporation (the "Borrower"), each of the other Persons listed on the signature page hereof and the Additional Collateral Grantors (as defined in Section 24(c)) (the Borrower, such other Persons and such Additional Collateral Grantors collectively referred to herein as the "Grantors", and each individually, a "Grantor") to FLEET NATIONAL BANK ("Fleet"), as collateral agent (together with any successor collateral agent appointed pursuant to Section 21, the "Collateral Agent") for the Secured Parties, as custodian for the Hedge Banks and as Issuing Bank. PRELIMINARY STATEMENTS. (1) Precise Holding Corporation, a Delaware corporation, the Borrower and each Subsidiary Guarantor have entered into a Credit Agreement, dated as of June 13, 1997, (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined) with Fleet, as agent (together with any successor agent appointed pursuant to Article VII of the Credit Agreement, the "Agent"), and the Lenders from time to time party thereto. (2) Pursuant to the Subsidiary Guaranty, each Subsidiary Guarantor has guaranteed to the Lenders the payment when due of all obligations and liabilities of the Borrower under or with respect to the Loan Documents. (3) Each Grantor is the record owner of all stock at any time pledged or required to be pledged hereunder, including without limitation the shares of stock described in Part I of Schedule I hereto and issued by the corporations named therein (the "Pledged Shares") and of the indebtedness described in Part II of said Schedule I and issued by the obligors named therein (the "Pledged Debt"). (4) It is a condition precedent to the making of Advances by the Lenders and the issuance of Letters of Credit by the Issuing Bank under the Credit Agreement and the entry by the Hedge Banks into the Bank Hedge Agreements with the Borrower from time to time that each Grantor shall have granted the assignment and security interest and made the pledge and assignment contemplated by this Agreement. (5) Each Grantor will obtain benefits from the incurrence of Advances and the issuance of Letters of Credit under the Credit Agreement and the entering into of Bank Hedge Agreements with the Hedge Banks and, accordingly, each Grantor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph (4). NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make Advances and the Issuing Bank to issue Letters of Credit under the Credit Agreement and to induce the Hedge Banks to enter into Bank Hedge Agreements with the KL2:194292.6 Borrower from time to time, each Grantor hereby agrees with the Collateral Agent for the ratable benefit of the Secured Parties as follows: Section 1. Grant and Pledge of Security. Each Grantor hereby assigns and pledges to the Collateral Agent for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent for the ratable benefit of the Secured Parties a security interest in, the following, in each case, as to each type of property described below, whether now owned or hereafter owned or acquired, wherever located and whether now or hereafter existing (collectively, the "Collateral"): (a) all of such Grantor's right, title and interest in and to all "equipment", as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York (the "New York UCC"), now or hereafter owned by such Grantor and, in any event, shall include, but shall not be limited to, all machinery, plant, equipment, furnishings, movable trade fixtures and vehicles and any or all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto, together with all condemnation awards, materials, appurtenances, rights and other property interests now or at any time hereafter owned by each Grantor in the property (such property hereinafter referred to as the "Property") (any and all such machinery, plant, Property, equipment, furnishings, fixtures, attachments, components, parts and accessions being the "Plant and Equipment"); (b) all of such Grantor's right, title and interest in and to all merchandise, inventory and goods in all of its forms, including, without limitation, (i) all raw materials, work in process therefor, parts, components, assemblies, supplies, materials, finished products and other goods and materials used or consumed in the manufacture or production thereof (including, without limitation, all wrapping, packaging, advertising, shipping materials, labels and other devices, names or marks affixed or to be affixed thereto for purposes of selling or of identifying the same or the seller or manufacturer thereof owned, consumed, used or held for use or sale, directly or indirectly, by, or on behalf of or for the account of such Grantor), (ii) goods in which such Grantor has an interest in mass or a joint or other interest or right of any kind (including, without limitation, goods in which such Grantor has an interest or right as consignee), (iii) goods that are returned to or repossessed by such Grantor and (iv) all "inventory" as such term is defined in the New York UCC and all additions, substitutions and replacements thereof, and all accessions thereto and products thereof and documents therefor (any and all such inventory, accessions, products and documents being the "Inventory"); (c) all of such Grantor's right, title and interest in and to any "account" and "general intangibles" as each such term is defined in the New York UCC and, in any event, shall include, but shall not be limited to, all accounts, contract rights, "chattel paper" (as defined in the New York KL2:194292.6 2 UCC and hereinafter referred to as "Chattel Paper"), instruments, deposit accounts, general intangibles and other rights and obligations of any kind, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights now or hereafter existing in and to all security agreements, leases and other contracts and "documents" (as defined in the New York UCC and hereinafter referred to as "Documents"), and all guaranties, endorsements and indemnifications on, or of, any of the foregoing, securing or otherwise relating to any such accounts, contract rights, Chattel Paper, instruments, deposit accounts, general intangibles, rights or obligations (any and all such accounts, contract rights, Chattel Paper, instruments, deposit accounts, general intangibles, rights and obligations, to the extent not referred to in clause (d), (e), (f) or (g) below, being the "Receivables", and any and all such leases, security agreements and other contracts and Documents being the "Related Contracts"); (d) all of the following (the "Security Collateral"): (i) the Pledged Shares and the certificates representing the Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; (ii) the Pledged Debt and the instruments evidencing the Pledged Debt, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Debt; (iii) all additional shares of stock from time to time acquired by such Grantor in any manner, and the certificates representing such additional shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares; and (iv) all additional indebtedness from time to time owed to such Grantor and the instruments evidencing such indebtedness, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness; (e) all of such Grantor's right, title and interest in and to each of the agreements listed on Schedule II, and each Bank Hedge Agreement to which such Grantor is or may hereafter become a party, in each case as such agreements may be amended or otherwise modified from time to time (collectively, the "Assigned Agreements"), including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due under or pursuant to the Assigned Agreements, (ii) all rights of such Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii) claims of such Grantor for damages arising out of or for breach of or default under the Assigned Agreements and (iv) the right of such Grantor to terminate the Assigned Agreements, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder (all such Collateral being the "Agreement Collateral"); (f) all of the following (collectively, the "Account Collateral"): KL2:194292.6 3 (i) the L/C Cash Collateral Account, all funds held therein and all certificates and instruments, if any, from time to time representing or evidencing the L/C Cash Collateral Account; (ii) all other deposit accounts of such Grantor, all funds held therein and all certificates and instruments, if any, from time to time representing or evidencing such deposit accounts; (iii) all Collateral Investments (as hereinafter defined) from time to time and all certificates and instruments, if any, from time to time representing or evidencing the Collateral Investments; (iv) all notes, certificates of deposit, deposit accounts, checks and other instruments from time to time hereafter delivered to or otherwise possessed by the Collateral Agent for or on behalf of such Grantor in substitution for or in addition to any or all of the then existing Account Collateral; and (v) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Account Collateral; (g) all of such Grantor's right, title and interest in and to all general intangibles of such Grantor (other than general intangibles for money due or to become due and described in clause (c) above), including, without limitation, all trademarks, trade names, trade styles, trade secrets, service marks, logos, copyrights, patents, patent applications, computer programs and all permits, licenses (written or oral), license applications, registrations and goodwill relating to or associated with any of the foregoing; and (h) all proceeds of any and all of the foregoing Collateral (including, without limitation, proceeds that constitute property of the types described in clauses (a) through (g) of this Section 1 and all accessions and additions to, all substitutions for and all proceeds, products, substitutions and replacement of any and all of the foregoing) and, to the extent not otherwise included, all (i) payments under insurance (whether or not the Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise and any and all other products of, or any rents, profits or other amounts from time to time paid or payable with respect to any of the foregoing Collateral and (ii) cash. Notwithstanding clauses (a) through (h), the payment and performance of each Grantor's obligations shall not be secured by more than 66% of the total combined voting power of all classes of capital stock owed by such Grantor of any foreign Subsidiary entitled to vote. Following a change in the relevant provisions of the Internal Revenue Code or the regulations, published rules, published rulings, notices or other official pronouncements issued or promulgated thereunder, if the Collateral Agent or the Required Lenders request a pledge of additional stock of any foreign Subsidiary of a Grantor, all of the stock of which foreign Subsidiary has not already been pledged pursuant to this Agreement, then within 90 days after KL2:194292.6 4 such request the relevant Grantor shall either (i) pledge such additional stock of such foreign Subsidiary or (ii) deliver to the Collateral Agent an opinion of the counsel of the respective Grantor, which counsel shall be reasonably acceptable to the Collateral Agent, that the requested pledge of such additional stock is more likely than not to cause the undistributed earnings of such foreign Subsidiary to be treated as a deemed dividend to such foreign Subsidiary's United States parent for Federal income tax purposes. Section 2. Security for Obligations. This Agreement secures (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities (including, without limitation, the principal of and interest on the Notes issued by, and Advances made to, the Borrower under the Credit Agreement, and all indemnities, fees and interest thereon or owed thereunder) of each Grantor to the Secured Parties, whether now existing or hereafter incurred under, arising out of or in connection with any Loan Document (including, without limitation, in the case of each Subsidiary Guarantor, all of its obligations and liabilities under the Subsidiary Guaranty) to which such Grantor is a party and the due performance and compliance by each Grantor with all of the terms, conditions and agreements contained in the Credit Agreement and such other Loan Documents (all such principal, interest, indemnities, fees, obligations and liabilities being herein collectively called the "Credit Agreement Obligations"); (ii) to the extent that any Bank Hedge Agreement is entitled to the benefits of this Agreement, the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities of each Grantor to the Hedge Banks, whether now existing or hereafter incurred under, arising out of or in connection with any such Bank Hedge Agreement and the due performance and compliance by such Grantor with all the terms, conditions and agreements contained in such Bank Hedge Agreement (all such obligations and liabilities described in this clause (ii) being herein collectively called the "Other Obligations", and together with the Credit Agreement Obligations, collectively the "Secured Obligations"). Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts that constitute part of the Secured Obligations and would be owed by such Grantor to the Secured Parties under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Grantor. Section 3. Grantors Remain Liable. Anything herein to the contrary notwithstanding, (a) each Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Collateral Agent of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) no Secured Party shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any other Loan Document, nor shall any Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. Section 4. Delivery of Security Collateral and Account Collateral. All certificates or instruments representing or evidencing Security Collateral or Account Collateral shall be delivered to and held by or on behalf of the Collateral Agent pursuant hereto and shall be in KL2:194292.6 5 suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Collateral Agent. Upon the occurrence and during the continuance of an Event of Default and upon acceleration of all Borrowings under the Credit Agreement, the Collateral Agent shall have the right, at any time in its discretion and without notice to any Grantor, to transfer to or to register in the name of the Collateral Agent or any of its nominees any or all of the Security Collateral and Account Collateral, subject only to the revocable rights specified in Section 13(a). In addition, the Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Security Collateral or Account Collateral for certificates or instruments of smaller or larger denominations. Section 5. Maintaining the L/C Cash Collateral Account. So long as any Advance or any other Secured Obligation shall remain unpaid, any Letter of Credit or Bank Hedge Agreement shall be outstanding or any Lender shall have any Commitment under the Credit Agreement: (a) The Borrower will maintain the L/C Cash Collateral Account with the Collateral Agent; and (b) It shall be a term and condition of the L/C Cash Collateral Account, notwithstanding any term or condition to the contrary in any other agreement relating to the L/C Cash Collateral Account, as the case may be, and except as otherwise provided by the provisions of Section 19, that no amount (including, without limitation, interest on Collateral Investments) shall be paid or released to or for the account of, or withdrawn by or for the account of, the Borrower or any other Person from the L/C Cash Collateral Account and shall be funded in accordance with the terms of the Credit Agreement. The L/C Cash Collateral Account shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. Section 6. Maintaining the Blocked Accounts. So long as any Advance shall remain unpaid, any Letter of Credit or Bank Hedge Agreement shall be outstanding or any Lender shall have any Commitment under the Credit Agreement: (a) Each Grantor shall maintain blocked deposit accounts ("Blocked Accounts") only with banks ("Blocked Account Banks") that have entered into letter agreements in substantially the form of Exhibit A (or such other form as the Collateral Agent shall agree) with such Grantor and the Collateral Agent ("Blocked Account Letters"). After the Initial Extension of Credit and in accordance with Section 5.01(o) of the Credit Agreement, the Borrower shall deliver each Blocked Account Letter to the Collateral Agent, duly executed by each Grantor, the Collateral Agent and the Blocked Account Bank party thereto. (b) Each Grantor shall immediately instruct each Person obligated at any time to make any payment to such Grantor for any reason (an "Obligor") to make such KL2:194292.6 6 payment to a Blocked Account and, if an Event of Default shall have occurred and be continuing, shall, at the request of the Collateral Agent, pay to the Collateral Agent for application as provided by the terms of the Credit Agreement, at the end of each Business Day, all proceeds of Collateral. So long as an Event of Default shall not have occurred and be continuing or if the Collateral Agent shall not have given the notice referred to in the immediately preceding sentence, such Grantor may operate the Blocked Account in accordance with its past business practice. (c) Upon any termination of any Blocked Account Letter or other agreement with respect to the maintenance of a Blocked Account by such Grantor or any Blocked Account Bank, such Grantor shall immediately notify all Obligors that were making payments to such Blocked Account to make all future payments to another Blocked Account. Such Grantor agrees to terminate any or all Blocked Accounts and Blocked Account Letters upon request by the Collateral Agent. Section 7. Investing of Amounts in the L/C Cash Collateral Account. If requested by the Borrower, the Collateral Agent will, subject to the provisions of Section 19, from time to time (a) invest amounts on deposit in the L/C Cash Collateral Account in such Cash Equivalents in the name of the Collateral Agent as the Borrower may select subject to approval of the Collateral Agent and (b) invest interest paid on the Cash Equivalents referred to in clause (a) above, and reinvest other proceeds of any such Cash Equivalents that may mature or be sold, in each case in such Cash Equivalents in the name of the Collateral Agent as the Borrower may select subject to approval of the Collateral Agent (the Cash Equivalents referred to in clauses (a) and (b) above being collectively "Collateral Investments"). Interest and proceeds that are not invested or reinvested in Collateral Investments as provided above shall be deposited and held in the L/C Cash Collateral Account. Section 8. Representations, Warranties and Covenants. Each Grantor represents, warrants, agrees and covenants as to itself and its Collateral, which representations, warranties, agreements and covenants shall survive execution and delivery of this Agreement, as follows: (a) All of the Plant and Equipment is located at the places specified beneath such Grantor's name on Part I of Schedule III hereto. All of the Inventory is located at the places specified beneath such Grantor's name on Part II of Schedule III hereto. The chief place of business and chief executive office of such Grantor and the office where such Grantor keeps its records concerning the Receivables, and the original copies of each Assigned Agreement and all originals of all Chattel Paper that evidence Receivables, are located at the address listed below the name of such Grantor on the signature pages hereof or, in the case of any Additional Collateral Grantor, at the address listed below the name of such Additional Collateral Grantor on its Pledge and Security Agreement Supplement (as defined in Section 24(c)). A complete copy of each Assigned Agreement has been delivered to the Collateral Agent. None of the Receivables or Agreement Collateral is evidenced by a promissory note or other instrument. (b) Such Grantor is the legal and beneficial owner of the Collateral free and clear of any Lien or other right, title or interest of any Person except for the security interest created under this Agreement and Liens permitted by Section 5.02(a) of the Credit KL2:194292.6 7 Agreement, and such Grantor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. No effective financing statement or other instrument similar in effect covering or purporting to cover all or any part of the Collateral is on file in any recording office, except such as may have been filed in favor of the Collateral Agent relating to this Agreement and those Liens permitted under Section 5.02(a) of the Credit Agreement. (c) Set forth on Schedule VI hereto a complete and accurate list as of the date hereof of all names under which the Grantor is doing business, including, without limitation, trade names, division names and fictitious names. (d) Such Grantor has exclusive possession and control of the Plant and Equipment and the Inventory, except for such Inventory as shall have been consigned by the Grantor in the ordinary course of business to its customers and subcontractors or as described on Schedule IV hereto. (e) All of the shares of stock that constitute Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable and each Grantor is the legal, record and beneficial owner of, and has good and marketable title to, such Pledged Shares, subject to no pledge, lien, mortgage hypothetication, security interest, charge, option or other encumbrance whatsoever except the liens and security interests created by this Agreement. The Pledged Debt has been duly authorized, authenticated or issued and delivered, is the legal, valid and binding obligation of the issuers thereof, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or limiting creditors' rights or by equitable principles generally (regardless of whether enforcement is sought in equity or at law), and is not in default. Each Grantor has full power, authority and legal right to pledge the Pledged Shares and Pledged Debt pledged by it pursuant to this Agreement. (f) As of the date hereof, the Pledged Shares constitute the percentage of the issued and outstanding shares of stock of the issuers thereof indicated on Part I of Schedule I hereto. As of the date hereof, the Pledged Debt is outstanding in the principal amount indicated on Part II of Schedule I hereto. (g) The Assigned Agreements, true and complete copies of which have been furnished to each Lender, have been duly authorized, executed and delivered by the Grantors and, to the best knowledge of the Grantors, all other parties thereto, have not been amended or otherwise modified, are in full force and effect and are binding upon and enforceable against the Grantor in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or limiting creditors' rights or by equitable principles generally (regardless of whether enforcement is sought in equity or at law). There exists no default under any Assigned Agreement by the Grantors and, to the best knowledge of the Grantors, any other party thereto. Each party (other than any Loan Party) to any Assigned Agreement (other than the Bank Hedge Agreements) has executed and delivered to such Grantor a consent, in substantially the form of Exhibit C hereto (or such other form as the Collateral KL2:194292.6 8 Agent shall agree), to the assignment of the Agreement Collateral to the Collateral Agent pursuant to this Agreement. (h) No Grantor has Blocked Accounts or other deposit accounts other than those listed on Schedule V hereto. (i) All filings and other actions necessary or desirable to perfect and protect the security interest in the Collateral taken as a whole created under this Agreement have been duly made or taken, and this Agreement, the pledge of the Security Collateral pursuant hereto and the pledge and assignment of the Account Collateral pursuant hereto, together with such filings and other actions, create a valid and perfected first priority security interest in the Collateral taken as a whole, securing the payment of the Secured Obligations, except for Collateral subject to Liens permitted pursuant to Section 5.02(a) of the Credit Agreement. (j) No consent of any other Person and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other third party is required (i) for the grant by such Grantor of the assignment and security interest granted hereunder, for the pledge by such Grantor of the Security Collateral pursuant hereto or for the execution, delivery or performance of this Agreement by such Grantor, (ii) for the perfection or maintenance of the pledge, assignment and security interest created hereunder (including the first priority nature of such pledge, assignment or security interest), except for the filing of financing and continuation statements under the UCC, which financing statements have been duly filed and are effective, under applicable law, to perfect the security interest granted to the Collateral Agent herein, or (iii) for the exercise by the Collateral Agent of its voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement, except where the failure to obtain such consent or authorization would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (k) The Inventory has been produced by each Grantor in compliance in all material respects with all requirements of the Fair Labor Standards Act. (l) This Agreement is made with full recourse to each Grantor (including, without limitation, with full recourse to all assets of such Grantor) and pursuant to and upon all warranties, representations, covenants and agreements on the part of such Grantor contained herein, in the other Collateral Documents and otherwise in writing in connection herewith or therewith. Section 9. Further Assurances. (a) Each Grantor agrees that from time to time, at its own expense, it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Collateral Agent may reasonably request, in order to perfect and protect any pledge, assignment or security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Grantor will: (i) upon the occurrence and during the KL2:194292.6 9 continuance of an Event of Default and upon the acceleration of all Borrowings under the Credit Agreement, if the Collateral Agent so directs, legend, in form and manner satisfactory to the Collateral Agent, its Receivables and the Related Contracts, as well as books, records and documents (if any) of such Grantor evidencing or pertaining to such Receivables and Related Contracts with an appropriate reference to the fact that such Receivables and Related Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein; (ii) if any Collateral shall be evidenced by a promissory note or other instrument or Chattel Paper, deliver and pledge to the Collateral Agent hereunder such note or instrument duly indorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent; and (iii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Collateral Agent may reasonably request, in order to perfect and preserve the pledge, assignment and security interest granted or purported to be granted hereunder. (b) Each Grantor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Collateral without the signature of such Grantor where permitted by law. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (c) Each Grantor shall furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail. (d) Each Grantor shall promptly notify the Collateral Agent (but in any event, within 2 Business Days) after it acquires beneficial ownership of real property and, within 15 Business Days after the Collateral Agent's request, such Grantor shall issue a mortgage to the Collateral Agent for the benefit of the Secured Parties, in form and substance satisfactory to the Collateral Agent. Section 10. As to Plant and Equipment and Inventory. (a) Each Grantor shall keep the Plant and Equipment and the Inventory (other than Plant and Equipment and Inventory sold in the ordinary course of business) at the places therefor specified in Section 8(a) or, upon 30 days' prior written notice to the Collateral Agent, at such other places in a jurisdiction where all action required by Section 9 shall have been taken with respect to the Plant and Equipment and the Inventory and, at the request of the Collateral Agent, an opinion of counsel acceptable to the Collateral Agent shall have been furnished to the Collateral Agent prior to any such change of location to the effect that all financing or continuation statements and amendment or supplements thereto have been filed in the appropriate filing office or offices, and all other actions have been taken, in order to perfect (and maintain the perfection of) the security interest granted hereby in respect of the types of Collateral. (b) Each Grantor shall cause the Plant and Equipment to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and in accordance with any manufacturer's manual where applicable, and shall KL2:194292.6 10 10 forthwith, or in the case of any loss or damage to any of the Plant and Equipment as quickly as practicable after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable to such end. Notwithstanding the foregoing, no Grantor shall be required to maintain, preserve, repair, replace or improve any Plant or Equipment if the Board of Directors or senior executive officers of such Grantor shall determine in the reasonable business judgement of such Board of Directors or senior executive officers, as the case may be, that not doing so is in the best interests of such Grantor. Each Grantor shall promptly furnish to the Collateral Agent a statement respecting any material loss or damage to any of the Plant and Equipment. (c) Each Grantor shall pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including, without limitation, claims for labor, materials and supplies) against, the Plant and Equipment and Inventory, except those being contested diligently in good faith. In producing the Inventory, each Grantor shall comply in all material respects with all requirements of the Fair Labor Standards Act. Section 11. Insurance. (a) Each Grantor shall, at its own expense, maintain insurance with respect to the Plant and Equipment and the Inventory against loss or damage of the kinds customarily insured against by corporations similarly situated and owning properties and engaged in like businesses, with reputable insurers or with the government of the United States of America or any agency or instrumentality thereof, in such amounts (giving effect to self insurance) with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry. Each policy for liability insurance shall provide for all losses to be paid on behalf of the Collateral Agent and such Grantor as their interests may appear, and each policy for property damage insurance shall provide for all losses to be paid directly to the Collateral Agent, for the ratable benefit of the Secured Parties and, in certain circumstances, to the Borrower in accordance with, and as permitted by, the terms of the Credit Agreement. Each such policy shall in addition (i) name such Grantor and the Collateral Agent as insured parties thereunder (without any representation or warranty by or obligation upon the Collateral Agent) as their interests may appear, (ii) provide that there shall be no recourse against the Collateral Agent for payment of premiums or other amounts with respect thereto and (iii) provide that at least 10 days' prior written notice of cancellation or of lapse shall be given to the Collateral Agent by the insurer. Each Grantor shall, as often as the Collateral Agent reasonably requests, deliver to the Collateral Agent original or duplicate policies of such insurance and a report of a reputable insurance broker with respect to such insurance. Further, each Grantor shall, at the request of the Collateral Agent, duly execute and deliver instruments of assignment of such insurance policies to comply with the requirements of Section 9 and cause the insurers to acknowledge notice of such assignment. (b) Reimbursement under any liability insurance maintained by any Grantor pursuant to this Section 11 may be paid directly to the Person who shall have incurred liability covered by such insurance. In case of any loss involving damage to the Plant and Equipment or the Inventory when subsection (c) of this Section 11 is not applicable, such Grantor shall make or cause to be made the necessary repairs to or replacements of such Plant and Equipment or such Inventory, and any proceeds of insurance maintained by such Grantor pursuant to this Section 11 shall be applied pursuant to and in accordance with the Credit Agreement. KL2:194292.6 11 11 Notwithstanding the foregoing, no Grantor shall be required to repair or replace any Plant or Equipment if the Board of Directors or senior executive officers of such Grantor shall determine in the reasonable business judgment of such Board of Directors or senior executive officers, as the case may be, that not doing so is in the best interests of such grantor. (c) Upon the occurrence and during the continuance of any Event of Default, all insurance payments in respect of such Plant and Equipment or such Inventory shall be paid to and applied by the Collateral Agent as specified in Section 19(b). Section 12. Place of Perfection; Records; Collection of Receivables. (a) Each Grantor shall keep its chief place of business and chief executive office and the office where it keeps its records concerning the Collateral, and the original copies of the Assigned Agreements and all originals of all Chattel Paper that evidence Receivables, at the location therefor specified in Section 8(a) or, upon 30 days' prior written notice to the Collateral Agent, at such other locations in a jurisdiction where all actions required by Section 9 shall have been taken with respect to the Collateral and, at the request of the Collateral Agent, an opinion of counsel acceptable to the Collateral Agent shall have been furnished to the Collateral Agent prior to any such change of location to the effect that all financing or continuation statements and amendment or supplements thereto have been filed in the appropriate filing office or offices, and all other actions have been taken, in order to perfect (and maintain the perfection of) the security interest granted hereby in respect of the types of Collateral. Each Grantor will hold and preserve such records, Assigned Agreements and Chattel Paper and will permit representatives of the Collateral Agent at any and all reasonable times to inspect and make abstracts from such records and Chattel Paper. (b) Except as otherwise provided in this subsection (b), each Grantor shall continue to collect, at its own expense, all amounts due or to become due such Grantor under the Receivables. Upon the occurrence and during the continuance of any Event of Default, in connection with such collections, each Grantor may take (and, at the Collateral Agent's direction, shall take) such action as such Grantor or the Collateral Agent may deem necessary or advisable to enforce collection of the Receivables; provided, however, that the Collateral Agent shall have the right upon the occurrence and during the continuance of an Event of Default, upon notice to such Grantor of its intention to do so, to notify the obligors under any Receivables of the assignment of such Receivables to the Collateral Agent and to direct such obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Collateral Agent and, upon such notification and at the expense of such Grantor, to enforce collection of any such Receivables, and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by any Grantor of the notice from the Collateral Agent referred to in the proviso to the immediately preceding sentence, (i) all amounts and proceeds (including instruments) received by such Grantor in respect of the Receivables shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary indorsement) to be applied as provided by Section 19(b) of this Agreement and (ii) such Grantor shall not adjust, settle or compromise the amount or payment of any Receivable, release wholly or partly any obligor thereof, or allow any credit or discount thereon. KL2:194292.6 12 Section 13. Voting Rights; Dividends; Etc. (a) So long as no Event of Default shall have occurred and be continuing: (i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Security Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the other Documents; provided, however, that such Grantor shall not exercise or refrain from exercising any such right if such action (a) would reasonably be expected to have a material adverse effect on the value of the Security Collateral or any part thereof or (b) would violate or be inconsistent with any of the terms of this Agreement, the Credit Agreement, any other Loan Document or any Bank Hedge Agreement; (ii) Each Grantor shall be entitled to receive and retain any and all dividends and interest paid in respect of the Security Collateral permitted by the Credit Agreement; provided, however, that any and all (A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, such Security Collateral, and (B) dividends and other distributions paid or payable in cash in respect of such Security Collateral in connection with a partial or total liquidation or dissolution shall be, and shall be forthwith delivered to the Collateral Agent to hold as, Security Collateral and shall, if received by such Grantor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of such Grantor and be forthwith delivered to the Collateral Agent as Security Collateral in the same form as so received (with any necessary indorsement). Notwithstanding the foregoing, it is understood that any and all dividends and other distributions paid or payable in cash in respect of such Security Collateral in connection with a reduction of capital, capital surplus or paid-in-surplus and any and all cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, such Security Collateral shall be forthwith delivered to the Blocked Accounts by such Grantor. (iii) The Collateral Agent shall execute and deliver (or cause to be executed and delivered) to each Grantor all such proxies and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights that it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to paragraph (ii) above. (b) Upon the occurrence and during the continuance of an Event of Default: (i) All rights of each Grantor (x) to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 13(a)(i) shall, upon notice to such Grantor by the Collateral Agent, cease and KL2:194292.6 13 13 (y) to receive the dividends and interest payments that it would otherwise be authorized to receive and retain pursuant to Section 13(a)(ii) shall automatically cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Security Collateral such dividends and interest payments. (ii) All dividends and interest payments that are received by any Grantor contrary to the provisions of paragraph (i) of this Section 13(b) shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent as Security Collateral in the same form as so received (with any necessary indorsement). Section 14. [Intentionally Omitted] Section 15. [Intentionally Omitted] Section 16. Transfers and Other Liens; Additional Shares. (a) Each Grantor agrees not (i) to sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, except sales, assignments and dispositions otherwise permitted under the Credit Agreement, or (ii) to create or suffer to exist any Lien upon or with respect to any of the Collateral except for the pledge, assignment and security interest created under this Agreement and the Liens permitted under Section 5.02(a) of the Credit Agreement. (b) Each Grantor shall (i) for the Pledged Shares and all other shares of stock pledged hereunder that are issued by issuers which are controlled by such Grantor, cause each issuer of the Pledged Shares and each issuer of all other shares of stock pledged hereunder not to issue any stock or other securities in addition to or in substitution for the Pledged Shares or such other shares issued by any such issuer, except to such Grantor, and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities. Section 17. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Collateral Agent, effective upon the occurrence and during the continuation of any Event of Default, such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Collateral Agent's discretion and upon notice to such Grantor, to take any action and to execute any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) to obtain and adjust insurance required to be paid to the Collateral Agent pursuant to Section 11, (b) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, KL2:194292.6 14 (c) to receive, indorse and collect any drafts or other instruments, documents and Chattel Paper, in connection with clause (a) or (b) above, and (d) to file any claims or take any action or institute any proceedings that the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce compliance with the terms and conditions of any Assigned Agreement or the rights of the Collateral Agent with respect to any of the Collateral. Section 18. Collateral Agent May Perform. If any Grantor fails to perform any agreement contained herein, the Collateral Agent may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by such Grantor under Section 22(b). Section 19. Remedies. If any Event of Default shall have occurred and be continuing: (a) The Collateral Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the New York UCC (whether or not the New York UCC applies to the affected Collateral) and also may (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place and time to be designated by the Collateral Agent and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) (i) All cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent pursuant to Section 22) shall be applied as follows: (A) first, to the extent proceeds remain after the application of any amounts pursuant to Section 22, an amount equal to the outstanding Primary Obligations (as defined in Section 19(b)(ii)) shall be paid to the Secured Parties as provided in Section 19(b)(iv) hereof, with each Secured Party receiving an amount equal to such outstanding Primary Obligations KL2:194292.6 15 (as defined in Section 19(b)(ii)) or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share of the amount remaining to be distributed; (B) second, to the extent proceeds remain after the application pursuant to the preceding clause (A), an amount equal to the outstanding Secondary Obligations (as defined in Section 19(b)(ii)) shall be paid to the Secured Parties as provided in Section 19(b)(iv) hereof, with each Secured Party receiving an amount equal to its outstanding Secondary Obligations, or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share (as defined in Section 19(b)(ii)) of the amount remaining to be distributed; and (C) third, to the extent proceeds remain after the application pursuant to the preceding clauses (A) and (B), and following the termination of this Agreement pursuant to Section 27 hereof, to the relevant Grantor or to whomever may be lawfully entitled to receive such surplus. (ii) For purposes of this Agreement (x) "Pro Rata Share" shall mean, when calculating a Secured Party's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Party's Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in the case of the Credit Agreement Obligations, all principal of, and interest on, all Advances, and all fees and (ii) in the case of the Other Obligations that are secured by this Agreement or any other Collateral Document, all amounts due under such Bank Hedge Agreements and (z) "Secondary Obligations" shall mean all Secured Obligations other than Primary Obligations. (iii) When payments to Secured Parties are based upon their respective Pro Rata Shares, the amounts received by such Secured Parties hereunder shall be applied (for purposes of making determinations under this Section 19(b) only) (i) first, to their Primary Obligations and (ii) second, to their Secondary Obligations. If any payment to any Secured Party of its Pro Rata Share of any distribution would result in overpayment to such Secured Party, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as the case may be, of the other Secured Parties, with each Secured Party whose Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured Party and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Parties entitled to such distribution. KL2:194292.6 16 (iv) All payments required to be made hereunder shall be made (x) if to the Lenders, to the Collateral Agent under the Credit Agreement for the account of the Lenders, and (y) if to the Hedge Banks, to the trustee, paying agent or other similar representative (each a "Representative") for the Hedge Banks or, in the absence of such a Representative, directly to the Hedge Banks, as their interests may appear. (v) For purposes of applying payments received in accordance with this Section 19(b), the Collateral Agent shall be entitled to rely upon the Representative for the Hedge Banks or, in the absence of such a Representative, upon the Hedge Banks for a determination (which each Representative for any Hedge Banks and the Lenders agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Lenders or the Hedge Banks, as the case may be. Unless it has actual knowledge (including by way of written notice from a Lender or a Hedge Bank) to the contrary, each Representative, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that no Secondary Obligations are outstanding. Unless it has actual knowledge (including by way of written notice from a Hedge Bank) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Bank Hedge Agreements are in existence. (vi) It is understood that the Grantors shall remain jointly and severally liable to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate amount of the Secured Obligations. (c) The Collateral Agent may exercise any and all rights and remedies of the Grantors under or in connection with the Assigned Agreements or otherwise in respect of the Collateral, including, without limitation, any and all rights of any Grantor to demand or otherwise require payment of any amount under, or performance of any provision of, any Assigned Agreement. (d) All payments received by any Grantor under or in connection with any Assigned Agreement or otherwise in respect of the Collateral shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary indorsement). (e) The Collateral Agent may, without notice to any Grantor except as required by law and at any time or from time to time, charge, set-off and otherwise apply all or any part of the Secured Obligations against the L/C Cash Collateral Account or any part thereof. Section 20. Registration Rights. If the Collateral Agent shall determine to exercise its right to sell all or any of the Security Collateral pursuant to Section 19, each Grantor agrees that, upon request of the Collateral Agent, such Grantor will, at its own expense: KL2:194292.6 17 (a) execute and deliver, and cause each issuer of the Security Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Collateral Agent, advisable to register such Security Collateral under the provisions of the Securities Act of 1933, as amended from time to time (the "Securities Act"), to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished and to make all amendments and supplements thereto and to the related prospectus that, in the opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; (b) use its best efforts to qualify the Security Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Security Collateral, as requested by the Collateral Agent; (c) cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement that will satisfy the provisions of Section 11(a) of the Securities Act; (d) provide the Collateral Agent with such other information (including, without limitation, forward looking information) as may be necessary or, in the opinion of the Collateral Agent, advisable to enable the Collateral Agent to effect the sale of such Security Collateral; and (e) do or cause to be done all such other acts and things as may be necessary to make such sale of the Security Collateral or any part thereof valid and binding and in compliance with applicable law. Notwithstanding anything contained in this Agreement, the Collateral Agent may sell all or any of the Security Collateral at a private sale without registering such Security Collateral under the provisions of the Securities Act and the Collateral Agent is not liable for any reduced value of such Security Collateral received by the Collateral Agent as a result of such sale. The Collateral Agent is authorized, in connection with any sale of the Security Collateral pursuant to Section 19, to deliver or otherwise disclose to any prospective purchaser of the Security Collateral (i) any registration statement or prospectus, and all supplements and amendments thereto, prepared pursuant to clause (a) above, (ii) any information and projections provided to it pursuant to clause (d) above and (iii) any other information in its possession relating to the Security Collateral. Section 21. The Collateral Agent. (a) The Secured Parties, by their acceptance of the benefits of this Agreement and the other Loan Documents, hereby irrevocably designate Fleet to act as the Collateral Agent with respect to this Agreement and as specified in the other Loan Documents. Each Secured Party hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note and by the acceptance of the benefits of this Agreement and the other Loan Documents shall be deemed irrevocably to authorize, the Collateral Agent to take KL2:194292.6 18 18 such action on its behalf under the provisions of this Agreement and the other Loan Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof or thereof and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder and under the other Loan Documents by or through its authorized agents or employees. (b) The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Loan Documents. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have by reason of this Agreement, any other Loan Document or any Bank Hedge Agreement a fiduciary relationship in respect of any Secured Party; and nothing in this Agreement, any other Loan Document or any Bank Hedge Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement or any other Loan Document except as expressly set forth herein or therein. (c) The Collateral Agent shall not be responsible for insuring the Collateral hereunder or any collateral under the other Collateral Documents or for the payment of taxes, charges or assessments or discharging of Liens upon the Collateral hereunder or any collateral under the Collateral Documents or otherwise as to the maintenance of the Collateral hereunder or any collateral under the Collateral Documents. The Collateral Agent shall not be required to ascertain or inquire as to the performance by any Grantor of any of the covenants or agreements contained in this Agreement or any other Loan Document or any Bank Hedge Agreement. (d) The Collateral Agent shall be under no obligation or duty to take any action under this Agreement or any other Loan Document if taking such action (i) would subject the Collateral Agent to a tax in any jurisdiction where it is not then subject to a tax or (ii) would require the Collateral Agent to qualify to do business in any jurisdiction where it is not then so qualified, unless the Collateral Agent receives security or indemnity satisfactory to it against such tax (or equivalent liability), or any liability resulting from such qualification, in each case as results from the taking of such action under this Agreement or any other Loan Document or (iii) would subject the Collateral Agent to in personam jurisdiction in any locations where it is not then so subject. Notwithstanding any other provision of this Agreement or any other Loan Document, neither the Collateral Agent nor any of its officers, directors, employees, affiliates or agents shall, in its individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance with this Agreement or any other Loan Document except for its own gross negligence or willful misconduct. (e) Independently and without reliance upon the Collateral Agent, each Secured Party, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Grantor in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of each Grantor, and the Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Party with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any Notes or at any time or times thereafter. The Collateral Agent shall not be responsible in any manner KL2:194292.6 19 19 whatsoever to any Secured Party for the correctness of any recitals, statements, information, representations or warranties in any Document or in any document, certificate or other writing delivered in connection therewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or the other Documents or the security interests granted hereunder or thereunder or the financial condition of any Grantor or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Loan Document, or the financial condition of any Grantor, or the existence or possible existence of any Default or Event of Default. The Collateral Agent makes no representations as to the value or condition of the Collateral hereunder or the collateral under any other Collateral Document or any part thereof, or as to the title of any Grantor thereto or as to the security afforded by this Agreement or the other Collateral Documents. (f) (i) No Secured Party shall have the right to cause the Collateral Agent to take any action with respect to the Collateral hereunder or the collateral under any other Collateral Document, with only the Required Lenders (or after the repayment in full of all Credit Agreement Obligations, the holders of a majority of the outstanding Other Obligations) having the right to direct the Collateral Agent to take any such action. If the Collateral Agent shall request instructions from the Required Lenders (or after the repayment in full of all Credit Agreement Obligations, the holders of a majority of the outstanding Other Obligations), with respect to any act or action (including failure to act) in connection with this Agreement or any other Collateral Document, the Collateral Agent shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Lenders (or after the repayment in full of all Credit Agreement Obligations, the holders of a majority of the outstanding Other Obligations) and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Collateral Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Party shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders (or after the repayment in full of all Credit Agreement Obligations, the holders of a majority of the outstanding Other Obligations). (ii) The Collateral Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or any other Loan Document at the request or direction of any of the Secured Parties, unless such Secured Parties shall have offered to the Collateral Agent reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining to this Agreement or any other Document and its duties hereunder or thereunder, upon advice of counsel selected by it. (h) To the extent the Collateral Agent is not reimbursed and indemnified by any Grantor under this Agreement or any other Loan Document, the Secured Parties will reimburse KL2:194292.6 20 and indemnify the Collateral Agent, in proportion to their respective outstanding principal amounts (including, for this purpose, any unpaid Primary Obligations in respect of Bank Hedge Agreements, as outstanding principal) of Obligations, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder or under any other Loan Document, or in any way relating to or arising out of its actions as Collateral Agent in respect of this Agreement or under any other Loan Document (including any amounts required to be returned by the Collateral Agent in respect of Collateral hereunder or collateral under any other Collateral Document) except for those resulting solely from the Collateral Agent's own gross negligence or willful misconduct. The indemnities set forth in this Section 21(h) shall survive the repayment of all Obligations, with the respective indemnification at such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Collateral Agent is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of this Agreement. The indemnities set forth in this Section 21(h) are in addition to any indemnities provided by the Lenders to the Collateral Agent pursuant to the Credit Agreement, with the effect being that the Lenders shall be responsible for indemnifying the Collateral Agent to the extent the Collateral Agent does not receive payments pursuant to this Section 21(h) from the Secured Parties (although in such event, and upon the payment in full of all such amounts owing to the Collateral Agent, the respective Lenders who paid same shall be subrogated to the rights of the Collateral Agent to receive payment from the Secured Parties). (i) With respect to its obligations as a lender under the Credit Agreement and any other Loan Documents to which the Collateral Agent is a party, and to act as agent under one or more of such Loan Documents, the Collateral Agent shall have the rights and powers specified therein and herein for a "Lender" or an "Collateral Agent", as the case may be, and may exercise the same rights and powers as though it were not performing the duties specified herein; and the terms "Lender," "Required Lenders," "holders of Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the Collateral Agent in its individual capacity. The Collateral Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Grantor or any Affiliate or Subsidiary of any Grantor as if it were not performing the duties specified herein or in the other Loan Documents, and may accept fees and other consideration from any Grantor for services in connection with the Credit Agreement, the other Loan Documents and otherwise without having to account for the same to the Secured Parties. (j) The Collateral Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Collateral Agent. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note, shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. KL2:194292.6 21 (k) The Collateral Agent may resign from the performance of all of its functions and duties under this Agreement at any time by giving 20 Business Days' prior or written notice to each Grantor and the Secured Parties. Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clause (ii) or (iii) of this Section 21(k). (ii) If a successor Collateral Agent shall not have been appointed within said 20 Business Day period by the Required Lenders, the Collateral Agent, with the consent of each Grantor, which consent shall not be unreasonably withheld or delayed, shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder until such time, if any, as the Required Lenders appoint a successor Collateral Agent as provided above. (iii) If no successor Collateral Agent has been appointed pursuant to clause (ii) of this Section 21(k) by the 20th Business Day after the date of such notice of resignation was given by the Collateral Agent, the Required Lenders shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder until such time, if any, as the Required Lenders appoint a successor Collateral Agent as provided above. (l) Each Grantor (by its execution and delivery hereof) hereby agrees that it shall pay to Fleet as the Collateral Agent, such fees as have been separately agreed to in writing with Fleet for acting as Collateral Agent hereunder and under the other Collateral Documents. In the event a successor Collateral Agent is appointed pursuant to Section 21(k), each Grantor hereby agrees to pay such successor Collateral Agent such fees for acting as such as would customarily be charged by such Collateral Agent for acting in such capacity in similar situations. Section 22. Indemnity and Expenses. (a) Each of the Grantors jointly and severally agrees to indemnify each Secured Party from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities found in a final, appealable judgment by a court of competent jurisdiction to have resulted solely from such Secured Party's gross negligence or wilful misconduct. (b) Each Grantor jointly and severally agrees to pay to the Collateral Agent, upon demand, the amount of any and all reasonable costs and expenses, including, without limitation, the reasonable fees and expenses of its counsel and of any experts and agents (including, without limitation, the following costs of such counsel: support staff, litigation preparation, computerized research, telephone, telefax, mileage, deposition, postage, photocopy, process service, video tape and other similar costs), that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent or any other Secured Party hereunder or (iv) the failure by such Grantor to perform or observe any of the provisions hereof. Section 23. Security Interest Absolute. The obligations of each Grantor under this Agreement are independent of the Secured Obligations, and a separate action or actions may be KL2:194292.6 22 brought and prosecuted against such Grantor to enforce this Agreement, irrespective of whether any action is brought against the other Grantors or whether the other Grantors are joined in any such action or actions. All rights of the Collateral Agent and the pledge, assignment and security interest hereunder, and all obligations of each Grantor hereunder, shall be absolute and unconditional, irrespective of: (i) any lack of validity or enforceability of any Loan Document, any Bank Hedge Agreement or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document or any Bank Hedge Agreement, including, without limitation, any increase in the Secured Obligations resulting from the extension of additional credit to any Grantor or any of its Subsidiaries or otherwise; (iii) any taking, exchange, release or nonperfection of any other collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations; (iv) any manner of application of collateral, or proceeds thereof, to all or any of the Secured Obligations, or any manner of sale or other disposition of any collateral for all or any of the Secured Obligations or any other assets of any Grantor or any of its Subsidiaries; (v) any change, restructuring or termination of the corporate structure or existence of any Grantor or any of its Subsidiaries; or (vi) any other circumstance that might otherwise constitute a defense available to, or a discharge of, such Grantor or a third-party grantor of a security interest. Section 24. Amendments; Waivers; Etc. (a) No amendment or waiver of any provision of this Agreement, and no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) No failure on the part of the Collateral Agent, any Lender or any Hedge Bank to exercise, and no delay in exercising, any right, power or privilege hereunder shall operate as a waiver thereof or consent thereto; nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. (c) Upon the execution and delivery by any Person of a security agreement supplement in substantially the form of Exhibit B hereto (each a "Pledge and Security Agreement Supplement"), (i) such Person shall be referred to as an "Additional Collateral Grantor" and shall be and become a Grantor, and each reference in this Agreement to "Grantor" shall also mean and be a reference to such Additional Collateral Grantor and (ii) the supplements attached to each KL2:194292.6 23 Pledge and Security Agreement Supplement shall be incorporated into and become a part of and supplement Schedules I through VII hereto, as appropriate, and the Collateral Agent may attach such supplements to such Schedules, and each reference to such Schedules shall mean and be a reference to such Schedules, as supplemented pursuant hereto. Section 25. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed, cabled or delivered, if to any Grantor, addressed to it at the address set forth below the name of such Grantor on the signature pages hereof (or, in the case of any Additional Collateral Grantor, at the address set forth below the name of such Additional Collateral Grantor on the signature page of its Pledge and Security Agreement Supplement), and if to the Collateral Agent, any Lender, the Issuing Bank or any Hedge Bank, addressed to it at its address set forth in Section 8.02 of the Credit Agreement, or, as to any party, at such other address as shall be designated by such party in a written notice to the each other party complying as to delivery with the terms of this Section 25. All such notices and other communications shall, when mailed, telecopied, telegraphed or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively, addressed as aforesaid. Section 26. Continuing Security Interest; Assignments under the Credit Agreement. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the latest of the indefeasible and irrevocable payment in full in cash of the Secured Obligations, the Final Maturity Date and the termination or expiration of all Bank Hedge Agreements, (b) be binding upon each Grantor, its successors and assigns and (c) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in Section 8.07 of the Credit Agreement. Section 27. Release and Termination. (a) Upon any sale, lease, transfer or other disposition of any item of Collateral in accordance with the terms of the Loan Documents (other than sales of Inventory in the ordinary course of business consistent with past practices), the Collateral Agent will, at the appropriate Grantor's expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted hereby; provided, however, that (i) at the time of such request and such release no Event of Default shall have occurred and be continuing, (ii) such Grantor shall have delivered to the Collateral Agent, at least ten Business Days prior to the date of the proposed release, a written request for release describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including, without limitation, the price thereof and any expenses in connection therewith, together with a form of release for execution by the Collateral Agent and a certification by such Grantor to the effect that the transaction is in compliance with the Loan Documents and as to such other matters as the Collateral Agent may request and (iii) the Net Cash Proceeds of any such sale, KL2:194292.6 24 lease, transfer or other disposition required to be applied in accordance with Section 2.06 of the Credit Agreement shall be paid to, or in accordance with the instructions of, the Collateral Agent at the closing. (b) Upon the latest of the indefeasible and irrevocable payment in full in cash of the Secured Obligations, the Final Maturity Date and the termination or expiration of all Bank Hedge Agreements, the pledge, assignment and security interest granted hereby shall terminate and all rights to the Collateral shall revert to the appropriate Grantor. Upon any such termination, the Collateral Agent will, at the appropriate Grantor's expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination. Section 28. Jurisdiction, Etc. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE. UNLESS OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT, TERMS USED IN ARTICLE 9 OF THE NEW YORK UCC ARE USED HEREIN AS THEREIN DEFINED. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY BANK HEDGE AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH SUCH PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, ANY OTHER DOCUMENT TO WHICH IT IS A PARTY OR ANY BANK HEDGE AGREEMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY. EACH SUCH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 8.02 OF THE CREDIT AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH SUCH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER DOCUMENT OR UNDER ANY BANK HEDGE AGREEMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, THE COLLATERAL AGENT, ANY SECURED PARTY OR ANY HEDGE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE KL2:194292.6 25 LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN ANY OTHER JURISDICTION. (b) EACH PARTY TO THIS AGREEMENT HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY BANK HEDGE AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER DOCUMENTS, ANY BANK HEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. KL2:194292.6 26 IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. PRECISE TECHNOLOGY, INC., as Grantor By ___________________________________ Name: Title: PRECISE TECHNOLOGY OF DELAWARE, INC. By ___________________________________ Name: Title: PRECISE TECHNOLOGY OF ILLINOIS, INC. By ___________________________________ Name: Title: PRECISE TMP, INC. By ___________________________________ Name: Title: PRECISE POLESTAR, INC. By ___________________________________ Name: Title: [Signature Page to the General Pledge and Security Agreement] KL2:194292.6 MASSIE TOOL, MOLD & DIE, INC. By ___________________________________ Name: Title: Agreed and consented to as of the date first above written: FLEET NATIONAL BANK, as Collateral Agent By _______________________________ Name: Title: [Signature Page to the General Pledge and Security Agreement] KL2:194292.6 Schedule I Part I PLEDGED SHARES Percentage of Issuing Corporation Number of Shares Shares Outstanding Par Value - ------------------- ---------------- ------------------ --------- $ Part II PLEDGED DEBT KL2:194292.6 Schedule II ASSIGNED AGREEMENTS KL2:194292.6 Schedule III Part I LOCATIONS OF PLANT AND EQUIPMENT Part II LOCATIONS OF INVENTORY KL2:194292.6 Schedule IV INVENTORY SCHEDULE FOR SECTION 8(a) KL2:194292.6 Schedule V BLOCKED ACCOUNTS Bank Name: Bank Address: Contact: 1. Account Name: Account Number: 2. Account Name: Account Number: 3. Account Name: Account Number: KL2:194292.6 Schedule VI TRADE NAMES KL2:194292.6 EXHIBIT A to Pledge and Security Agreement FORM OF BLOCKED ACCOUNT LETTER _______________, 199_ [Bank] [Address] Attn: ________________ Re: [NAME OF GRANTOR] Ladies and Gentlemen: Reference is made to deposit accounts listed on the attached Schedule I into which certain monies, instruments and other properties are deposited from time to time (the "Accounts") maintained with you by ____________ (the "Company"). Pursuant to a Pledge and Security Agreement dated June 13, 1997 (the "Security Agreement"), the Company has granted to Fleet National Bank, as collateral agent (the "Collateral Agent") for the Lenders referred to in the Credit Agreement dated as of June 13, 1997 (the "Credit Agreement"; unless otherwise defined herein, the terms defined in the Credit Agreement being used herein as therein defined) with the Company, a security interest in certain property of the Company, including, among other things, the following (the "Account Collateral"): the Accounts, all funds held therein and all certificates and instruments, if any, from time to time representing or evidencing the Accounts, all notes, certificates of deposit, checks, interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Account Collateral and all proceeds of any and all of the foregoing Account Collateral and, to the extent not otherwise included, all (i) payments under insurance (whether or not the Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Account Collateral and (ii) cash. It is a condition to the continued maintenance of the Accounts with you that you agree to this letter agreement. By signing this letter agreement, you acknowledge notice of, and consent to the terms and provisions of, the Security Agreement and confirm to the Collateral Agent that you have received no notice of any other pledge or assignment of the Accounts. Further, you hereby agree with the Collateral Agent that: KL2:194292.6 (a) Notwithstanding anything to the contrary in any other agreement relating to the Accounts, the Accounts are and will be subject to the terms and conditions of the Security Agreement, will be maintained solely for the benefit of the Collateral Agent, will be entitled "_________________ " and will be subject to written instructions only from an officer of the Collateral Agent. (b) Upon the written request of the Collateral Agent to you, which request shall specify that an "Event of Default" under the Credit Agreement has occurred and is continuing (which writing may be by telex or telecopy and upon which you may conclusively rely, absent manifest error), you shall immediately transfer (at the cost and expense of the Company) subject to your usual deposit terms, all funds then or thereafter deposited in the Accounts by wire transfer to the Collateral Agent at __________________________, Account No. _____________, _________________. (c) From and after the date that the Collateral Agent shall have sent to you a written notice (which writing may be by telex or telecopy and upon which you may conclusively rely, absent manifest error) that an "Event of Default" under the Credit Agreement has occurred and until the date, if any, that the Collateral Agent shall have advised you in writing (which writing may be by telex or telecopy and upon which you may conclusively rely, absent manifest error) that no Event of Default is continuing, you shall not honor any withdrawal or transfer from, or any check, draft or other item of payment on, the Accounts, other than any withdrawal, transfer, check, draft or other item made in writing by the Collateral Agent or bearing the written consent of the Collateral Agent, and, to the extent of collected funds in the Accounts, you shall honor each such withdrawal, transfer, check, draft or other item made in writing by the Collateral Agent or bearing the written consent of the Collateral Agent. (d) You will follow your usual operating procedures for the handling of the Accounts, including any remittance received in the Accounts that contains restrictive endorsements, irregularities (such as a variance between the written and numerical amounts), undated or postdated items, missing signatures, incorrect payees, etc. (e) You will maintain a record of all checks and other remittance items received in the Accounts and furnish to the Collateral Agent a monthly statement of the Accounts. (f) You shall furnish to the Collateral Agent, promptly upon the reasonable written request of the Collateral Agent in each instance, the bank statements and all other information regarding the Accounts, to the extent the same is provided to the Company, for the period of time specified in such written notice, and the Company hereby authorizes you to furnish same. (g) You agree that you will not make, and you hereby waive all of your rights to make, any charge, debit or offset to the Accounts for any reason whatsoever, and KL2:194292.6 2 waive any and all liens, whether contractual or provided under law, which you may have or hereafter acquire on the Accounts or funds therein, in each case, other than any charge, offset, debit or lien in respect of your customary service charges relating to the Accounts. (h) All service charges and fees with respect to the Accounts shall be payable by the Company. (i) The Collateral Agent shall be entitled to exercise any and all rights of the Company in respect of the Accounts in accordance with the terms of the Security Agreement, and the undersigned shall comply in all respects with such exercise. This letter agreement shall be binding upon you and your successors and assigns and shall inure to the benefit of the Collateral Agent, the Lenders and their successors, transferees and assigns. You may terminate this letter agreement only upon thirty days' prior written notice to the Company and the Collateral Agent. Upon such termination you shall close the Accounts and transfer all funds in the Accounts to the Company. KL2:194292.6 3 THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE. Very truly yours, [NAME OF GRANTOR] By:___________________________________ Name: Title: FLEET NATIONAL BANK, as Collateral Agent By:___________________________________ Name: Title: Acknowledged and agreed to as of the date first above written: [BANK] By:_______________________________ Name: Title: KL2:194292.6 4 SCHEDULE I Accounts 1. Account Name: Account Number: 2. Account Name: Account Number: 3. Account Name: Account Number: KL2:194292.6 EXHIBIT B to Pledge and Security Agreement FORM OF PLEDGE AND SECURITY AGREEMENT SUPPLEMENT [Date] Ladies and Gentlemen: Reference is made to the above-captioned Pledge and Security Agreement, dated as of June 13, 1997 (as amended, supplemented or otherwise modified, the "Security Agreement"). Unless otherwise defined herein, terms defined in the Security Agreement are used herein as therein defined. The undersigned hereby agrees, as of the date first above written, to become a Grantor under the Security Agreement as if it were an original party thereto and agrees that each reference in the Security Agreement to a "Grantor" shall also mean and be a reference to the undersigned. The undersigned hereby assigns and pledges to the Collateral Agent for its benefit, the benefit of the Issuing Bank and the ratable benefit of the Lenders and hereby grants to the Collateral Agent for its benefit, the benefit of the Issuing Bank and the ratable benefit of the Lenders as collateral for the Secured Obligations a pledge and assignment of, and a security interest in, all of the right, title and interest of the undersigned in and to its Collateral, whether now owned or hereafter acquired, wherever located and whether now or hereafter existing. The undersigned has attached hereto supplements to Schedules I through VII to the Security Agreement, and the undersigned hereby certifies that such supplements have been prepared by the undersigned in substantially the form of the Schedules to the Security Agreement and are accurate and complete as of the date first above written. The undersigned hereby makes each representation and warranty set forth in Section 8 of the Security Agreement as to itself and as to its Collateral to the same extent as KL2:194292.6 each other Grantor and hereby agrees to be bound as a Grantor by all of the terms and provisions of the Security Agreement to the same extent as all other Grantors. THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE. Very truly yours, [NAME OF ADDITIONAL GRANTOR] By ___________________________________ Name: Title: Address: KL2:194292.6 2 EXHIBIT C to Pledge and Security Agreement FORM OF CONSENT AND AGREEMENT The undersigned hereby acknowledges notice of, and consents to the terms and provisions of, the Pledge and Security Agreement dated June 13, 1997 (the "Security Agreement"; the terms defined therein being used herein as therein defined) from PRECISE TECHNOLOGY, INC., (the "Borrower") and each other Grantor party thereto to FLEET NATIONAL BANK, as collateral agent (the "Collateral Agent") for the Secured Parties referred to therein, and hereby agrees with the Collateral Agent that: (a) The undersigned will make all payments to be made by it under or in connection with the __________ Agreement dated _______________, 19__ (the "Assigned Agreement") between the undersigned and the Borrower in accordance with the instructions of the Collateral Agent. (b) All payments referred to in paragraph (a) above shall be made by the undersigned irrespective of, and without deduction for, any counterclaim, defense, recoupment or set-off and shall be final, and the undersigned will not seek to recover from any Secured Party for any reason any such payment once made. (c) The Collateral Agent shall be entitled to exercise any and all rights and remedies of the Borrower under the Assigned Agreement in accordance with the terms of the Security Agreement, and the undersigned shall comply in all respects with such exercise. (d) The undersigned will not, without the prior written consent of the Collateral Agent, (i) cancel or terminate the Assigned Agreement or consent to or accept any cancellation or termination thereof, (ii) amend or otherwise modify the Assigned Agreement, or (iii) make any prepayment of amounts to become due under or in connection with the Assigned Agreement, except as expressly provided therein. In order to induce the Lenders to make Advances under the Credit Agreement, the undersigned repeats and reaffirms for the benefit of the Secured Parties the representations and warranties made in Section _____ of the Assigned Agreement. This Consent and Agreement shall be binding upon the undersigned and its successors and assigns, and shall inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Secured Parties and their successors, transferees and assigns. KL2:194292.6 THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE. IN WITNESS WHEREOF, the undersigned has duly executed this Consent and Agreement as of the date set opposite its name below. Dated: _______________, 19__ [NAME OF OBLIGOR] By: __________________________________ Name: Title: KL2:194292.6 2 EXHIBIT D-2 TO THE CREDIT AGREEMENT PARENT PLEDGE AND SECURITY AGREEMENT Dated June 13, 1997 From PRECISE HOLDING CORPORATION, as Grantor, to FLEET NATIONAL BANK, as Collateral Agent T A B L E O F C O N T E N T S Section Page 1. Grant and Pledge of Security 2 2. Security for Obligations 2 3. Grantor Remains Liable 3 4. Delivery of Collateral 3 5. Representations, Warranties and Covenants 3 6. Further Assurances 4 7. Voting Rights; Dividends; Etc. 5 8. Transfers and Other Liens; Additional Shares 6 9. Collateral Agent Appointed Attorney-in-Fact 6 10. Collateral Agent May Perform 7 11. Remedies 7 12. Registration Rights 9 13. The Collateral Agent 10 14. Indemnity and Expenses 14 15. Security Interest Absolute 14 16. Amendments; Waivers; Etc 15 17. Addresses for Notices 15 18. Continuing Security Interest; Assignments under the Credit Agreement 15 19. Release and Termination 16 20. Jurisdiction, Etc. 16 Schedule I-Pledged Shares PARENT PLEDGE AND SECURITY AGREEMENT PARENT PLEDGE AND SECURITY AGREEMENT (as amended, supplemented or otherwise modified from time to time, this "Agreement"), dated June 13, 1997, made by and between PRECISE HOLDING CORPORATION, a Delaware corporation (the "Grantor") to FLEET NATIONAL BANK ("Fleet"), as collateral agent (together with any successor collateral agent appointed pursuant to Section 13, the "Collateral Agent") for the Secured Parties, as custodian for the Hedge Banks and as Issuing Bank. PRELIMINARY STATEMENTS. (1) The Grantor, Precise Technology, Inc., a Delaware corporation (the "Borrower"), and each Subsidiary Guarantor have entered into a Credit Agreement, dated as of June 13, 1997, (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined) with Fleet, as agent (together with any successor agent appointed pursuant to Article VII of the Credit Agreement, the "Agent"), and the Lenders from time to time party thereto. (2) Pursuant to the Parent Guaranty, the Grantor has guaranteed to the Lenders the payment when due of all obligations and liabilities of the Borrower under or with respect to the Loan Documents. (3) The Grantor is the record owner of all stock at any time pledged or required to be pledged hereunder, including without limitation the shares of stock described in Schedule I hereto and issued by the corporation named therein (the "Pledged Shares"). (4) It is a condition precedent to the making of Advances by the Lenders and the issuance of Letters of Credit by the Issuing Bank under the Credit Agreement and the entry by the Hedge Banks into the Bank Hedge Agreements with the Borrower from time to time that the Grantor shall have granted the assignment and security interest and made the pledge and assignment contemplated by this Agreement. (5) The Grantor will obtain benefits from the incurrence of Advances and the issuance of Letters of Credit under the Credit Agreement and the entering into of Bank Hedge Agreements with the Hedge Banks and, accordingly, the Grantor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph (4). NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make Advances and the Issuing Bank to issue Letters of Credit under the Credit Agreement and to induce the Hedge Banks to enter into Bank Hedge Agreements with the Borrower from time to time, the Grantor hereby agrees with the Collateral Agent for the ratable benefit of the Secured Parties as follows: KL2:200855.2 Section 1. Grant and Pledge of Security. The Grantor hereby assigns and pledges to the Collateral Agent for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent for the ratable benefit of the Secured Parties a security interest in, the following, in each case, as to each type of property described below, whether now owned or hereafter owned or acquired, wherever located and whether now or hereafter existing (collectively, the "Collateral"): (a) the Pledged Shares and the certificates representing the Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; and (b) all proceeds of any and all of the foregoing Collateral. Notwithstanding clauses (a) through (c), the payment and performance of the Grantor's obligations shall not be secured by more than 66% of the total combined voting power of all classes of capital stock owed by the Grantor of any foreign Subsidiary entitled to vote. Following a change in the relevant provisions of the Internal Revenue Code or the regulations, published rules, published rulings, notices or other official pronouncements issued or promulgated thereunder, if the Collateral Agent or the Required Lenders request a pledge of additional stock of any foreign Subsidiary of the Grantor, all of the stock of which foreign Subsidiary has not already been pledged pursuant to this Agreement, then within 90 days after such request the Grantor shall either (i) pledge such additional stock of such foreign Subsidiary or (ii) deliver to the Collateral Agent an opinion of the counsel of the Grantor, which counsel shall be reasonably acceptable to the Collateral Agent, that the requested pledge of such additional stock is more likely than not to cause the undistributed earnings of such foreign Subsidiary to be treated as a deemed dividend to such foreign Subsidiary's United States parent for Federal income tax purposes. Section 2. Security for Obligations. This Agreement secures (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities (including, without limitation, the principal of and interest on the Notes issued by, and Advances made to, the Borrower under the Credit Agreement, and all indemnities, fees and interest thereon or owed thereunder) of the Grantor to the Secured Parties, whether now existing or hereafter incurred under, arising out of or in connection with any Loan Document (including, without limitation, all of the Grantor's obligations and liabilities under the Parent Guaranty) to which the Grantor is a party and the due performance and compliance by the Grantor with all of the terms, conditions and agreements contained in the Credit Agreement and such other Loan Documents (all such principal, interest, indemnities, fees, obligations and liabilities being herein collectively called the "Credit Agreement Obligations"); (ii) to the extent that any Bank Hedge Agreement is entitled to the benefits of this Agreement, the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities of the Grantor to the Hedge Banks, whether now existing or hereafter incurred under, arising out of or in connection with any such Bank Hedge Agreement and the due performance and compliance by the Grantor with all the terms, conditions and agreements contained in such Bank Hedge Agreement (all such obligations and liabilities described in this clause (ii) being herein collectively called the "Other Obligations", and together with the Credit KL2:200855.2 2 Agreement Obligations, collectively the "Secured Obligations"). Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts that constitute part of the Secured Obligations and would be owed by the Grantor to the Secured Parties under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Grantor. Section 3. Grantor Remains Liable. Anything herein to the contrary notwithstanding, (a) the Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Collateral Agent of any of the rights hereunder shall not release the Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) no Secured Party shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any other Loan Document, nor shall any Secured Party be obligated to perform any of the obligations or duties of the Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. Section 4. Delivery of Collateral. All certificates or instruments representing or evidencing Collateral shall be delivered to and held by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Collateral Agent. Upon the occurrence and during the continuance of an Event of Default and upon acceleration of all Borrowings under the Credit Agreement, the Collateral Agent shall have the right, at any time in its discretion and without notice to the Grantor, to transfer to or to register in the name of the Collateral Agent or any of its nominees any or all of the Collateral, subject only to the revocable rights specified in Section 8(a). In addition, the Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations. Section 5. Representations, Warranties and Covenants. The Grantor represents, warrants, agrees and covenants as to itself and its Collateral, which representations, warranties, agreements and covenants shall survive execution and delivery of this Agreement, as follows: (a) The Grantor is the legal and beneficial owner of the Collateral free and clear of any Lien or other right, title or interest of any Person except for the security interest created under this Agreement and Liens permitted by Section 5.02(a) of the Credit Agreement, and the Grantor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. No effective financing statement or other instrument similar in effect covering or purporting to cover all or any part of the Collateral is on file in any recording office, except such as may have been filed in favor of the Collateral Agent relating to this Agreement and those Liens permitted under Section 5.02(a) of the Credit Agreement. (b) All of the shares of stock that constitute Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable and the Grantor is the legal, record and beneficial owner of, and has good and marketable title to, such Pledged KL2:200855.2 3 Shares, subject to no pledge, lien, mortgage hypothetication, security interest, charge, option or other encumbrance whatsoever except the liens and security interests created by this Agreement. The Grantor has full power, authority and legal right to pledge the Pledged Shares pledged by it pursuant to this Agreement. (c) As of the date hereof, the Pledged Shares constitute the percentage of the issued and outstanding shares of stock of the issuers thereof indicated on Part I of Schedule I hereto. (d) All filings and other actions necessary or desirable to perfect and protect the security interest in the Collateral taken as a whole created under this Agreement have been duly made or taken, and this Agreement, the pledge of the Collateral pursuant hereto, together with such filings and other actions, create a valid and perfected first priority security interest in the Collateral taken as a whole, securing the payment of the Secured Obligations, except for Collateral subject to Liens permitted pursuant to Section 5.02(a) of the Credit Agreement. (e) No consent of any other Person and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other third party is required (i) for the grant by the Grantor of the assignment and security interest granted hereunder, for the pledge by the Grantor of the Collateral pursuant hereto or for the execution, delivery or performance of this Agreement by the Grantor, (ii) for the perfection or maintenance of the pledge, assignment and security interest created hereunder (including the first priority nature of such pledge, assignment or security interest), except for the filing of financing and continuation statements under the UCC, which financing statements have been duly filed and are effective, under applicable law, to perfect the security interest granted to the Collateral Agent herein, or (iii) for the exercise by the Collateral Agent of its voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement, except where the failure to obtain such consent or authorization would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (f) This Agreement is made with full recourse to the Grantor (including, without limitation, with full recourse to all assets of the Grantor) and pursuant to and upon all warranties, representations, covenants and agreements on the part of the Grantor contained herein, in the other Collateral Documents and otherwise in writing in connection herewith or therewith. Section 6. Further Assurances. (a) The Grantor agrees that from time to time, at its own expense, it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Collateral Agent may reasonably request, in order to perfect and protect any pledge, assignment or security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, the Grantor will: (i) if any Collateral shall be evidenced by a promissory note or other instrument or chattel paper, deliver and pledge to the Collateral Agent KL2:200855.2 4 hereunder such note or instrument duly indorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent; and (ii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Collateral Agent may reasonably request, in order to perfect and preserve the pledge, assignment and security interest granted or purported to be granted hereunder. (b) The Grantor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Collateral without the signature of the Grantor where permitted by law. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (c) The Grantor shall furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail. Section 7. Voting Rights; Dividends; Etc. (a) So long as no Event of Default shall have occurred and be continuing: (i) The Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the other Documents; provided, however, that the Grantor shall not exercise or refrain from exercising any such right if such action (a) would reasonably be expected to have a material adverse effect on the value of the Collateral or any part thereof or (b) would violate or be inconsistent with any of the terms of this Agreement, the Credit Agreement, any other Loan Document or any Bank Hedge Agreement; (ii) The Grantor shall be entitled to receive and retain any and all dividends and interest paid in respect of the Collateral permitted by the Credit Agreement; provided, however, that any and all (A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, such Collateral, and (B) dividends and other distributions paid or payable in cash in respect of such Collateral in connection with a partial or total liquidation or dissolution shall be, and shall be forthwith delivered to the Collateral Agent to hold as, Collateral and shall, if received by the Grantor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of the Grantor and be forthwith delivered to the Collateral Agent as Collateral in the same form as so received (with any necessary indorsement). Notwithstanding the foregoing, it is understood that any and all dividends and other distributions paid or payable in cash in respect of such Collateral in KL2:200855.2 5 connection with a reduction of capital, capital surplus or paid-in-surplus and any and all cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, such Collateral shall be forthwith delivered to blocked accounts maintained by the Grantor with Fleet. (iii) The Collateral Agent shall execute and deliver (or cause to be executed and delivered) to the Grantor all such proxies and other instruments as the Grantor may reasonably request for the purpose of enabling the Grantor to exercise the voting and other rights that it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to paragraph (ii) above. (b) Upon the occurrence and during the continuance of an Event of Default: (i) All rights of the Grantor (x) to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall, upon notice to the Grantor by the Collateral Agent, cease and (y) to receive the dividends and interest payments that it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) shall automatically cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Collateral such dividends and interest payments. (ii) All dividends and interest payments that are received by the Grantor contrary to the provisions of paragraph (i) of this Section 7(b) shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of the Grantor and shall be forthwith paid over to the Collateral Agent as Collateral in the same form as so received (with any necessary indorsement). Section 8. Transfers and Other Liens; Additional Shares. (a) The Grantor agrees not (i) to sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, except sales, assignments and dispositions otherwise permitted under the Credit Agreement, or (ii) to create or suffer to exist any Lien upon or with respect to any of the Collateral except for the pledge, assignment and security interest created under this Agreement and the Liens permitted under Section 5.02(a) of the Credit Agreement. (b) The Grantor shall (i) for the Pledged Shares and all other shares of stock pledged hereunder that are issued by issuers which are controlled by the Grantor, cause each issuer of the Pledged Shares and each issuer of all other shares of stock pledged hereunder not to issue any stock or other securities in addition to or in substitution for the Pledged Shares or such other shares issued by any such issuer, except to the Grantor, and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities. Section 9. Collateral Agent Appointed Attorney-in-Fact. The Grantor hereby irrevocably appoints the Collateral Agent, effective upon the occurrence and during the continuation of any Event of Default, the Grantor's attorney-in-fact, with full authority in the KL2:200855.2 6 place and stead of the Grantor and in the name of the Grantor or otherwise, from time to time in the Collateral Agent's discretion and upon notice to the Grantor, to take any action and to execute any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (b) to receive, indorse and collect any drafts or other instruments, documents and Chattel Paper, in connection with clause (a) or (b) above, and (c) to file any claims or take any action or institute any proceedings that the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce compliance with the terms and conditions of any Assigned Agreement or the rights of the Collateral Agent with respect to any of the Collateral. Section 10. Collateral Agent May Perform. If the Grantor fails to perform any agreement contained herein, the Collateral Agent may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Grantor under Section 14(b). Section 11. Remedies. If any Event of Default shall have occurred and be continuing: (a) The Collateral Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the New York UCC (whether or not the New York UCC applies to the affected Collateral) and also may (i) require the Grantor to, and the Grantor hereby agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place and time to be designated by the Collateral Agent and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable. The Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) (i) All cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, KL2:200855.2 7 in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent pursuant to Section 14) shall be applied as follows: (A) first, to the extent proceeds remain after the application of any amounts pursuant to Section 14, an amount equal to the outstanding Primary Obligations (as defined in Section 11(b)(ii)) shall be paid to the Secured Parties as provided in Section 11(b)(iv) hereof, with each Secured Party receiving an amount equal to such outstanding Primary Obligations (as defined in Section 11(b)(ii)) or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share of the amount remaining to be distributed; (B) second, to the extent proceeds remain after the application pursuant to the preceding clause (A), an amount equal to the outstanding Secondary Obligations (as defined in Section 11(b)(ii)) shall be paid to the Secured Parties as provided in Section 11(b)(iv) hereof, with each Secured Party receiving an amount equal to its outstanding Secondary Obligations, or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share (as defined in Section 11(b)(ii)) of the amount remaining to be distributed; and (C) third, to the extent proceeds remain after the application pursuant to the preceding clauses (A) and (B), and following the termination of this Agreement pursuant to Section 19 hereof, to the Grantor or to whomever may be lawfully entitled to receive such surplus. (ii) For purposes of this Agreement (x) "Pro Rata Share" shall mean, when calculating a Secured Party's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Party's Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in the case of the Credit Agreement Obligations, all principal of, and interest on, all Advances, and all fees and (ii) in the case of the Other Obligations that are secured by this Agreement or any other Collateral Document, all amounts due under such Bank Hedge Agreements and (z) "Secondary Obligations" shall mean all Secured Obligations other than Primary Obligations. (iii) When payments to Secured Parties are based upon their respective Pro Rata Shares, the amounts received by such Secured Parties hereunder shall be applied (for purposes of making determinations under this Section 11(b) only) (i) first, to their Primary Obligations and (ii) second, to their Secondary Obligations. If any payment to any Secured Party of its Pro Rata Share of any distribution would result in overpayment to such Secured Party, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary KL2:200855.2 8 Obligations, as the case may be, of the other Secured Parties, with each Secured Party whose Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured Party and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Parties entitled to such distribution. (iv) All payments required to be made hereunder shall be made (x) if to the Lenders, to the Collateral Agent under the Credit Agreement for the account of the Lenders, and (y) if to the Hedge Banks, to the trustee, paying agent or other similar representative (each a "Representative") for the Hedge Banks or, in the absence of such a Representative, directly to the Hedge Banks, as their interests may appear. (v) For purposes of applying payments received in accordance with this Section 11(b), the Collateral Agent shall be entitled to rely upon the Representative for the Hedge Banks or, in the absence of such a Representative, upon the Hedge Banks for a determination (which each Representative for any Hedge Banks and the Lenders agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Lenders or the Hedge Banks, as the case may be. Unless it has actual knowledge (including by way of written notice from a Lender or a Hedge Bank) to the contrary, each Representative, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that no Secondary Obligations are outstanding. Unless it has actual knowledge (including by way of written notice from a Hedge Bank) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Bank Hedge Agreements are in existence. (vi) It is understood that the Grantor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate amount of the Secured Obligations. (c) The Collateral Agent may exercise any and all rights and remedies of the Grantor in respect of the Collateral. (d) The Collateral Agent may, without notice to the Grantor except as required by law and at any time or from time to time, charge, set-off and otherwise apply all or any part of the Secured Obligations against the L/C Cash Collateral Account or any part thereof. Section 12. Registration Rights. If the Collateral Agent shall determine to exercise its right to sell all or any of the Collateral pursuant to Section 11, the Grantor agrees that, upon request of the Collateral Agent, the Grantor will, at its own expense: KL2:200855.2 9 (a) execute and deliver, and cause each issuer of the Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Collateral Agent, advisable to register such Collateral under the provisions of the Securities Act of 1933, as amended from time to time (the "Securities Act"), to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished and to make all amendments and supplements thereto and to the related prospectus that, in the opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; (b) use its best efforts to qualify the Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Collateral, as requested by the Collateral Agent; (c) cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement that will satisfy the provisions of Section 11(a) of the Securities Act; (d) provide the Collateral Agent with such other information (including, without limitation, forward looking information) as may be necessary or, in the opinion of the Collateral Agent, advisable to enable the Collateral Agent to effect the sale of such Collateral; and (e) do or cause to be done all such other acts and things as may be necessary to make such sale of the Collateral or any part thereof valid and binding and in compliance with applicable law. Notwithstanding anything contained in this Agreement, the Collateral Agent may sell all or any of the Collateral at a private sale without registering such Collateral under the provisions of the Securities Act and the Collateral Agent is not liable for any reduced value of such Collateral received by the Collateral Agent as a result of such sale. The Collateral Agent is authorized, in connection with any sale of the Collateral pursuant to Section 11, to deliver or otherwise disclose to any prospective purchaser of the Collateral (i) any registration statement or prospectus, and all supplements and amendments thereto, prepared pursuant to clause (a) above, (ii) any information and projections provided to it pursuant to clause (d) above and (iii) any other information in its possession relating to the Collateral. Section 13. The Collateral Agent. (a) The Secured Parties, by their acceptance of the benefits of this Agreement and the other Loan Documents, hereby irrevocably designate Fleet to act as the Collateral Agent with respect to this Agreement and as specified in the other Loan Documents. Each Secured Party hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note and by the acceptance of the benefits of this Agreement and the other Loan Documents shall be deemed irrevocably to authorize, the Collateral Agent to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and any other instruments and agreements referred to herein or therein and to exercise such KL2:200855.2 10 powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof or thereof and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder and under the other Loan Documents by or through its authorized agents or employees. (b) The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Loan Documents. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have by reason of this Agreement, any other Loan Document or any Bank Hedge Agreement a fiduciary relationship in respect of any Secured Party; and nothing in this Agreement, any other Loan Document or any Bank Hedge Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement or any other Loan Document except as expressly set forth herein or therein. (c) The Collateral Agent shall not be responsible for the payment of taxes, charges or assessments or discharging of Liens upon the Collateral hereunder or any collateral under the Collateral Documents or otherwise as to the maintenance of the Collateral hereunder or any collateral under the Collateral Documents. The Collateral Agent shall not be required to ascertain or inquire as to the performance by the Grantor of any of the covenants or agreements contained in this Agreement or any other Loan Document or any Bank Hedge Agreement. (d) The Collateral Agent shall be under no obligation or duty to take any action under this Agreement or any other Loan Document if taking such action (i) would subject the Collateral Agent to a tax in any jurisdiction where it is not then subject to a tax or (ii) would require the Collateral Agent to qualify to do business in any jurisdiction where it is not then so qualified, unless the Collateral Agent receives security or indemnity satisfactory to it against such tax (or equivalent liability), or any liability resulting from such qualification, in each case as results from the taking of such action under this Agreement or any other Loan Document or (iii) would subject the Collateral Agent to in personam jurisdiction in any locations where it is not then so subject. Notwithstanding any other provision of this Agreement or any other Loan Document, neither the Collateral Agent nor any of its officers, directors, employees, affiliates or agents shall, in its individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance with this Agreement or any other Loan Document except for its own gross negligence or willful misconduct. (e) Independently and without reliance upon the Collateral Agent, each Secured Party, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Grantor in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of the Grantor, and the Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Party with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any Notes or at any time or times thereafter. The Collateral Agent shall not be responsible in any manner whatsoever to any Secured Party for the correctness of any recitals, statements, information, representations or warranties in any Document or in any document, certificate or other writing delivered in connection therewith or for the execution, effectiveness, genuineness, validity, KL2:200855.2 11 enforceability, perfection, collectibility, priority or sufficiency of this Agreement or the other Documents or the security interests granted hereunder or thereunder or the financial condition of the Grantor or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Loan Document, or the financial condition of the Grantor, or the existence or possible existence of any Default or Event of Default. The Collateral Agent makes no representations as to the value or condition of the Collateral hereunder or the collateral under any other Collateral Document or any part thereof, or as to the title of the Grantor thereto or as to the security afforded by this Agreement or the other Collateral Documents. (f) (i) No Secured Party shall have the right to cause the Collateral Agent to take any action with respect to the Collateral hereunder or the collateral under any other Collateral Document, with only the Required Lenders (or after the repayment in full of all Credit Agreement Obligations, the holders of a majority of the outstanding Other Obligations) having the right to direct the Collateral Agent to take any such action. If the Collateral Agent shall request instructions from the Required Lenders (or after the repayment in full of all Credit Agreement Obligations, the holders of a majority of the outstanding Other Obligations), with respect to any act or action (including failure to act) in connection with this Agreement or any other Collateral Document, the Collateral Agent shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Lenders (or after the repayment in full of all Credit Agreement Obligations, the holders of a majority of the outstanding Other Obligations) and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Collateral Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Party shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders (or after the repayment in full of all Credit Agreement Obligations, the holders of a majority of the outstanding Other Obligations). (ii) The Collateral Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or any other Loan Document at the request or direction of any of the Secured Parties, unless such Secured Parties shall have offered to the Collateral Agent reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining to this Agreement or any other Document and its duties hereunder or thereunder, upon advice of counsel selected by it. (h) To the extent the Collateral Agent is not reimbursed and indemnified by the Grantor under this Agreement or any other Loan Document, the Secured Parties will reimburse and indemnify the Collateral Agent, in proportion to their respective outstanding principal amounts (including, for this purpose, any unpaid Primary Obligations in respect of Bank Hedge Agreements, as outstanding principal) of Obligations, for and against any and all liabilities, KL2:200855.2 12 obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder or under any other Loan Document, or in any way relating to or arising out of its actions as Collateral Agent in respect of this Agreement or under any other Loan Document (including any amounts required to be returned by the Collateral Agent in respect of Collateral hereunder or collateral under any other Collateral Document) except for those resulting solely from the Collateral Agent's own gross negligence or willful misconduct. The indemnities set forth in this Section 13(h) shall survive the repayment of all Obligations, with the respective indemnification at such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Collateral Agent is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of this Agreement. The indemnities set forth in this Section 13(h) are in addition to any indemnities provided by the Lenders to the Collateral Agent pursuant to the Credit Agreement, with the effect being that the Lenders shall be responsible for indemnifying the Collateral Agent to the extent the Collateral Agent does not receive payments pursuant to this Section 13(h) from the Secured Parties (although in such event, and upon the payment in full of all such amounts owing to the Collateral Agent, the respective Lenders who paid same shall be subrogated to the rights of the Collateral Agent to receive payment from the Secured Parties). (i) With respect to its obligations as a lender under the Credit Agreement and any other Loan Documents to which the Collateral Agent is a party, and to act as agent under one or more of such Loan Documents, the Collateral Agent shall have the rights and powers specified therein and herein for a "Lender" or a "Collateral Agent", as the case may be, and may exercise the same rights and powers as though it were not performing the duties specified herein; and the terms "Lender," "Required Lenders," "holders of Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the Collateral Agent in its individual capacity. The Collateral Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Grantor or any Affiliate or Subsidiary of the Grantor as if it were not performing the duties specified herein or in the other Loan Documents, and may accept fees and other consideration from the Grantor for services in connection with the Credit Agreement, the other Loan Documents and otherwise without having to account for the same to the Secured Parties. (j) The Collateral Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Collateral Agent. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note, shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. (k) The Collateral Agent may resign from the performance of all of its functions and duties under this Agreement at any time by giving 20 Business Days' prior or written notice to the Grantor and the Secured Parties. Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clause (i) or (ii) of this Section 13(k). KL2:200855.2 13 (i) If a successor Collateral Agent shall not have been appointed within said 20 Business Day period by the Required Lenders, the Collateral Agent, with the consent of the Grantor, which consent shall not be unreasonably withheld or delayed, shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder until such time, if any, as the Required Lenders appoint a successor Collateral Agent as provided above. (ii) If no successor Collateral Agent has been appointed pursuant to clause (i) of this Section 13(k) by the 20th Business Day after the date of such notice of resignation was given by the Collateral Agent, the Required Lenders shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder until such time, if any, as the Required Lenders appoint a successor Collateral Agent as provided above. (l) The Grantor (by its execution and delivery hereof) hereby agrees that it shall pay to Fleet as the Collateral Agent, such fees as have been separately agreed to in writing with Fleet for acting as Collateral Agent hereunder and under the other Collateral Documents. In the event a successor Collateral Agent is appointed pursuant to Section 13(k), the Grantor hereby agrees to pay such successor Collateral Agent such fees for acting as such as would customarily be charged by such Collateral Agent for acting in such capacity in similar situations. Section 14. Indemnity and Expenses. (a) The Grantor agrees to indemnify each Secured Party from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities found in a final, appealable judgment by a court of competent jurisdiction to have resulted solely from such Secured Party's gross negligence or wilful misconduct. (b) The Grantor agrees to pay to the Collateral Agent, upon demand, the amount of any and all reasonable costs and expenses, including, without limitation, the reasonable fees and expenses of its counsel and of any experts and agents (including, without limitation, the following costs of such counsel: support staff, litigation preparation, computerized research, telephone, telefax, mileage, deposition, postage, photocopy, process service, video tape and other similar costs), that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent or any other Secured Party hereunder or (iv) the failure by the Grantor to perform or observe any of the provisions hereof. Section 15. Security Interest Absolute. The obligations of the Grantor under this Agreement are independent of the Secured Obligations, and a separate action or actions may be brought and prosecuted against the Grantor to enforce this Agreement. All rights of the Collateral Agent and the pledge, assignment and security interest hereunder, and all obligations of the Grantor hereunder, shall be absolute and unconditional, irrespective of: (i) any lack of validity or enforceability of any Loan Document, any Bank Hedge Agreement or any other agreement or instrument relating thereto; KL2:200855.2 14 (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document or any Bank Hedge Agreement, including, without limitation, any increase in the Secured Obligations resulting from the extension of additional credit to the Grantor or any of its Subsidiaries or otherwise; (iii) any taking, exchange, release or nonperfection of any other collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations; (iv) any manner of application of collateral, or proceeds thereof, to all or any of the Secured Obligations, or any manner of sale or other disposition of any collateral for all or any of the Secured Obligations or any other assets of the Grantor or any of its Subsidiaries; (v) any change, restructuring or termination of the corporate structure or existence of the Grantor or any of its Subsidiaries; or (vi) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Grantor or a third-party grantor of a security interest. Section 16. Amendments; Waivers; Etc. (a) No amendment or waiver of any provision of this Agreement, and no consent to any departure by the Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) No failure on the part of the Collateral Agent, any Lender or any Hedge Bank to exercise, and no delay in exercising, any right, power or privilege hereunder shall operate as a waiver thereof or consent thereto; nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Section 17. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed, cabled or delivered, if to the Grantor, addressed to it at the address set forth below its name on the signature pages hereof and if to the Collateral Agent, any Lender, the Issuing Bank or any Hedge Bank, addressed to it at its address set forth in Section 8.02 of the Credit Agreement, or, as to any party, at such other address as shall be designated by such party in a written notice to the each other party complying as to delivery with the terms of this Section 17. All such notices and other communications shall, when mailed, telecopied, telegraphed or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively, addressed as aforesaid. Section 18. Continuing Security Interest; Assignments under the Credit Agreement. This Agreement shall create a continuing security interest in the Collateral and shall KL2:200855.2 15 (a) remain in full force and effect until the latest of the indefeasible and irrevocable payment in full in cash of the Secured Obligations, the Final Maturity Date and the termination or expiration of all Bank Hedge Agreements, (b) be binding upon the Grantor, its successors and assigns and (c) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in Section 8.07 of the Credit Agreement. Section 19. Release and Termination. (a) Upon any sale, lease, transfer or other disposition of any item of Collateral in accordance with the terms of the Loan Documents, the Collateral Agent will, at the Grantor's expense, execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted hereby; provided, however, that (i) at the time of such request and such release no Event of Default shall have occurred and be continuing, (ii) the Grantor shall have delivered to the Collateral Agent, at least ten Business Days prior to the date of the proposed release, a written request for release describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including, without limitation, the price thereof and any expenses in connection therewith, together with a form of release for execution by the Collateral Agent and a certification by the Grantor to the effect that the transaction is in compliance with the Loan Documents and as to such other matters as the Collateral Agent may request and (iii) the Net Cash Proceeds of any such sale, lease, transfer or other disposition required to be applied in accordance with Section 2.06 of the Credit Agreement shall be paid to, or in accordance with the instructions of, the Collateral Agent at the closing. (b) Upon the latest of the indefeasible and irrevocable payment in full in cash of the Secured Obligations, the Final Maturity Date and the termination or expiration of all Bank Hedge Agreements, the pledge, assignment and security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Grantor. Upon any such termination, the Collateral Agent will, at the Grantor's expense, execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. Section 20. Jurisdiction, Etc. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE. UNLESS OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT, TERMS USED IN ARTICLE 9 OF THE NEW YORK UCC ARE USED HEREIN AS THEREIN DEFINED. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY BANK HEDGE AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS KL2:200855.2 16 AGREEMENT, EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH SUCH PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, ANY OTHER DOCUMENT TO WHICH IT IS A PARTY OR ANY BANK HEDGE AGREEMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY. EACH SUCH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 8.02 OF THE CREDIT AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH SUCH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER DOCUMENT OR UNDER ANY BANK HEDGE AGREEMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, THE COLLATERAL AGENT, ANY SECURED PARTY OR ANY HEDGE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN ANY OTHER JURISDICTION. (b) EACH PARTY TO THIS AGREEMENT HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY BANK HEDGE AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER DOCUMENTS, ANY BANK HEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. KL2:200855.2 17 IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. PRECISE HOLDING CORPORATION, as Grantor By ___________________________________ Name: Title: Agreed and consented to as of the date first above written: FLEET NATIONAL BANK, as Collateral Agent By _______________________________ Name: Title: [Signature Page to Parent Pledge and Security Agreement] KL2:200855.2 18 Schedule I PLEDGED SHARES Percentage of Issuing Corporation Number of Shares Shares Outstanding Par Value - ------------------- ---------------- ------------------ --------- $ KL2:200855.2 EXHIBIT E TO THE CREDIT AGREEMENT PATENT, TRADEMARK AND COPYRIGHT PLEDGE AND SECURITY AGREEMENT Dated June 13, 1997 from PRECISE TECHNOLOGY, INC., and THE OTHER GRANTORS NAMED HEREIN, as Grantors, to FLEET NATIONAL BANK, as Collateral Agent KL2:192595.3 TABLE OF CONTENTS PRELIMINARY STATEMENTS:........................................- 1 - SECTION 1. Grant of Security..............................................- 2 - SECTION 2. Security for Obligations.......................................- 3 - SECTION 3. Grantor Remains Liable.........................................- 3 - SECTION 4. Representations and Warranties.................................- 3 - SECTION 5. Further Assurances.............................................- 5 - SECTION 6. Transfers and Other Liens......................................- 7 - SECTION 7. The Collateral Agent Appointed Attorney-in-Fact................- 7 - SECTION 8. The Collateral Agent May Perform...............................- 8 - SECTION 9. The Collateral Agent's Duties..................................- 8 - SECTION 10. Remedies.......................................................- 8 - SECTION 11. Indemnity and Expenses........................................- 10 - SECTION 12. Amendments; Waivers; Etc......................................- 10 - SECTION 13. Notices, Etc..................................................- 10 - SECTION 14. Continuing Security Interest; Assignments Under the Credit Agreement..................................- 10 - SECTION 15. Release and Termination.......................................- 11 - SECTION 16. GOVERNING LAW; TERMS..........................................- 11 - KL2:192595.3 SCHEDULES Schedule I - Patents and Patent Applications Schedule II - Trademark and Service Mark Registrations and Applications Schedule III - Copyright Registrations and Applications Schedule IV - Licenses Schedule V - Pending Litigation/Unauthorized Uses KL2:192595.3 PATENT, TRADEMARK AND COPYRIGHT PLEDGE AND SECURITY AGREEMENT PATENT, TRADEMARK AND COPYRIGHT PLEDGE AND SECURITY AGREEMENT (as amended, supplemented or otherwise modified from time to time, this "Agreement"), dated June 13, 1997, made by and among PRECISE TECHNOLOGY, INC., a Delaware corporation (the "Borrower"), each of the other Persons listed on the signature page hereof and the Additional Collateral Grantors (as defined in the Security Agreement) (Parent, the Borrower, such other Persons and such Additional Collateral Grantors collectively referred to herein as the "Grantors" and each individually, a "Grantor") to FLEET NATIONAL BANK ("Fleet"), as collateral agent (together with any successor collateral agent appointed pursuant to Section 21 of the Security Agreement (the "Collateral Agent") for the Secured Parties, as custodian for the Hedge Banks and as Issuing Bank. PRELIMINARY STATEMENTS: (1) Precise Holding Corporation, a Delaware corporation, the Borrower and each Subsidiary Guarantor have entered into a Credit Agreement, dated as of June 13, 1997, (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined) with Fleet, as agent (together with any successor agent appointed pursuant to Article VII of the Credit Agreement, the "Agent"), and the Lenders from time to time party thereto. (3) Pursuant to the Subsidiary Guaranty, each Subsidiary Guarantor has guaranteed to the Lenders the payment when due of all obligations and liabilities of the Borrower under or with respect to the Loan Documents. (4) It is a condition precedent to the making of Advances by the Lenders and the issuance of Letters of Credit by the Issuing Bank under the Credit Agreement and the entry by the Hedge Banks into the Bank Hedge Agreements with the Borrower from time to time that each Grantor shall have granted the assignment and security interest and made the pledge and assignment contemplated by this Agreement. (5) Each Grantor will obtain benefits from the incurrence of Advances and the issuance of Letters of Credit under the Credit Agreement and the entering into of Bank Hedge Agreements with the Hedge Banks and, accordingly, each Grantor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph (4). NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make Advances and the Issuing Bank to issue Letters of Credit under the Credit Agreement and to induce the Hedge Banks to enter into Bank Hedge Agreements with the Borrower from time to time, each Grantor hereby agrees with the Collateral Agent for the ratable benefit of the Secured Parties as follows: KL2:192595.3 SECTION 1. Grant of Security. Each Grantor hereby assigns and pledges to the Collateral Agent for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent for the ratable benefit of the Secured Parties, a security interest in all of such Grantor's right, title and interest in and to the following, whether now owned or hereafter acquired, whether now or hereafter existing (collectively, the "Intellectual Property Collateral"): (a) all patents, patent applications and patentable inventions, including, without limitation, each patent and patent application identified on Schedule I attached hereto and made a part hereof, and including without limitation (i) all inventions and improvements described and claimed therein, (ii) the right to sue or otherwise recover for any misappropriations thereof, (iii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past and future infringements thereof), and (iv) all rights corresponding thereto throughout the world and all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (the "Patents"); (b) all trademarks, service marks, trade names, trade dress or other indicia of trade origin, trademark and service mark registrations, and applications for trademark or service mark registrations and any renewals thereof, including, without limitation, each registration and application identified on Schedule II attached hereto and made a part hereof, and including without limitation (i) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (ii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (iii) all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark, service mark, trade name, trade dress or other indicia of trade origin (the "Trademarks"); and (c) all copyrights, whether statutory or common law, and whether or not the underlying works of authorship have been published, and all works of authorship and other intellectual property rights therein, all copyrights of works based on, incorporated in, derived from or relating to works covered by such copyrights, all right, title and interest to make and exploit all derivative works based on or adopted from works covered by such copyrights, and all copyright registrations and copyright applications, and any renewals or extensions thereof, including, without limitation, each copyright registration and copyright application, if any, identified on Schedule III attached hereto and made a part hereof, and including, without limitation, (i) the right to print, publish and distribute any of the foregoing, (ii) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto KL2:192595.3 - 2 - (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (iv) all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (the "Copyrights"); and (d) all license agreements with any other Person in connection with any of the Patents or Trademarks, or such other Person's patents, trade names, trademarks or copyrights, whether such Grantor is a licensor or licensee under any such license agreement, including, without limitation, the license agreements listed on Schedule IV attached hereto and made a part hereof, subject, in each case, to the terms of such license agreements, including, without limitation, terms requiring consent to a grant of a security interest, and any right to prepare for sale, sell and advertise for sale, all Inventory (as defined in the Security Agreement) now or hereafter owned by such Grantor and now or hereafter covered by such licenses (the "Licenses"). SECTION 2. Security for Obligations. The pledge, assignment and security interest granted under this Agreement by each Grantor secure the payment of all Obligations of such Grantor now or hereafter existing under this Agreement and the other Loan Documents whether for principal, interest, premiums, fees, expenses, or otherwise (all such Obligations being the "Secured Obligations"). Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts that constitute part of the Secured Obligations and would be owed by any Grantor to the Collateral Agent but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Grantor. SECTION 3. Grantor Remains Liable. Anything herein to the contrary notwithstanding, (i) each Grantor shall remain liable under the contracts and agreements included in the Intellectual Property Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Collateral Agent of any of the rights hereunder shall not release each Grantor from any of its duties or obligations under the contracts and agreements included in the Intellectual Property Collateral and (iii) the Collateral Agent has no obligation or liability under the contracts and agreements included in the Intellectual Property Collateral by reason of this Agreement, nor shall the Collateral Agent be obligated to perform any of the obligations or duties of such Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 4. Representations and Warranties. Each Grantor represents and warrants as to itself and its Intellectual Property Collateral as follows: (a) Such Grantor is the legal and beneficial owner of the entire right, title and interest in and to the Intellectual Property Collateral in which it is granting a security interest free and clear of any Lien, except for the pledge, assignment and security interest created by this Agreement. No effective financing statement or other instrument similar KL2:192595.3 - 3 - in effect covering all or any part of the Intellectual Property Collateral or listing such Grantor or any trade name of such Grantor as debtor is on file in any recording office (including, without limitation, the United States Patent and Trademark Office), except such as may have been filed in favor of the Collateral Agent relating to this Agreement and those Liens permitted by Section 5.02(a) of the Credit Agreement. (b) Set forth in Schedule I is a complete and accurate list of all patents and all patent applications owned by such Grantor. Set forth in Schedule II is a complete and accurate list of all trademark and service mark registrations and all trademark and service mark applications owned by such Grantor. Set forth in Schedule III is a complete and accurate list of all copyright registrations and copyright applications owned by each Grantor. Set forth in Schedule IV is a complete and accurate list of all Licenses owned by such Grantor in which such Grantor is (i) a licensor with respect to any of the Patents, Trademarks or Copyrights, or (ii) a licensee of any other person's patents, trade names, trademarks or copyrights. Such Grantor has made all necessary filings and recordations to protect and maintain its interest in the patents, patent applications, trademark and service mark registrations, trademark and service mark applications, copyright registrations and copyright applications and licenses set forth in Schedules I, II, III and IV. (c) Each patent, patent application, trademark or service mark registration, and trademark or service mark application and copyright registration or copyright application of such Grantor set forth in Schedules I, II and III is subsisting and has not been adjudged invalid, unregistrable or unenforceable, in whole or in part, and is valid, registrable and enforceable. Each License of such Grantor identified in Schedule IV is validly subsisting and has not been adjudged invalid or unenforceable, in whole or in part, and is valid and enforceable. Such Grantor has notified the Collateral Agent in writing of all uses of any item of Intellectual Property Collateral which could reasonably be expected to lead to such item becoming invalid or unenforceable, including unauthorized uses by third parties and uses which were not supported by the goodwill of the business connected with such Intellectual Property Collateral. (d) Such Grantor has not made a previous assignment, transfer or agreement constituting a present or future assignment, transfer or encumbrance of any of the Intellectual Property Collateral. Such Grantor has not granted any license (other than those listed in Schedule IV hereto), release, covenant not to sue, or non-assertion assurance to any person with respect to any part of the Intellectual Property Collateral. (e) Such Grantor has used reasonable and proper statutory notice in connection with its use of each patent, each registered trademark and service mark and each registered copyright contained in Schedules I, II and III. (f) This Agreement creates a valid and perfected first priority security interest in the Intellectual Property Collateral, securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly made or taken. KL2:192595.3 - 4 - (g) No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the grant by such Grantor of the assignment and security interest granted hereby or the execution, delivery or performance of this Agreement by such Grantor, (ii) the perfection or maintenance of the pledge, assignment and security interest created hereby (including the first priority nature of such pledge, assignment or security interest) or (iii) the exercise by the Collateral Agent of its rights provided for in this Agreement or the remedies in respect of the Intellectual Property Collateral pursuant to this Agreement, in each case other than the filing of financing and continuation statements under the UCC, which financing statements have been duly filed, and the filing of this Agreement with the United States Patent and Trademark Office,except where the failure to obtain such authorization or approval or other action would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (h) Except for the Licenses set forth in Schedule IV and except as set forth in Schedule V hereto, such Grantor has no knowledge of the existence of any right or any claim that is likely to be made by any third party relating to any item of Intellectual Property Collateral. (i) Except as set forth in Schedule V, no claim has been made and is continuing or threatened that any item of Intellectual Property Collateral is invalid or unenforceable or that the use by such Grantor of any Intellectual Property Collateral does or may violate the rights of any person. Except as set forth in Schedule V, there is currently no infringement or unauthorized use of any item of Intellectual Property Collateral. (j) Such Grantor has taken all necessary steps to use consistent standards of quality in the manufacture, distribution and sale of all products sold and the provision of all services provided under or in connection with any of the Trademarks and has taken all necessary steps to ensure that all licensed users of any of the Trademarks use such consistent standards of quality. (k) There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived. SECTION 5. Further Assurances. (a) Each Grantor agrees that from time to time, at its own expense, it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Collateral Agent may deem desirable and may reasonably request, in order to perfect and protect any pledge, assignment or security interest granted or purported to be granted hereby (including, without limitation, the first-priority nature thereof) or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any part of the Intellectual Property Collateral. Without limiting the generality of the foregoing, each Grantor shall promptly execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or as the Collateral Agent may deem desirable and may reasonably request in order to perfect and preserve the pledge, assignment and security interest granted or purported to be granted hereby. KL2:192595.3 - 5 - (b) Each Grantor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Intellectual Property Collateral without the signature of such Grantor where permitted by law. A photocopy or other reproduction of this Agreement or any financing statement covering the Intellectual Property Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (c) Each Grantor shall furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Intellectual Property Collateral and such other reports in connection with the Intellectual Property Collateral as the Collateral Agent may reasonably request, all in reasonable detail. (d) Each Grantor agrees that, should it obtain an ownership interest in any Patent, Trademark, Copyright or License which is not now a part of the Intellectual Property Collateral, (i) the provisions of Section 1 hereof shall automatically apply thereto, (ii) any such Patent, Trademark, Copyright or License shall automatically become part of the Intellectual Property Collateral, and (iii) with respect to any ownership interest in any patent, patent application, trademark or service mark registration, trademark or service mark application, copyright registration, copyright application or license that such Grantor should obtain, it shall give prompt written notice thereof to the Collateral Agent in accordance with Section 13 hereof. Each Grantor authorizes the Collateral Agent to modify this Agreement by amending Schedules I, II, III and IV (and will cooperate reasonably with the Collateral Agent in effecting any such amendment) to include any patent, patent application, trademark or service mark registration, trademark or service mark application, copyright application or license which becomes part of the Intellectual Property Collateral under this Section. (e) With respect to each patent, patent application, trademark or service mark registration, trademark or service mark application, copyright registration, copyright application and license, such Grantor agrees to take all necessary steps, including, without limitation, in the United States Patent and Trademark Office or in any court, to (i) maintain each such patent, patent application, trademark or service mark registration, trademark or service mark application, copyright registration, copyright application and license and (ii) pursue each such application for Patent, Trademark or Copyright now or hereafter included in the Intellectual Property Collateral, including, without limitation, the filing of responses to office actions issued by the United States Patent and Trademark Office, the filing of applications for renewal or extension, the filing of affidavits under Sections 8 and 15 of the United States Trademark Act, and the participation in opposition, cancellation and infringement and misappropriation proceedings, the filing of divisional, continuation, continuation-in-part and substitute applications, the filing of applications for re-issue, renewal or extensions, the payment of maintenance fees, and the participation in interference, reexamination, opposition, infringement and misappropriation proceedings. Each Grantor agrees to take corresponding steps with respect to each new or acquired Patent, Trademark, Copyright or License to which it is now or later becomes entitled. Any expenses incurred in connection with such activities shall be borne by such Grantor. Such Grantor shall not, without the written consent of the Collateral Agent, discontinue use of or otherwise abandon any Patent, Trademark or Copyright identified in Schedules I, II and III, or abandon any right to file an application for a Patent, Trademark or KL2:192595.3 - 6 - Copyright, or abandon any pending application for a Patent, Trademark or Copyright identified in Schedules I, II and III. Further, such Grantor shall not, without the written consent of the Collateral Agent, discontinue use of or otherwise abandon any other Patent, Trademark or Copyright or abandon any right to file an application for any other Patent, Trademark or Copyright or abandon any pending application for any other Patent, Trademark or Copyright. (f) Each Grantor agrees to notify the Collateral Agent promptly and in writing if it learns (i) that any item of the Intellectual Property Collateral may be determined to have become abandoned or dedicated or (ii) of any adverse determination or the institution of any proceeding (including, without limitation, the institution of any proceeding in the United States Patent and Trademark Office or any court) regarding any item of the Intellectual Property Collateral. (g) In the event that any Grantor becomes aware that any item of the Intellectual Property Collateral is infringed or misappropriated by a third party, such Grantor shall promptly notify the Collateral Agent and shall take such actions as such Grantor or the Collateral Agent deems reasonable and appropriate under the circumstances to protect such Intellectual Property Collateral, including, without limitation, suing for infringement or misappropriation and for an injunction against such infringement or misappropriation. Any expense incurred in connection with such activities shall be borne by such Grantor. (h) Each Grantor shall continue to use proper statutory notice in connection with its use of each of its patents, registered trademarks and service marks and registered copyrights contained in Schedules I, II, III. (i) Each Grantor shall take all steps which it or the Collateral Agent deems reasonable and appropriate under the circumstances to preserve and protect its Intellectual Property Collateral, including, without limitation, maintaining the quality of any and all products or services used or provided in connection with any of the Trademarks, consistent with the quality of the products and services as of the date hereof, and taking all steps necessary to ensure that all licensed users of any of the Trademarks use such consistent standards of quality. SECTION 6. Transfers and Other Liens. Each Grantor agrees not (i) to sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any item of the Intellectual Property Collateral or (ii) to create or suffer to exist any Lien upon or with respect to any of the Intellectual Property Collateral, except for the pledge, assignment and security interest created by this Agreement and except as otherwise permitted by the other Loan Documents. SECTION 7. The Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Collateral Agent such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time upon the occurrence and during the continuance of a Default and with prior notice to such Grantor, to take any action and to execute any instrument that may be necessary or that the Collateral Agent may deem desirable to accomplish the purposes of this Agreement, including, without limitation: KL2:192595.3 - 7 - (a) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Intellectual Property Collateral, (b) to receive, endorse and collect any drafts, instruments, chattel paper and other documents in connection with subsection 7(a) hereof and give full discharge for the same; and (c) to file any claims or take any action or to institute any proceedings that may be necessary or that the Collateral Agent may deem desirable for the collection of any payments relating to any of the Intellectual Property Collateral or otherwise to enforce the rights of the Collateral Agent with respect to any of the Intellectual Property Collateral. SECTION 8. The Collateral Agent May Perform. If any Grantor fails to perform any agreement contained herein, the Collateral Agent, with prior notice to such Grantor, may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by such Grantor under Section 11 hereof. SECTION 9. The Collateral Agent's Duties. The powers conferred on the Collateral Agent hereunder are solely to protect its interest in the Intellectual Property Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the safe custody and preservation of the certificates of registration for any of the Trademarks or the letters patent for any of the Patents in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Intellectual Property Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Intellectual Property Collateral. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the certificates of registration for any of the Trademarks or the letters patent for any of the Patents in its possession if such certificates of registration and letters patent are accorded treatment substantially equal to that which the Borrower accords its own property of like tenor. The Collateral Agent may resign from the performance of all of its functions and duties under this Agreement at any time in accordance with the provisions of Section 21 of the Security Agreement. SECTION 10. Remedies. If any Event of Default shall have occurred and be continuing: (a) The Collateral Agent may exercise in respect of the Intellectual Property Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of New York at such time (the "New York UCC") whether or not the New York UCC applies to the affected Intellectual Property Collateral, and also may (i) require each Grantor to, and each Grantor hereby KL2:192595.3 - 8 - agrees that it shall at its own expense and upon request of the Collateral Agent forthwith, assemble all or part of the documents and things embodying any part of the Intellectual Property Collateral as directed by the Collateral Agent and make them available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both parties and (ii) without notice except as specified below, sell the Intellectual Property Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker's board or at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable. In the event of any sale, assignment, or other disposition of any of the Intellectual Property Collateral of any Grantor, the goodwill of the business connected with and symbolized by any Trademarks subject to such disposition shall be included, and such Grantor shall supply to the Collateral Agent or its designee such Grantor's know-how and expertise, and documents and things embodying the same, relating to the manufacture, distribution, advertising and sale of products or the provision of services relating to any Intellectual Property Collateral subject to such disposition, and such Grantor's customer lists and other records and documents relating to such Intellectual Property Collateral and to the manufacture, distribution, advertising and sale of such products and services. Such Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Intellectual Property Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale, without further notice, may be made at the time and place to which it was so adjourned. (b) Any cash held by the Collateral Agent as Collateral and all cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon, all or any part of the Intellectual Property Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and/or then or at any time thereafter applied in whole or in part by the Collateral Agent for the ratable benefit of the Secured Parties against, all or any part of the Secured Obligations in such order in accordance with Section 20(b) of the Security Agreement. (c) It is understood that the Grantors shall remain jointly and severally liable to the extent of any deficiency between the amount of the proceeds of the Intellectual Property Collateral and the aggregate amount of the Secured Obligations. (d) The Collateral Agent may exercise any and all rights and remedies of such Grantor in respect to the Intellectual Property Collateral, including, without limitation, any and all rights of any Grantor to demand or otherwise require payment of any amount under, or performance of any provision of, any of the Intellectual Property Collateral. (e) All payments received by any Grantor in respect of the Intellectual Property Collateral shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the KL2:192595.3 - 9 - Collateral Agent in the same form as so received (with any necessary endorsement or assignment). SECTION 11. Indemnity and Expenses. (a) Each Grantor agrees to indemnify the Collateral Agent and its officers, directors, employees, agents and advisors (each an "Indemnified Party") from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except to the extent that such claims, losses or liabilities are found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. (b) Each Grantor jointly and severally agrees to pay to the Collateral Agent, upon demand, the amount of any and all reasonable costs and expenses (including, without limitation, the reasonable fees and expenses of its counsel and of any experts and agents, including, without limitation, the following costs of such counsel, experts and agents: support staff, litigation preparation, computerized research, telephone, telefax, mileage, deposition, postage, photocopy, process service, video tape and other similar costs) that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Intellectual Property Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent or (iv) the failure by such Grantor to perform or observe any of the provisions hereof. SECTION 12. Amendments; Waivers; Etc. (a) No amendment or waiver of any provision of this Agreement, and no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Agent and the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) No failure on the part of the Collateral Agent to exercise, and no delay in exercising, any right, power or privilege hereunder shall operate as a waiver thereof or consent thereto; nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. SECTION 13. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed or delivered, (i) if to any Grantor or the Collateral Agent, addressed to it at its address set forth in Section 8.02 of the Credit Agreement or (ii) as to any party at such other address as shall be designated by such party in a notice to each other party complying as to delivery with the terms of this Section 13. All such notices and other communications shall, when mailed, telecopied, telegraphed or telexed, be effective when deposited in the mails, transmitted by telecopier, delivered to the telegraph company or confirmed by telex answerback, respectively, addressed as aforesaid. SECTION 14. Continuing Security Interest; Assignments Under the Credit Agreement. This Agreement shall create a continuing security interest in the Intellectual Property Collateral and shall (i) remain in full force and effect until the later of (x) the KL2:192595.3 - 10 - indefeasible and irrevocable cash payment in full of the Secured Obligations and (y) the Final Maturity Date, (ii) be binding upon such Grantor, its successors and assigns and (iii) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of, and be enforceable by, the Collateral Agent and its respective successors, transferees and assigns. Without limiting the generality of this Section 14(iii), any Collateral Agent may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment or Commitments, the Advances owing to it and any Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Collateral Agent herein or otherwise, in each case as provided in Section 8.07 of the Credit Agreement. SECTION 15. Release and Termination. (a) Upon any sale, lease, transfer or other disposition of any item of Intellectual Property Collateral in accordance with the terms of the Loan Documents (other than sales of Inventory in the ordinary course of business), the Collateral Agent shall, at the appropriate Grantor's expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the release of such item of Intellectual Property Collateral from the assignment and security interest granted hereby; provided, however, that (i) at the time of such request and such release, no Default shall have occurred and be continuing, (ii) such Grantor shall have delivered to the Collateral Agent, at least five Business Days prior to the date of the proposed release, a request for release describing the item of the Intellectual Property Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail (including, without limitation, the price thereof and any expenses in connection therewith), together with a form of release for execution by the Collateral Agent and a certification by such Grantor to the effect that the transaction is in compliance with the Loan Documents and as to such other matters as the Collateral Agent may request and (iii) the Collateral Agent shall have approved such sale, lease transfer or other disposition in writing. (b) Upon the later of (i) the indefeasible and irrevocable cash payment in full of the Secured Obligations and (ii) the Final Maturity Date, the pledge, assignment and security interest granted hereby shall automatically terminate and all rights to the Intellectual Property Collateral shall revert to such Grantor. Upon any such termination and reversion, the Collateral Agent shall, at such Grantor's expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination and reversion. SECTION 16. GOVERNING LAW; TERMS. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR INTELLECTUAL PROPERTY COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. UNLESS OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT, TERMS USED IN ARTICLE 9 OF THE KL2:192595.3 - 11 - NEW YORK UCC ARE USED HEREIN AS THEREIN DEFINED. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY BANK HEDGE AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH SUCH PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY BANK HEDGE AGREEMENT TO WHICH IT IS A PARTY BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY. EACH SUCH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 8.02 OF THE CREDIT AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH SUCH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER DOCUMENT OR UNDER ANY BANK HEDGE AGREEMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, THE COLLATERAL AGENT, ANY SECURED PARTY OR ANY HEDGE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN ANY OTHER JURISDICTION. (b) EACH PARTY TO THIS AGREEMENT HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY BANK HEDGE AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS KL2:192595.3 - 12 - AGREEMENT, THE OTHER DOCUMENTS, ANY BANK HEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. KL2:192595.3 - 13 - IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. PRECISE TECHNOLOGY, INC. By:___________________________________ Name: Title: PRECISE TECHNOLOGY OF DELAWARE, INC. By:___________________________________ Name: Title: PRECISE TECHNOLOGY OF ILLINOIS, INC. By:___________________________________ Name: Title: PRECISE TMP, INC. By:___________________________________ Name: Title: PRECISE POLESTAR, INC. By:___________________________________ Name: Title: [Signature Page to the Patent, Trademark and Copyright Pledge and Security Agreement] KL2:192595.3 MASSIE TOOL, MOLD & DIE, INC. By:___________________________________ Name: Title: Agreed and consented to as of the date first above written: FLEET NATIONAL BANK, as Collateral Agent By:______________________________ Name: Title: [Signature Page to the Patent, Trademark and Copyright Pledge and Security Agreement] KL2:192595.3 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ____ day of , before me personally came __________________________________ to me known, who, being by me duly sworn, did depose and say he resides at __________________________________________ ____________________________________________________________ and that he is the _______________________ of ____________, the corporation described in and which executed the above instrument; that he has been authorized to execute said instrument on behalf of said corporation; and that he signed said instrument on behalf of said corporation pursuant to said authority. ________________________ Notary Public [Notarial Seal] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ____ day of , before me personally came ___________________________________________ to me known, who, being by me duly sworn, did depose and say he resides at _________________________________________ ____________________________________________________________ and that he is the _______________________ of ___________, the corporation described in and which executed the above instrument; that he has been authorized to execute said instrument on behalf of said corporation; and that he signed said instrument on behalf of said corporation pursuant to said authority. ________________________ Notary Public [Notarial Seal] KL2:192595.3 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ____ day of before me personally came ___________________________________________ to me known, who, being by me duly sworn, did depose and say he resides at _________________________________________ ____________________________________________________________ and that he is the _______________________ of Fleet National Bank, the banking corporation described in and which executed the above instrument; that he has been authorized to execute said instrument on behalf of said corporation; and that he signed said instrument on behalf of said corporation pursuant to said authority. ________________________ Notary Public [Notarial Seal] KL2:192595.3 - 17 - EXHIBIT F-1 TO THE CREDIT AGREEMENT PARENT GUARANTY Dated June 13, 1997 from PRECISE HOLDING CORPORATION, as Guarantor, in favor of THE SECURED PARTIES REFERRED TO IN THE CREDIT AGREEMENT REFERRED TO HEREIN TABLE OF CONTENTS Section Page 1. Guaranty .............................................................. 1 2. Guaranty Absolute ..................................................... 2 3. Security .............................................................. 3 4. Waivers and Acknowledgments ........................................... 3 5. Subrogation ........................................................... 4 6. Subordination ......................................................... 4 7. Payments Free and Clear of Taxes, Etc. ................................ 5 8. Representations and Warranties ........................................ 8 9. Affirmative Covenants ................................................. 10 10. [Intentionally Omitted] ............................................... 10 11. Amendments, Etc. ...................................................... 10 12. Notices, Etc. ......................................................... 10 13. No Waiver; Remedies ................................................... 11 14. Fees; Expenses ........................................................ 11 15. Right of Set-off ...................................................... 11 16. Indemnification ....................................................... 11 17. Continuing Guaranty; Assignments under the Credit Agreement ........... 12 18. Counterparts .......................................................... 12 19. Payments by Guarantor ................................................. 12 20. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL, ETC. ............... 12 ii PARENT GUARANTY This GUARANTY, dated as of June 13, 1997 (as amended, modified or supplemented from time to time, this "Guaranty"), made by PRECISE HOLDING CORPORATION, a Delaware corporation (the "Guarantor"), in favor of the Secured Parties (as defined in the Credit Agreement referred to below). WHEREAS, the Lenders and Fleet National Bank, as agent for the Lenders, are parties to a Credit Agreement dated as of June 13, 1997 (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined) with the Guarantor, Precise Technology, Inc. (the "Borrower"), and certain Subsidiaries of the Borrower as set forth therein. The Borrower is a Wholly-Owned Subsidiary of the Guarantor. It is a condition precedent to the making of Advances and the issuances of Letters of Credit by the Lenders under the Credit Agreement that the Guarantor shall have executed and delivered this Guaranty; and WHEREAS, the Guarantor will obtain benefits from the receipt of Advances by the Borrower under the Credit Agreement and, accordingly, desires to execute this Guaranty in order to satisfy the condition described in the preceding paragraph; NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to the Guarantor, the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Lenders to make Advances and to issue Letters of Credit under the Credit Agreement from time to time, the Guarantor hereby makes the following representations and warranties to the Secured Parties and hereby covenants and agrees with each Secured Party as follows: Section 1. Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees (i) the full and prompt payment in cash when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities (including, without limitation, the principal of and interest on the Notes issued by, and Advances made to, the Borrower under the Credit Agreement, and all indemnities, fees and interest thereon or owed thereunder) owing by each Loan Party to the Secured Parties, whether now existing or hereafter incurred under, arising out of or in connection with any Loan Document to which such Loan Party is a party and the due performance and compliance by each Loan Party with all of the terms, conditions and agreements contained in the Credit Agreement and such other Loan Documents (all such principal, interest, indemnities, fees, obligations and liabilities being herein collectively called the "Guaranteed Obligations"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses, including, without limitation, the following costs of such counsel: KL2:193861.3 support staff, litigation preparation, computerized research, telephone, telefax, mileage, deposition, postage, photocopy, process service, video tape and other similar costs) incurred by the Agent or any other Secured Party in enforcing any rights under this Guaranty. Without limiting the generality of the foregoing, the Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrower to the Agent or any other Secured Party under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower. Section 2. Guaranty Absolute. The Guarantor, unconditionally and irrevocably, guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or any other Secured Party with respect thereto. The Obligations of the Guarantor under this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Loan Party or whether the Borrower or any other Loan Party is joined in any such action or actions. The liability of the Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and the Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following: (a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents, or any other release, amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower or otherwise; (c) any taking, exchange, release or non-perfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) any manner of application of Collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral for all or any of the Guaranteed Obligations or any other Obligations of any Loan Party or any Subsidiary of any Loan Party under the Loan Documents or any other assets of any Loan Party or any Subsidiary of any Loan Party; - 2 - KL2:193861.3 (e) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any Subsidiary of any Loan Party; (f) any failure of any Secured Party to disclose to the Borrower or the Guarantor any information relating to the financial condition, operations, properties or prospects of any other Loan Party now or in the future known to any Secured Party (the Guarantor waiving any duty on the part of the Secured Parties to disclose such information); or (g) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Agent or any other Secured Party that might otherwise constitute a defense available to, or a discharge of, the Borrower, the Guarantor or any other guarantor or surety. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Secured Party or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise, all as though such payment had not been made. This Guaranty shall constitute a guaranty of payment and performance, and not of collection. Notwithstanding the foregoing, the Guarantor's waivers under clauses (b), (c), (f) and (g) of this Section 2 shall not apply in respect of any action or inaction taken by the Agent or any other Secured Party with respect to the foregoing clauses (b), (c), (f) and (g) of this Section 2 to the extent that such action or inaction is proven to constitute willful misconduct. Section 3. Security. This Guaranty is secured by a first priority perfected continuing security interest in all of the assets and property of the Guarantor granted to the Collateral Agent pursuant to the Parent Pledge and Security Agreement dated the date hereof between Parent and the Collateral Agent. Section 4. Waivers and Acknowledgments. (a) The Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Agent or any other Secured Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against the Borrower or any other Person or any Collateral (except as shall be required by applicable law and cannot be waived). (b) The Guarantor hereby waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. - 3 - KL2:193861.3 (c) The Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in this Section 4 are knowingly made in contemplation of such benefits. Notwithstanding the foregoing, the Guarantor's waivers under clauses (a) and (b) of this Section 4 shall not apply in respect of any action or inaction taken by the Agent or any other Secured Party with respect to the foregoing clauses (a) and (b) of this Section 4 to the extent that such action or inaction is proven to constitute willful misconduct. Section 5. Subrogation. The Guarantor will not exercise any rights that it may now or hereafter acquire against the Borrower or any other insider guarantor that arise from the existence, payment, performance or enforcement of the Guarantor's Obligations under this Guaranty (whether contractual, under Section 509 of Title 11 of the United States Code entitled "Bankruptcy" as now or hereafter in effect, or any successor thereto, or otherwise) or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Agent or any other Secured Party against the Borrower or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and the Commitments shall have expired or terminated. If any amount shall be paid to the Guarantor in violation of the preceding sentence at any time prior to the later of (x) the indefeasible and irrevocable payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and (y) the Final Maturity Date, such amount shall be held in trust for the benefit of the Agent and the other Secured Parties and shall forthwith be paid to the Agent to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) the Guarantor shall make payment to the Agent or any other Secured Party of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall be paid in full in cash and (iii) the Final Maturity Date shall have occurred, the Agent and the other Secured Parties will, at the Guarantor's request and expense, execute and deliver to the Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Guarantor of an interest in the Guaranteed Obligations resulting from such payment by the Guarantor. Section 6. Subordination. Any and all rights and claims of the Guarantor against the Borrower or any of its property, arising by reason of any payment by the Guarantor to the Agent pursuant to the provisions of this Guaranty shall be subordinate and subject in right of - 4 - KL2:193861.3 payment to the prior payment and satisfaction of all Guaranteed Obligations and all other amounts payable under this Guaranty. Any Debt of the Borrower, now or hereafter held by the Guarantor, is hereby subordinated to all indebtedness and obligations guaranteed hereby. Upon the occurrence and during the continuance of an Event of Default, any such indebtedness of the Borrower to the Guarantor shall, if the Agent so requests, be collected, enforced, and received by the Guarantor in trust for the Agent and held as security for the payment of the Guaranteed Obligations to the Agent, but without reducing or affecting in any manner the liability of the Guarantor hereunder. Section 7. Payments Free and Clear of Taxes, Etc. (a) Subject to Sections 7(e) and (f), any and all payments by the Guarantor hereunder or under the Notes shall be made, in accordance with Section 2.11 of the Credit Agreement, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings imposed by a Governmental Authority, and all liabilities with respect thereto, excluding net income taxes and franchise taxes imposed on the Agent or any Lender as a result of a present or former connection between the Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Guaranty, the Credit Agreement or any Note) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 7) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Guarantor shall make such deductions and (iii) the Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law; provided, however, that the Guarantor shall not be required to increase such amounts payable to any Lender organized under the laws of a jurisdiction outside the United States to the extent provided in subsection (f) of this Section 7, and shall not be required to indemnify such Lender pursuant to this Section 7(a) if such Lender fails to comply with the requirements of subsection (e) of this Section 7 (without regard to the last sentence thereof). (b) In addition, the Guarantor shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Guaranty, the Credit Agreement or the Notes; excluding any present or future stamp, documentary, excise, property or similar taxes, charges or levies (including without limitation, mortgage recording taxes and similar fees) that arise as a result of sales, assignments or other transfers of rights hereunder by any Lender (all such non-excluded taxes, charges and levies being hereinafter referred to as "Other Taxes"). - 5 - KL2:193861.3 (c) The Guarantor shall indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes, and for the full amount of taxes imposed by any jurisdiction on amounts payable under this Section 7, paid by such Lender or the Agent (as the case may be) and any liability (including penalties, additions to Tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Guarantor shall furnish to the Agent, at its address referred to in Section 8.02 of the Credit Agreement, the original receipt of payment thereof or a certified copy of such receipt or, if none is available, other documentary evidence showing such payment. In the case of any payment hereunder or under the Notes by or on behalf of the Guarantor through an account or branch outside the United States or on behalf of the Guarantor by a payor that is not a United States person, if the Guarantor determines that no Taxes are payable in respect thereof, the Guarantor shall furnish, or shall cause such payor to furnish, to the Agent, at such address, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes. For purposes of subsections (d) and (e) of this Section 7, the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Guaranty in the case of each initial Lender or the Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long thereafter as such Lender remains lawfully able to do so), provide the Agent and the Borrower with Internal Revenue Service form 1001 or 4224, as well as form W-9 or W-8, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is exempt from or is entitled to a reduced rate of United States withholding tax on payments under this Guaranty, the Credit Agreement or the Notes. If the form provided by a Lender at the time such Lender first becomes a party to the Credit Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender becomes a party to the Credit Agreement, the Lender assignor was entitled to payments under subsection (a) of this Section 7 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender assignee on such date. If any form or document referred to in this subsection (e) of this Section 7 requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form 1001 or 4224, that the Lender - 6 - KL2:193861.3 reasonably considers to be confidential, the Lender shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. Notwithstanding anything to the contrary contained herein, if the withholding taxes applicable to any payment under any Note or under the Credit Agreement to a Lender or Lender assignor shall be increased from that which would have otherwise been applicable at the time of the execution and delivery by such Lender of the Credit Agreement or the date of the Assignment and Acceptance pursuant to which it became a Lender, as the case may be, due to (i) a change in the manner in which such Lender or Lender assignor holds its interest in the Note, or (ii) an audit of the Internal Revenue Service indicating that such Lender or Lender assignor is not entitled to an exemption from, or a reduced rate for, such withholding taxes at the date of the execution and delivery by such Lender of the Credit Agreement or the date of the Assignment and Acceptance pursuant to which it became a Lender then any withholding taxes resulting therefrom shall be considered excluded from Taxes. (f) For any period with respect to which a Lender has failed to provide the Guarantor with the appropriate form or document described in subsection (e) of this Section 7 (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required to obtain an exemption from Taxes), such Lender shall not be entitled to indemnification under subsection (a) or (c) of this Section 7 with respect to Taxes imposed by the United States; provided, however, that should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, the Guarantor shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. (g) If requested by the Guarantor, and at the Guarantor's expense, any Lender and the Agent shall take such steps as may be appropriate in the sole discretion of such Lender or the Agent, as the case may be, to seek a refund of any Taxes or Other Taxes paid by the Guarantor. If any Lender or the Agent receives a refund in respect of any Taxes or Other Taxes for which the Lender has received payment from the Guarantor hereunder, such Lender and the Agent, within 15 days of such receipt, shall deliver to the Guarantor the amount of such refund. In addition, within 15 days of a written request of the Guarantor, any Lender and the Agent shall execute and deliver to the Guarantor such certificates, forms or other documents which can be reasonably furnished consistent with the facts and which are reasonably necessary in the opinion of such Lender and the Agent to assist the Guarantor in applying for refunds of Taxes or Other Taxes remitted hereunder. (h) If the Guarantor is required to pay any amounts pursuant to the provisions of this Section 7, and if thereafter any Lender or the Agent shall receive or be granted a credit against or remission or other relief for any Taxes solely in respect of the amounts so paid by the Guarantor, such Lender shall, to the extent that it can do so without prejudice to the retention of the amount of such credit, remission or other relief, pay to the Guarantor as soon as reasonably practicable after the date on which such Lender or the Agent effectively obtains the benefit of such credit, remission or other relief an amount which such Lender reasonably - 7 - KL2:193861.3 determines to be equal to such credit, remission or other relief less any sum which the Lender is required by law to deduct therefrom. The Lender may, in its sole discretion, determine the order of utilization of all charges, deductions, credits and expenses. (i) In the event that any Lender or the Agent receives written communication from any Governmental Authority with respect to an assessment or proposed assessment of any Taxes or Other Taxes which the Guarantor is liable to indemnify pursuant to the provisions of this Section 7, such Lender or the Agent shall notify the Guarantor in writing as soon as reasonably practicable after receipt of such written communication. Section 8. Representations and Warranties. The Guarantor hereby represents and warrants as follows: (a) The Guarantor (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or assets or in which the conduct of its business requires it to so qualify or be licensed, except where the failure to be so qualified would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (iii) has all requisite corporate power and authority (including, without limitation, all material governmental licenses, permits and other approvals) to own or lease and operate its properties and assets and to carry on its business as now conducted and as presently proposes to be conducted. (b) The execution, delivery and performance by the Guarantor of this Guaranty and each other Document to which it is a party, and the consummation of the transactions contemplated hereby and thereby and the compliance by it with the terms and provisions thereof, are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action and do not (i) contravene the Guarantor's charter or bylaws (or equivalent documentation), (ii) violate any law (including, without limitation, the Exchange Act and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any material contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting the Guarantor, any of its Subsidiaries or any of their respective properties or assets or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties or assets of the Guarantor or any of its Subsidiaries. Neither the Guarantor nor any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, in each case - 8 - KL2:193861.3 where such breach or imposition would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by the Guarantor of this Guaranty and each other Document to which it is a party, or for the consummation of the transactions contemplated hereby and thereby, (ii) the grant by the Guarantor of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents (including the first priority nature thereof) or (iv) the exercise by the Agent, the Collateral Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for the authorizations, approvals, actions, notices and filings listed on Schedule 4.01(d) to the Credit Agreement, all of which have been duly obtained, taken, given or made and are in full force and effect. All applicable waiting periods in connection with the transactions contemplated hereby have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse conditions upon the rights of the Guarantor or any of its Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties or assets now owned or hereafter acquired by any of them, except where the failure to obtain such authorization or approval or other action would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (d) There is no action, suit, investigation, litigation or proceeding affecting the Guarantor or any of its Subsidiaries, including any Environmental Claim, pending or threatened before any court, governmental agency or arbitrator (i) that affects or purports to affect the legality, validity or enforceability of this Guaranty or any other Loan Document or the consummation of the transactions contemplated hereby or thereby, (ii) with respect to any material Debt of the Guarantor or any of its Subsidiaries or (iii) that would reasonably be expected to have a Material Adverse Effect. (e) This Guaranty has been duly executed and delivered by the Guarantor. This Guaranty is the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or limiting creditors' rights or by equitable principles generally (regardless of whether enforcement is sought in equity or at law). (f) Any information, exhibit or report (including, without limitation, the Offering Memorandum and all information contained in the Documents but excluding any financial projections) prepared and furnished by or on behalf of the Guarantor in writing to any Secured Party for purposes of or in connection with this Guaranty, the other - 9 - KL2:193861.3 Documents or any transaction contemplated herein or therein is, and all other such information hereafter prepared and furnished by or on behalf of the Guarantor in writing to the Agent or any Secured Party will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at such time in light of the circumstances under which such information was provided. (g) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived. (h) The Guarantor has, independently and without reliance upon the Agent or any Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty. Section 9. Affirmative Covenants. The Guarantor covenants and agrees that, so long as any part of the Guaranteed Obligations shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment, the Guarantor will at all times require, perform or observe, and will cause each Loan Party and each of their respective Subsidiaries to perform or observe, all of the terms, covenants and agreements that the Loan Documents state that the Guarantor or the Borrower or any other Loan Party is to perform or observe or that the Guarantor or the Borrower is to cause any Loan Party's Subsidiaries to perform or observe. Section 10. [Intentionally Omitted] Section 11. Amendments, Etc. No amendment or waiver of any provision of this Guaranty and no consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Agent and the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, (a) release or limit the liability of the Guarantor hereunder, (b) postpone any date fixed for payment hereunder or (c) amend this Section 11. Section 12. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy or telex communication) and mailed, telegraphed, telecopied, telexed or delivered to it, if to the Guarantor, addressed to it at 501 Mosside Boulevard, North Versailles, PA 15137, Attention: John R. Weeks, telecopier number (412) 823-4110, with copies to (a) Mentmore Holdings Corporation, 1430 Broadway, 13th Floor, New York, NY 10018-3308, Attention: William L. Remley, telecopier number (212) 391-1393 and (b) Winston & Strawn, 200 Park Avenue, New York, NY 10166, Attention: Robert Ericson, telecopier number (212) 294-4700; if to the Agent or any Lender, at its address - 10 - KL2:193861.3 specified in Section 8.02 of the Credit Agreement, or as to any party at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed, telegraphed, telecopied or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively. Section 13. No Waiver; Remedies. No failure on the part of the Agent, the Collateral Agent or any other Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 14. Fees; Expenses. The Guarantor hereby agrees to pay all out-of-pocket costs and expenses of the Agent in connection with the enforcement of this Guaranty and any amendment, waiver or consent relating hereto (including, without limitation, the reasonable fees and disbursements of counsel employed by the Secured Parties, including, without limitation, the following costs of such counsel: support staff, litigation preparation, computerized research, telephone, telefax, mileage, deposition, postage, photocopy, process service, video tape and other similar costs). Section 15. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Notes due and payable pursuant to the provisions of said Section 6.01, each Lender and each of its respective affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such affiliate to or for the credit or the account of the Guarantor against any and all of the Obligations of the Guarantor now or hereafter existing under this Guaranty, whether or not such Lender shall have made any demand under this Guaranty and although such Obligations may be unmatured. Each Lender agrees promptly to notify the Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its respective affiliates under this Section 15 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its respective affiliates may have. Section 16. Indemnification. Without limitation on any other Obligations of the Guarantor or remedies of the Secured Parties under this Guaranty, the Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless each Secured Party from and against, and shall pay on demand, any and all losses, liabilities, damages, costs, expenses and charges (including the reasonable fees and disbursements of such Secured Party's legal counsel) suffered or incurred by such Secured Party as a result of any failure of any - 11 - KL2:193861.3 Guaranteed Obligations to be the legal, valid and binding obligations of the Guarantor enforceable against the Guarantor in accordance with their terms. Section 17. Continuing Guaranty; Assignments under the Credit Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the later of (i) the indefeasible and irrevocable payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and (ii) the Final Maturity Date, (b) be binding upon the Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Agent, the Collateral Agent and the other Secured Parties and their successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Secured Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party herein or otherwise, in each case, subject to the conditions as and to the extent provided in Section 8.07 of the Credit Agreement. Section 18. Counterparts. This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Guarantor and the Agent. Section 19. Payments by Guarantor. All payments by the Guarantor hereunder will be made without setoff, counterclaim or other defense. Section 20. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL, ETC. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE SECURED PARTIES AND THE GUARANTOR SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS GUARANTY, EACH PARTY TO THIS GUARANTY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH SUCH PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT SUCH - 12 - KL2:193861.3 COURT LACKS PERSONAL JURISDICTION OVER SUCH PARTY. EACH SUCH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY IN ACCORDANCE WITH SECTION 12, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH SUCH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, THE COLLATERAL AGENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN ANY OTHER JURISDICTION. (b) THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER DOCUMENTS TO WHICH IT IS A PARTY IN THE COURTS REFERRED TO IN (a) ABOVE. THE GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (c) THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY OF THE DOCUMENTS, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF THE AGENT, THE COLLATERAL AGENT OR ANY OTHER SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF. - 13 - KL2:193861.3 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by an officer thereunto duly authorized as of the date first above written. PRECISE HOLDING CORPORATION By ___________________________________ Name: Title: [Signature Page to the Parent Guaranty] KL2:193861.3 EXHIBIT F-2 TO THE CREDIT AGREEMENT SUBSIDIARY GUARANTY Dated June 13, 1997 from CERTAIN SUBSIDIARIES OF PRECISE TECHNOLOGY, INC., as Guarantors, in favor of THE SECURED PARTIES REFERRED TO IN THE CREDIT AGREEMENT REFERRED TO HEREIN TABLE OF CONTENTS Section Page 1. Guaranty .............................................................. 1 2. Guaranty Absolute ..................................................... 2 3. Security .............................................................. 3 4. Waivers and Acknowledgments ........................................... 3 5. Subrogation ........................................................... 4 6. Subordination ......................................................... 5 7. Payments Free and Clear of Taxes, Etc. ................................ 5 8. Representations and Warranties ........................................ 8 9. Affirmative Covenants ................................................. 10 10. [Intentionally Omitted] ............................................... 10 11. Amendments, Etc. ...................................................... 10 12. Notices, Etc. ......................................................... 10 13. No Waiver; Remedies ................................................... 11 14. Fees; Expenses ........................................................ 11 15. Right of Set-off ...................................................... 11 16. Indemnification ....................................................... 11 17. Continuing Guaranty; Assignments under the Credit Agreement ........... 12 18. Counterparts. ......................................................... 12 19. Payments by Guarantors ................................................ 12 20. Additional Subsidiaries ............................................... 12 Section Page 21. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL; ETC. ............... 12 Schedule I - Outstanding Capital Stock of each Guarantor -ii- SUBSIDIARY GUARANTY This GUARANTY, dated as of June 13, 1997 (as amended, modified or supplemented from time to time, this "Guaranty"), made by each of the undersigned (each, a "Guarantor" and collectively, the "Guarantors"), in favor of the Secured Parties (as defined in the Credit Agreement referred to below). WHEREAS, the Lenders and Fleet National Bank, as Agent for the Lenders, are parties to a Credit Agreement dated as of June 13, 1997 (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined) with Precise Holding Corporation ("Parent"), Precise Technology, Inc. (the "Borrower"), and the Guarantors. Each Guarantor is a direct or indirect Subsidiary of the Borrower. It is a condition precedent to the making of Advances and the issuances of Letters of Credit by the Lenders under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty; and WHEREAS, each Guarantor will obtain benefits from the receipt of Advances by the Borrower under the Credit Agreement and, accordingly, desires to execute this Guaranty in order to satisfy the condition described in the preceding paragraph; NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Guarantor, the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Lenders to make Advances and to issue Letters of Credit under the Credit Agreement from time to time, each Guarantor hereby makes the following representations and warranties to the Secured Parties and hereby covenants and agrees with each Secured Party as follows: Section 1. Guaranty. (a) Each Guarantor, jointly and severally, hereby unconditionally and irrevocably guarantees (i) the full and prompt payment in cash when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities (including, without limitation, the principal of and interest on the Notes issued by, and Advances made to, the Borrower under the Credit Agreement, and all indemnities, fees and interest thereon or owed thereunder) owing by each Loan Party to the Secured Parties, whether now existing or hereafter incurred under, arising out of or in connection with any Loan Document to which such Loan Party is a party and the due performance and compliance by each Loan Party with all of the terms, conditions and agreements contained in the Credit Agreement and such other Loan Documents (all such principal, interest, indemnities, fees, obligations and liabilities being herein collectively called the "Guaranteed Obligations"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses, including, without limitation, the following costs of such counsel: support staff, litigation preparation, computerized research, telephone, telefax, mileage, deposition, postage, photocopy, process service, video tape and other similar costs) incurred by the Agent or any other Secured Party in enforcing any rights KL2:193918.4 under this Guaranty. Without limiting the generality of the foregoing, each Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrower to the Agent or any other Secured Party under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower. (b) The liability of each Guarantor under this Guaranty shall not exceed the greater of (i) the net benefit realized by such Guarantor from the proceeds of the Advances made from time to time by the Borrower to such Guarantor or any Subsidiary of such Guarantor and (ii) the greater of (x) 95% of the Adjusted Net Assets of such Guarantor on the date of delivery hereof and (y) 95% of the Adjusted Net Assets of such Guarantor on the date any demand is made hereunder. "Adjusted Net Assets" of such Guarantor at any date means the lesser of (x) the amount by which the present fair salable value of the property of such Guarantor exceeds the total amount of liabilities (including, without limitation, the maximum amount reasonably expected to come due in respect of contingent liabilities, other than contingent liabilities of such Guarantor under this Guaranty) of such Guarantor at such date and (y) the amount by which the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Guarantor on its debt, excluding debt in respect of this Guaranty, as they become absolute and matured. Section 2. Guaranty Absolute. Each Guarantor, jointly and severally, unconditionally and irrevocably, guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or any other Secured Party with respect thereto. The Obligations of each Guarantor under this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Guarantor or any other Loan Party under the Loan Documents, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower, any other Guarantor or any other Loan Party or whether the Borrower, any other Guarantor, or any other Loan Party is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following: (a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party or Parent under the Loan Documents, or any other release, amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower or otherwise; KL2:193918.4 -2- (c) any taking, exchange, release or non-perfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) any manner of application of Collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral for all or any of the Guaranteed Obligations or any other Obligations of any Loan Party or any Subsidiary of any Loan Party or Parent under the Loan Documents or any other assets of any Loan Party or any Subsidiary of any Loan Party or Parent; (e) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any Subsidiary of any Loan Party or Parent; (f) any failure of any Secured Party to disclose to the Borrower or any Guarantor any information relating to the financial condition, operations, properties or prospects of any other Loan Party or Parent now or in the future known to any Secured Party (each Guarantor waiving any duty on the part of the Secured Parties to disclose such information); or (g) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Agent or any other Secured Party that might otherwise constitute a defense available to, or a discharge of, the Borrower, each Guarantor or any other guarantor or surety. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Secured Party or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party or Parent or otherwise, all as though such payment had not been made. This Guaranty shall constitute a guaranty of payment and performance, and not of collection. Notwithstanding the foregoing, the Guarantor's waivers under clauses (b), (c), (f) and (g) of this Section 2 shall not apply in respect of any action or inaction taken by the Agent or any other Secured Party with respect to the foregoing clauses (b), (c), (f) and (g) of this Section 2 to the extent that such action or inaction constitutes willful misconduct. Section 3. Security. This Guaranty is secured by a first priority perfected security interest in all of the assets and property of each Guarantor granted to the Collateral Agent pursuant to the Security Agreement and the Intellectual Property Security Agreement. Section 4. Waivers and Acknowledgments. (a) Each Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Agent or any other Secured Party protect, secure, perfect or insure any Lien or any property subject thereto or KL2:193918.4 -3- exhaust any right or take any action against the Borrower, any other Guarantor or any other Person or any Collateral (except as shall be required by applicable law and cannot be waived). (b) Each Guarantor hereby waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. (c) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in this Section 4 are knowingly made in contemplation of such benefits. Notwithstanding the foregoing, the Guarantor's waivers under clauses (a) and (b) of this Section 4 shall not apply in respect of any action or inaction taken by the Agent or any other Secured Party with respect to the foregoing clauses (a) and (b) of this Section 4 to the extent that such action or inaction constitutes willful misconduct. Section 5. Subrogation. No Guarantor will exercise any rights that it may now or hereafter acquire against the Borrower, any other Guarantor or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor's Obligations under this Guaranty (whether contractual, under Section 509 of Title 11 of the United States Code entitled "Bankruptcy" as now or hereafter in effect, or any successor thereto, or otherwise) or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Agent or any other Secured Party against the Borrower, any other Guarantor or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, any other Guarantor or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and the Commitments shall have expired or terminated. If any amount shall be paid to any Guarantor in violation of the preceding sentence at any time prior to the later of (x) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and (y) the Final Maturity Date, such amount shall be held in trust for the benefit of the Agent and the other Secured Parties and shall forthwith be paid to the Agent to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) any Guarantor shall make payment to the Agent or any other Secured Party of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall be paid in full in cash and (iii) the Final Maturity Date shall have occurred, the Agent and the other Secured Parties will, at such Guarantor's request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation KL2:193918.4 -4- or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment by such Guarantor. Section 6. Subordination. Any and all rights and claims of any Guarantor against the Borrower or any of its property, arising by reason of any payment by such Guarantor to the Agent pursuant to the provisions of this Guaranty shall be subordinate and subject in right of payment to the prior payment and satisfaction of all Guaranteed Obligations and all other amounts payable under this Guaranty. Any Debt of the Borrower, now or hereafter held by any Guarantor, is hereby subordinated to all indebtedness and obligations guaranteed hereby. Upon the occurrence and during the continuance of an Event of Default, any such indebtedness of the Borrower to such Guarantor shall, if the Agent so requests, be collected, enforced, and received by such Guarantor in trust for the Agent and held as security for the payment of the Guaranteed Obligations to the Agent, but without reducing or affecting in any manner the liability of any Guarantor hereunder. Section 7. Payments Free and Clear of Taxes, Etc. (a) Subject to Sections 7(e) and (f), any and all payments by each Guarantor hereunder or under the Notes shall be made, in accordance with Section 2.11 of the Credit Agreement, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings imposed by a Governmental Authority, and all liabilities with respect thereto, excluding net income taxes and franchise taxes imposed on the Agent or any Lender as a result of a present or former connection between the Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Guaranty, the Credit Agreement or any Note) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 7) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Guarantor shall make such deductions and (iii) such Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law; provided, however, that no Guarantor shall be required to increase such amounts payable to any Lender organized under the laws of a jurisdiction outside the United States to the extent provided in subsection (f) of this Section 7, and shall not be required to indemnify such Lender pursuant to this Section 7(a) if such Lender fails to comply with the requirements of subsection (e) of this Section 7 (without regard to the last sentence thereof). (b) In addition, each Guarantor shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or KL2:193918.4 -5- otherwise with respect to, this Guaranty, the Credit Agreement or the Notes; excluding any present or future stamp, documentary, excise, property or similar taxes, charges or levies (including without limitation, mortgage recording taxes and similar fees) that arise as a result of sales, assignments or other transfers of rights hereunder by any Lender (all such non-excluded taxes, charges and levies being hereinafter referred to as "Other Taxes"). (c) Each Guarantor shall indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes, and for the full amount of taxes imposed by any jurisdiction on amounts payable under this Section 7, paid by such Lender or the Agent (as the case may be) and any liability (including penalties, additions to Tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, each Guarantor shall furnish to the Agent, at its address referred to in Section 8.02 of the Credit Agreement, the original receipt of payment thereof or a certified copy of such receipt or, if none is available, other documentary evidence showing such payment. In the case of any payment hereunder or under the Notes by or on behalf of any Guarantor through an account or branch outside the United States or on behalf of any Guarantor by a payor that is not a United States person, if such Guarantor determines that no Taxes are payable in respect thereof, such Guarantor shall furnish, or shall cause such payor to furnish, to the Agent, at such address, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes. For purposes of subsections (d) and (e) of this Section 7, the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Guaranty in the case of each initial Lender or the Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long thereafter as such Lender remains lawfully able to do so), provide the Agent and the Borrower with Internal Revenue Service form 1001 or 4224, as well as form W-9 or W-8, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is exempt from or is entitled to a reduced rate of United States withholding tax on payments under this Guaranty, the Credit Agreement or the Notes. If the form provided by a Lender at the time such Lender first becomes a party to the Credit Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender becomes a party to the Credit Agreement, the Lender assignor was entitled to payments under subsection (a) of this Section 7 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be KL2:193918.4 -6- imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender assignee on such date. If any form or document referred to in this subsection (e) of this Section 7 requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form 1001 or 4224, that the Lender reasonably considers to be confidential, the Lender shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. Notwithstanding anything to the contrary contained herein, if the withholding taxes applicable to any payment under any Note or under the Credit Agreement to a Lender or Lender assignor shall be increased from that which would have otherwise been applicable at the time of the execution and delivery by such Lender of the Credit Agreement or the date of the Assignment and Acceptance pursuant to which it became a Lender, as the case may be, due to (i) a change in the manner in which such Lender or Lender assignor holds its interest in the Note, or (ii) an audit of the Internal Revenue Service indicating that such Lender or Lender assignor is not entitled to an exemption from, or a reduced rate for, such withholding taxes at the date of the execution and delivery by such Lender of the Credit Agreement or the date of the Assignment and Acceptance pursuant to which it became a Lender then any withholding taxes resulting therefrom shall be considered excluded from Taxes. (f) For any period with respect to which a Lender has failed to provide any Guarantor with the appropriate form or document described in subsection (e) of this Section 7 (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required to obtain an exemption from Taxes), such Lender shall not be entitled to indemnification under subsection (a) or (c) of this Section 7 with respect to Taxes imposed by the United States; provided, however, that should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, each Guarantor shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. (g) If requested by any Guarantor, and at such Guarantor's expense, any Lender and the Agent shall take such steps as may be appropriate in the sole discretion of such Lender or the Agent, as the case may be, to seek a refund of any Taxes or Other Taxes paid by such Guarantor. If any Lender or the Agent receives a refund in respect of any Taxes or Other Taxes for which the Lender has received payment from such Guarantor hereunder, such Lender and the Agent, within 15 days of such receipt, shall deliver to such Guarantor the amount of such refund. In addition, within 15 days of a written request of any Guarantor, any Lender and the Agent shall execute and deliver to such Guarantor such certificates, forms or other documents which can be reasonably furnished consistent with the facts and which are reasonably necessary in the opinion of such Lender and the Agent to assist such Guarantor in applying for refunds of Taxes or Other Taxes remitted hereunder. (h) If any Guarantor is required to pay any amounts pursuant to the provisions of this Section 7, and if thereafter any Lender or the Agent shall receive or be granted a credit against or remission or other relief for any Taxes solely in respect of the amounts so paid by KL2:193918.4 -7- such Guarantor, such Lender shall, to the extent that it can do so without prejudice to the retention of the amount of such credit, remission or other relief, pay to such Guarantor as soon as reasonably practicable after the date on which such Lender or the Agent effectively obtains the benefit of such credit, remission or other relief an amount which such Lender reasonably determines to be equal to such credit, remission or other relief less any sum which the Lender is required by law to deduct therefrom. The Lender may, in its sole discretion, determine the order of utilization of all charges, deductions, credits and expenses. (i) In the event that any Lender or the Agent receives written communication from any Governmental Authority with respect to an assessment or proposed assessment of any Taxes or Other Taxes which any Guarantor is liable to indemnify pursuant to the provisions of this Section 7, such Lender or the Agent shall notify such Guarantor in writing as soon as reasonably practicable after receipt of such written communication. Section 8. Representations and Warranties. Each Guarantor hereby represents and warrants as follows: (a) Such Guarantor (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or assets or in which the conduct of its business requires it to so qualify or be licensed, except where the failure to be so qualified would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (iii) has all requisite corporate power and authority (including, without limitation, all material governmental licenses, permits and other approvals) to own or lease and operate its properties and assets and to carry on its business as now conducted and as presently proposes to be conducted. All of the outstanding capital stock of such Guarantor has been validly issued free of pre-emptive rights, is fully paid and non-assessable and is owned by the Persons and in the amounts and types specified in Schedule I free and clear of all Liens. (b) The execution, delivery and performance by such Guarantor of this Guaranty and each other Document to which it is a party, and the consummation of the transactions contemplated hereby and thereby and the compliance by it with the terms and provisions thereof, are within such Guarantor's corporate powers, have been duly authorized by all necessary corporate action and do not (i) contravene any Guarantor's charter or bylaws (or equivalent documentation), (ii) violate any law (including, without limitation, the Exchange Act and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any material contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Guarantor, any of its Subsidiaries or any of their respective properties or KL2:193918.4 -8- assets or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties or assets of any Guarantor or any of its Subsidiaries. No Guarantor nor any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, in each case where such breach or imposition would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by such Guarantor of this Guaranty and each other Document to which it is a party, or for the consummation of the transactions contemplated hereby or thereby, (ii) the grant by such Guarantor of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents (including the first priority nature thereof) or (iv) the exercise by the Agent, the Collateral Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for the authorizations, approvals, actions, notices and filings listed on Schedule 4.01(d) to the Credit Agreement, all of which have been duly obtained, taken, given or made and are in full force and effect. All applicable waiting periods in connection with the transactions contemplated hereby have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse conditions upon the rights of such Guarantor or any of its Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties or assets now owned or hereafter acquired by any of them except where the failure to be obtain such approval or authorization or other action would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (d) There is no action, suit, investigation, litigation or proceeding affecting such Guarantor or any of its Subsidiaries, including any Environmental Claim, pending or threatened before any court, governmental agency or arbitrator (i) that affects or purports to affect the legality, validity or enforceability of this Guaranty or any other Loan Document or the consummation of the transactions contemplated hereby or thereby, (ii) with respect to any material Debt of any Guarantor or any of its Subsidiaries or (iii) that would reasonably be expected to have a Material Adverse Effect. (e) This Guaranty has been duly executed and delivered by such Guarantor. This Guaranty is the legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or limiting creditors' rights or by equitable principles generally (regardless of whether enforcement is sought in equity or at law). KL2:193918.4 -9- (f) Any information, exhibit or report (including, without limitation, the Offering Memorandum and all information contained in the Documents but excluding any financial projections) prepared and furnished by or on behalf of such Guarantor or any of its Subsidiaries in writing to any Secured Party for purposes of or in connection with this Guaranty, the other Documents or any transaction contemplated herein or therein is, and all other such information hereafter prepared and furnished by or on behalf of such Guarantor or any of its Subsidiaries in writing to any Secured Parties will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at such time in light of the circumstances under which such information was provided. (g) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived. (h) Such Guarantor has, independently and without reliance upon the Agent or any Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty. Section 9. Affirmative Covenants. Each Guarantor covenants and agrees that, so long as any part of the Guaranteed Obligations shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment, such Guarantor will at all times require, perform or observe, and will cause each Loan Party and each of their respective Subsidiaries and Parent to perform or observe, all of the terms, covenants and agreements that the Loan Documents state that such Guarantor or the Borrower or any other Loan Party or Parent is to perform or observe or that such Guarantor or the Borrower is to cause any Loan Party's Subsidiaries to perform or observe. Section 10. [Intentionally Omitted] Section 11. Amendments, Etc. No amendment or waiver of any provision of this Guaranty and no consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Agent and the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, (a) release or limit the liability of any Guarantor hereunder, (b) postpone any date fixed for payment hereunder or (c) amend this Section 11. Section 12. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy or telex communication) and mailed, telegraphed, telecopied, telexed or delivered to it, if to any Guarantor, addressed to it at 501 Mosside Boulevard, North Versailles, PA 15137, Attention: John R. Weeks, telecopier number (412) 823-4110, with copies to (a) Mentmore Holdings Corporation, 1430 Broadway, KL2:193918.4 -10- 13th Floor, New York, NY 10018-3308, Attention: William L. Remley, telecopier number (212) 391-1393 and (b) Winston & Strawn, 200 Park Avenue, New York, NY 10166, Attention: Robert Ericson, telecopier number (212) 294-4700; if to the Agent or any Lender, at its address specified in Section 8.02 of the Credit Agreement, or as to any party at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed, telegraphed, telecopied or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively. Section 13. No Waiver; Remedies. No failure on the part of the Agent, the Collateral Agent or any other Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 14. Fees; Expenses. The Guarantors hereby jointly and severally agree to pay all out-of-pocket costs and expenses of the Agent in connection with the enforcement of this Guaranty and any amendment, waiver or consent relating hereto (including, without limitation, the reasonable fees and disbursements of counsel employed by the Secured Parties, including, without limitation, the following costs of such counsel: support staff, litigation preparation, computerized research, telephone, telefax, mileage, deposition, postage, photocopy, process service, video tape and other similar costs). Section 15. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Notes due and payable pursuant to the provisions of said Section 6.01, each Lender and each of its respective affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such affiliate to or for the credit or the account of any Guarantor against any and all of the Obligations of such Guarantor now or hereafter existing under this Guaranty, whether or not such Lender shall have made any demand under this Guaranty and although such Obligations may be unmatured. Each Lender agrees promptly to notify such Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its respective affiliates under this Section 15 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its respective affiliates may have. Section 16. Indemnification. Without limitation on any other Obligations of any Guarantor or remedies of the Secured Parties under this Guaranty, each Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless each Secured Party from and against, and shall pay on demand, any and all losses, liabilities, damages, costs, expenses and charges (including the reasonable fees and disbursements of such Secured Party's KL2:193918.4 -11- legal counsel) suffered or incurred by such Secured Party as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of each Guarantor enforceable against any Guarantor in accordance with their terms. Section 17. Continuing Guaranty; Assignments under the Credit Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the later of (i) the indefeasible and irrevocable payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and (ii) the Final Maturity Date, (b) be binding upon each Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Agent, the Collateral Agent and the other Secured Parties and their successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Secured Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party herein or otherwise, in each case, subject to the conditions as and to the extent provided in Section 8.07 of the Credit Agreement. Section 18. Counterparts. This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Guarantors and the Agent. Section 19. Payments by Guarantors. All payments made by any Guarantor hereunder will be made without setoff, counterclaim or other defense. Section 20. Additional Subsidiaries. It is understood and agreed that any Subsidiary of any Loan Party that is required to execute a counterpart of this Guaranty pursuant to the Credit Agreement shall automatically become a Guarantor hereunder by executing a counterpart hereof and delivering the same to the Agent. Section 21. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL; ETC. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE SECURED PARTIES AND EACH GUARANTOR SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS GUARANTY, EACH PARTY TO THIS GUARANTY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE KL2:193918.4 -12- AFORESAID COURTS. EACH SUCH PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT SUCH COURT LACKS PERSONAL JURISDICTION OVER SUCH PARTY. EACH SUCH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY IN ACCORDANCE WITH SECTION 12, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH SUCH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY LOAN DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, THE COLLATERAL AGENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN ANY OTHER JURISDICTION. (b) EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER DOCUMENTS TO WHICH IT IS A PARTY IN THE COURTS REFERRED TO IN (a) ABOVE. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (c) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY OF THE DOCUMENTS, THE TRANS ACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF THE AGENT, THE COLLATERAL AGENT OR ANY OTHER SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF. KL2:193918.4 -13- IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered by an officer thereunto duly authorized as of the date first above written. PRECISE TECHNOLOGY OF DELAWARE, INC. By ___________________________________ Name: Title: PRECISE TECHNOLOGY OF ILLINOIS, INC. By ___________________________________ Name: Title: PRECISE TMP, INC. By ___________________________________ Name: Title: PRECISE POLESTAR, INC. By ___________________________________ Name: Title: MASSIE TOOL, MOLD & DIE, INC. By ___________________________________ Name: Title: [Signature Page to the Subsidiary Guaranty] KL2:193918.4 -14- Schedule I to Subsidiary Guaranty Outstanding Capital Stock of each Guarantor KL2:193918.4 -15- EXHIBIT G [Form of Opinion of Borrower's Counsel] June 13, 1997 To the Agent and each of the Lenders party to the Credit Agreement referred to below and the Collateral Agent referred to therein Ladies and Gentlemen: We have acted as special counsel to Precise Holding Corporation, a Delaware corporation ("Parent"), Precise Technology, Inc., a Delaware corporation (the "Borrower") and each Subsidiary Guarantor in connection with the execution and delivery by Parent, the Borrower and each Subsidiary Guarantor of the Credit Agreement, dated as of June 13, 1997 (the "Credit Agreement") among Parent, the Borrower, each Subsidiary Guarantor, the financial institutions from time to time party thereto (the "Lenders"), and Fleet National Bank, as agent (the "Agent"), and the transactions contemplated thereby. This opinion is delivered to you pursuant to Section 3.01(g)(xvi) of the Credit Agreement. Unless otherwise indicated, capitalized terms used herein but not otherwise defined herein shall have the respective meanings set forth in the Loan Documents. Parent, the Borrower, each Subsidiary Guarantor collectively are referred to as the "Loan Parties" and each a "Loan Party". Parent, the Borrower, Precise Technology of Delaware Inc., a Delaware corporation, and Precise Technology of Illinois Inc., a Delaware corporation, collectively are referred to as the "Delaware Loan Parties" and each a "Delaware Loan Party". In connection with this opinion, we have examined: (i) the Credit Agreement; (ii) the Note; (iii) the Parent Guaranty; (iv) the Subsidiary Guaranty; (v) the Security Agreement; (vi) the Intellectual Property Security Agreement; (vii) the Mortgages; (viii) the Senior Subordinated Notes; (ix) the Senior Subordinated Notes Indenture; June 13, 1997 Page 2 (x) the Senior Subordinated Notes Guaranty; and (xi) UCC-1 Financing Statements the unexecuted forms of which are attached hereto as Exhibit A (collectively the "Financing Statements"). The documents described in clauses (i) through (vii) and (xi) are hereinafter referred to collectively as the "Loan Documents" and the documents described in clauses (i) through (xi) are referred to collectively as the "Documents". References in this opinion letter to the "New York UCC" are to the Uniform Commercial Code currently in effect in the State of New York. We have also examined such other agreements, instruments and documents, and such questions of law as we have deemed necessary or appropriate to enable us to render the opinions expressed below. Additionally, we have examined originals or copies, certified to our satisfaction, of such certificates of public officials and officers and representatives of the Loan Parties and we have made such inquiries of officers and representatives of the Loan Parties as we have deemed relevant or necessary, as the basis for the opinions set forth herein. In rendering the opinions expressed below, we have, with your consent, assumed that the signatures of persons signing all documents in connection with which this opinion is rendered are genuine, all documents submitted to us as originals or duplicate originals are authentic and all documents submitted to us as copies, whether certified or not, conform to authentic original documents. Additionally, we have, with your consent, assumed and relied upon, the following: (a) the accuracy and completeness of all certificates and other statements, documents, records, financial statements and papers reviewed by us, and the accuracy and completeness of all representations, warranties, schedules and exhibits contained in the Documents, with respect to the factual matters set forth therein; (b) all parties to the documents reviewed by us (other than the Loan Parties) are duly organized, validly existing and in good standing under the laws of all jurisdictions where they are conducting their businesses or otherwise required to be so qualified, and have full power and authority to execute, deliver and perform under such documents and all such documents have been duly authorized, executed and delivered by such parties; (c) neither the Agent, nor any Lender nor any of their respective representatives have any knowledge (actual or constructive) of any adverse claim, lien, security interest, claim, encumbrance, interest or other condition of title affecting any of the Collateral, except for Liens described in the Loan Documents, Liens assigned to the Collateral Agent pursuant to the Loan June 13, 1997 Page 3 Documents and Liens the existence of which would reasonably be expected not to have a Material Adverse Effect; (d) each Document constitutes the valid and binding obligation of each party thereto (other than the Loan Parties) enforceable against such party in accordance with its terms; (e) the descriptions of the Collateral in the Loan Documents reasonably describe the property intended to be described as Collateral; and (f) all of the transactions contemplated by the Loan Documents in connection with the Initial Extension of Credit, the Refinancing Transactions, and the issuance of the Senior Subordinated Notes pursuant to the Senior Subordinated Notes Indenture have been consummated, and consummated concurrently, such that no delivery or payment contemplated thereby shall be deemed to have been made until all such transactions shall have been completed. Whenever our opinion with respect to the existence or absence of facts is indicated to be based on our knowledge or awareness, we are referring to the knowledge of the particular Winston & Strawn attorneys who have represented the Loan Parties during the course of our limited representation of the Loan Parties in connection with the Documents. Except as expressly set forth herein, we have not undertaken any independent investigation, examination or inquiry to determine the existence or absence of any facts and no inference as to our knowledge concerning any facts should be drawn as a result of the limited representations undertaken by us. Based upon the foregoing and subject to the qualifications stated herein, we are of the opinion that: 1. Each Delaware Loan Party (i) is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or assets or in which the conduct of its business requires it to so qualify or be licensed, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and (iii) has all requisite corporate power and authority to own or lease and operate its properties and assets and to carry on its business as now conducted. All of the outstanding capital stock of each Delaware Loan Party has been validly issued, is fully paid and non-assessable and, to our knowledge, was not issued in violation of any preemptive or similar rights. To our knowledge, no Delaware Loan Party has outstanding any securities convertible into or exchangeable for its capital stock or has outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any June 13, 1997 Page 4 calls, commitments or claims of any character relating to, its capital stock. 2. Each Delaware Loan Party has all requisite corporate power and authority to execute, deliver and perform its obligations under each of the Loan Documents to which it is a party and has taken all necessary corporate action to authorize the execution and delivery of and the performance by it of its obligations under each of such Loan Documents. Each Loan Party has duly executed and delivered each of the Loan Documents to which it is a party, and each of such Loan Documents constitutes the valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms. 3. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby, do not (i) contravene any Loan Party's charter or bylaws, (ii) violate any law or regulation (or any writ, judgment, injunction, decree, determination or award of any court or governmental entity known to us) applicable to such Loan Party; (iii) to our knowledge, conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their respective properties or assets (which conflict, breach or default would individually or in the aggregate reasonably be expected to have a Material Adverse Effect) or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties or assets of any Loan Party or any of its Subsidiaries. 4. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or, to our knowledge, any other third party, is required for (i) the due execution, delivery, or performance by any Loan Party of any Loan Document to which it is a party, or for the consummation of the transactions contemplated thereby, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection of the Liens created by the Collateral Documents, except for the filings listed on Schedule 4.01(d) to the Credit Agreement. 5. To our knowledge, there is no action, suit, investigation, litigation or proceeding affecting any Loan Party pending or threatened before any court, governmental agency or arbitrator (i) that affects or purports to affect the legality, validity or enforceability of the Documents, the Senior Subordinated Notes or the consummation of the transactions contemplated thereby, or (ii) that could reasonably be expected to have a Material Adverse Effect. 6. No Loan Party nor any of its Subsidiaries is an "investment company," or a "holding company" of an "investment June 13, 1997 Page 5 company" as such terms are defined in the Investment Company Act of 1940, as amended. 7. The subordination provisions contained in the Senior Subordinated Notes and the other Senior Subordinated Note Documents are enforceable against the Borrower and the respective guarantors party thereto, and the Obligations of each Loan Party under the Loan Documents and the Guaranteed Obligations of each Loan Party (as defined in the Parent Guaranty and the Subsidiary Guaranty) are within the definition of "Senior Debt" under the Senior Subordinated Notes Indenture. 8. The Security Agreement is effective to create in favor of the Collateral Agent for the benefit of the Secured Parties a valid security interest under the New York UCC in all of the right, title and interest of each Loan Party in, to and under all "equipment", "inventory", "accounts", "instruments", "documents", "chattel paper" and "general intangibles" (as such terms are defined in the New York UCC) that are included within the definition of "Collateral" set forth in the Security Agreement (collectively referred to hereinafter as the "Article 9 Collateral"), to the extent a security interest may be created therein under the New York UCC, except that (a) such security interest will continue in such Article 9 Collateral after its sale, exchange or other disposition only to the extent provided in Sections 9-306, 9-307 and 9-308 of the New York UCC, (b) the security interest in Article 9 Collateral in which any Loan Party acquires rights after the commencement of a case under the Federal Bankruptcy Code in respect of such Loan Party may be limited by Section 552 of such Code and (c) the security interest in any such Article 9 Collateral constituting a "security" (as defined in the New York UCC) is enforceable only to the extent that such security also has been transferred to the Collateral Agent or a Person designated by it in one of the ways set forth in Section 8-313(1) of the New York UCC (delivery of possession thereof to the Collateral Agent being one of such ways). 9. Assuming that the Financing Statements are filed in the offices set forth on Schedule I hereto and are not subsequently released, terminated or modified, the Collateral Agent's security interest in the Article 9 Collateral described therein will be perfected. When filed in each of the jurisdictions identified in Schedule I hereto, the effectiveness of the Financing Statements will lapse on the expiration of a five year period from their date of filing unless appropriate continuation statements are filed within the six month period prior to expiration of the applicable five year period. If the Loan Party that has executed particular Financing Statements so changes its name, identity or corporate structure that such Financing Statements become seriously misleading, such Financing Statements will be ineffective to perfect a security interest in Article 9 Collateral acquired more than four months after such change. If any such Loan Party changes June 13, 1997 Page 6 its chief executive office to a new jurisdiction outside the jurisdiction in which it has its chief executive office as indicated in the Security Agreement, the effectiveness of such Financing Statements will be terminated four months after such change as to Article 9 Collateral consisting of "accounts" (as such term is defined in the New York UCC). 10. Upon delivery pursuant to the Security Agreement to the Collateral Agent of certificates representing the Pledged Shares and Pledged Debt (as such terms are defined in the Security Agreement) together with undated stock or bond powers duly endorsed in blank, and assuming that the Collateral Agent is taking possession of the Pledged Shares and Pledged Debt for value and in good faith and without notice of any adverse claim with respect thereto within the meaning of the New York UCC, the Security Agreement creates a valid and perfected security interest in the Pledged Shares and Pledged Debt in favor of the Collateral Agent. In giving the opinions set forth in paragraphs 8 through 10 above, we have examined standard compilations of the Uniform Commercial Code as in effect in jurisdictions other than the State of New York to determine the appropriate location(s) and the types of forms required for the filing of financing statements in such jurisdictions. In addition, we have assumed that none of the Article 9 Collateral consists or will consist of fixtures, minerals or the like (including oil and gas and accounts relating thereto), interests in real estate cooperatives, consumer goods or farm products, livestock, crops, gain, timber, equipment used in farming operations and/or accounts or general intangibles resulting from the sale thereof. The opinions as expressed herein are subject to the following qualifications: (a) the enforceability of the Loan Documents and the obligations of the Loan Parties thereunder and the availability of certain rights and remedial provisions provided for in the Loan Documents are subject to the effect of bankruptcy, fraudulent conveyance or transfer, insolvency, reorganization, liquidation, conservatorship, and moratorium laws and are subject to limitations imposed by other laws and judicial decisions relating to or affecting the rights of creditors or secured creditors generally, and general principles of equity (regardless of whether enforcement is considered in proceedings at law or in equity) upon the availability of injunctive relief or other equitable remedies; (b) as to our opinions set forth in paragraph 2 hereof, we express no opinion as to the enforceability of cumulative remedies to the extent such cumulative remedies purport to or would have the effect of compensating the party entitled to the benefits thereof in amounts in excess of the actual loss suffered by such party; June 13, 1997 Page 7 (c) we express no opinion as to any Collateral as to which the creation and perfection of security interests therein are not governed solely by the New York UCC or any Collateral consisting of goods that are or may become fixtures on any premises, nor do we express any opinion with respect to the creation, perfection or enforceability of security interests in property in which it is illegal or violative of governmental rules or regulations to grant a security interest, or any security interest in any "accounts," "chattel paper," "documents," "instruments" or "general intangibles" (as defined in the New York UCC) with respect to which the account debtor or obligor is the United States of America, any state, county, city, municipality or other governmental body, or any department, agency or instrumentality thereof, unless the same has been assigned to the Collateral Agent to the extent required by the Assignment of Claims Act of 1940, as amended, or any similar law or regulation relating to the assignment or pledge thereof; (d) we express no opinion as to the perfection of a security interest in any Collateral consisting of "proceeds" (as such term is defined in the New York UCC) to the extent such perfection is limited as set forth in Section 9-306 of the New York UCC and note that, under certain circumstances described in Sections 9-307 and 9-308 of the New York UCC, purchasers of Collateral may take the same free of a perfected security interest; (e) we have not made nor undertaken to make any investigation of the state of title to the Collateral or the location thereof and we express no opinion as to the priority of the liens, security interests or pledges granted or purported to be granted by the Loan Documents; (f) any purported assignment of any agreement or any governmental approval, license or permit may be subject to restrictions upon assignment or transfer which, although not necessarily applicable to assignments intended as security, may be required to be satisfied before the Collateral Agent will be treated as an assignee (other than a collateral assignee) thereof, except to the extent that consents to or approvals of such assignment have been obtained from the appropriate governmental body or third party; (g) the rights of debtors, guarantors and other secured parties to receive notices under Section 9-504 and 9-505 of the New York UCC may not be waived prior to default and the failure to comply with such notice requirements may bar or limit the recovery of any deficiency remaining after the retention or sale of repossessed collateral and further, we express no opinion as to the right of the Collateral Agent to enforce any of its rights without notice to the relevant Loan Party and without judicial hearing or without bond, nor do we express any opinion as to whether the periods of notice set forth in the Loan Documents are enforceable; June 13, 1997 Page 8 (h) certain provisions of the Loan Documents regarding the application of proceeds realized from the sale of Collateral do not make reference (although they do not have to in order to enable the Collateral Agent to exercise the rights and remedies of a secured party under the New York UCC) to the Collateral Agent's obligations to satisfy indebtedness due to the holders of subordinate security interests in such collateral under certain conditions under Section 9-504(l)(c) of the New York UCC or to account to Loan Party involved for any surplus proceeds; (i) notwithstanding certain language of the Loan Documents, the Collateral Agent may be limited to recovering only reasonable expenses with respect to the retaking, holding, preparing for sale or lease, selling, leasing and the like of Collateral and reasonable attorneys' fees and legal expenses and only reasonable compensation for funding losses, increased costs or yield protection; (j) the duties to exercise reasonable care in the custody and preservation of Collateral in a secured party's possession, to deal with and to dispose of Collateral in a commercially reasonable manner as required by the Code or other applicable law may not be disclaimed by agreement, modified, waived or released prior to a default; (k) we express no opinion with respect to the validity, binding effect or enforceability of any provision of the Loan Documents which purports to authorize the Collateral Agent to sign or file financing statements or other documents without the signature of the relevant Loan Party (except to the extent a secured party may execute and file financing statements without the signature of the debtor under Section 9-402(2) of the New York UCC); (l) we express no opinion with respect to the validity, binding effect or enforceability of any purported waiver, release or disclaimer under any of the Loan Documents relating to (i) statutory or equitable rights and defenses of the Loan Parties which are not subject to waiver, release or disclaimer, or (ii) rights or claims of, or duties owing to, the Loan Parties (including, without limitation, any waiver, release or disclaimer of any provision of the New York UCC) to the extent limited by Sections 1-102(3), 9-207 and 9-501(3) of the New York UCC or other provisions of applicable law, or to the extent such rights, claims and duties otherwise exist as a matter of law except to the extent the Loan Party has effectively so waived, released or disclaimed such rights, claims or duties in accordance with Section 9-501 of the New York UCC or other applicable law; (m) we express no opinion as to the Collateral Agent's ability to use "self-help" remedies to repossess the Collateral if a breach of the peace were to occur; June 13, 1997 Page 9 (n) certain other rights, remedies and waivers contained in the Loan Documents may be rendered ineffective, or limited by, applicable laws, rules, regulations, constitutional requirements or judicial decisions governing such provisions, but such laws, rules, regulations, constitutional limitations and judicial decisions do not, in our opinion, make the Loan Documents inadequate for the practical realization of the benefits and/or security provided by such Loan Documents, although they may result in a delay thereof (and we express no opinion with respect to the economic consequences of any such delay); (o) we express no opinion with respect to the applicability or effect of federal or state anti-trust, securities or "blue sky" laws with respect to the transactions contemplated by the Loan Documents; (p) we express no opinion with respect to the validity, binding effect or enforceability of any provision of the Loan Documents purporting to eliminate any obligation to marshall assets; and (q) we express no opinion with respect to any provisions of the Loan Documents purporting to appoint the Collateral Agent as attorney-in-fact or agent for any Loan Party. The opinions expressed herein are based upon and are limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the laws of the United States of America and we express no opinion with respect to the laws of any other state or jurisdiction. Our opinions set forth in this letter are based upon the facts in existence and laws in effect on the date hereof and we expressly disclaim any obligation to update our opinions herein, regardless of whether changes in such facts or laws come to our attention after the delivery hereof. This opinion is solely for the benefit of the addressees hereof (and each other entity that hereafter becomes a Lender under the Credit Agreement). This opinion may not be relied upon in any manner by any other person and may not be quoted or filed with a governmental agency without our prior written consent. Very truly yours, SCHEDULE I UCC-1 FILING JURISDICTIONS Name of Entity Filing Locations - -------------- ---------------- Precise Technology, Inc. Delaware Secretary of State New Castle County, DE Florida Secretary of State Pinellas County, FL Illinois Secretary of State Cook County, IL Massachusetts Secretary of Commonwealth Town of Grafton, MA Missouri Secretary of State Clay County, MO Pennsylvania Secretary of Commonwealth Allegheny County (PA) Prothonotary Centre County (PA) Prothonotary Indiana Secretary of State Tippecanoe County, IN New York Secretary of State New York County, NY Precise TMP, Inc. Florida Secretary of State Pinellas County, FL Massachusetts Secretary of Commonwealth Worcester District, MA Town of Grafton, MA Northbridge (MA) Town Clerk Clay County, MO Clay County Recorder, MO Missouri Secretary of State Precise Technology of Delaware, Inc. Delaware Secretary of State New Castle County, DE Precise Technology of Illinois, Inc. Delaware Secretary of State New Castle County, DE Illinois Secretary of State Cook County, IL Precise Polestar, Inc. Pennsylvania Secretary of the Commonwealth Centre County (PA) Prothonotary Virginia Secretary of State City of Richmond, VA Massie Tool, Mold & Die, Inc. Florida Secretary of State Pinellas County, FL Precise Holding Corporation New York Secretary of State New York County, NY Delaware Secretary of State New Castle County, DE EXHIBIT H EXECUTION COPY ================================================================================ PRECISE TECHNOLOGY, INC. 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007 ------------------------ INDENTURE Dated as of June 13, 1997 ------------------------ ------------------------ Marine Midland Bank Trustee ------------------------ ================================================================================ TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE................... 1 Section 1.01. Definitions.................................................. 1 Section 1.02. Other Definitions............................................ 18 Section 1.03. Incorporation By Reference of Trust Indenture Act............ 18 Section 1.04. Rules of Construction........................................ 19 Section 1.05. Compliance Certificates and Opinions......................... 19 ARTICLE 2 THE NOTES.................................................... 21 Section 2.01. Form and Dating.............................................. 21 Section 2.02. Execution and Authentication................................. 22 Section 2.03. Registrar and Paying Agent................................... 23 Section 2.04. Paying Agent to Hold Money in Trust.......................... 23 Section 2.05. Holder Lists................................................. 24 Section 2.06. Transfer and Exchange........................................ 24 Section 2.07. Replacement Notes............................................ 36 Section 2.08. Outstanding Notes............................................ 36 Section 2.09. Treasury Notes............................................... 36 Section 2.10. Temporary Notes.............................................. 36 Section 2.11. Cancellation................................................. 37 Section 2.12. Defaulted Interest........................................... 37 ARTICLE 3 REDEMPTION AND PREPAYMENT.................................... 38 Section 3.01. Applicability of Article..................................... 38 Section 3.02. Election to Redeem; Notice to Trustee........................ 38 Section 3.03. Selection by Trustee of Notes to Be Redeemed................. 38 Section 3.04. Notice of Redemption......................................... 38 Section 3.05. Deposit of Redemption Price.................................. 39 Section 3.06. Notes Payable on Redemption Date............................. 39 Section 3.07. Notes Redeemed in Part....................................... 39 Section 3.08. Optional Redemption.......................................... 40 Section 3.09. Mandatory Redemption......................................... 40 Section 3.10. Offer to Purchase by Application of Excess Proceeds.......... 40 ARTICLE 4 COVENANTS.................................................... 42 Section 4.01. Payment of Principal, Premium and Interest................... 42 Section 4.02. Maintenance of Office or Agency.............................. 43 Section 4.03. Money for Security Payments to Be Held In Trust.............. 43 Section 4.04. Reports...................................................... 44 Section 4.05. Statement as to Compliance; Notice of Default. .............. 45 Section 4.06. Payment of Taxes and Other Claims............................ 46 Section 4.07. Limitation on Liens.......................................... 46 Section 4.08. Corporate Existence.......................................... 46 Section 4.09. Offer to Repurchase Upon Change of Control................... 46 Section 4.10. Asset Sales.................................................. 48 i Section 4.11. Limitation on Restricted Payments............................ 49 Section 4.12. Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock.............................. 51 Section 4.13. Transactions with Affiliates................................. 53 Section 4.14. Dividend and Other Payment Restrictions Affecting Subsidiaries....................................... 54 Section 4.15. Limitation on Issuances and Sales of Capital Stock of Wholly Owned Restricted Subsidiaries...................... 55 Section 4.16. Limitation on Layering Debt.................................. 55 Section 4.17. Additional Subsidiary Guarantees............................. 55 Section 4.18. Payments For Consent......................................... 56 ARTICLE 5 SUCCESSORS................................................... 56 Section 5.01. Merger, Consolidation, or Sale of All or Substantially All Assets..................................... 56 Section 5.02. Successor Corporation Substituted............................ 57 ARTICLE 6 DEFAULTS AND REMEDIES........................................ 57 Section 6.01. Events of Default and Notice Thereof......................... 57 Section 6.02. Acceleration of Maturity; Rescission......................... 58 Section 6.03. Other Remedies............................................... 59 Section 6.04. Waiver of Past Defaults...................................... 59 Section 6.05. Control by Majority.......................................... 59 Section 6.06. Limitation on Suits.......................................... 60 Section 6.07. Rights of Holders of Notes to Receive Payment................ 60 Section 6.08. Collection Suit by Trustee................................... 60 Section 6.09. Trustee May File Proofs of Claim............................. 60 Section 6.10. Priorities................................................... 61 Section 6.11. Undertaking for Costs........................................ 61 Section 6.12. Waiver of Stay, Extension of Usury Laws...................... 61 ARTICLE 7 TRUSTEE...................................................... 62 Section 7.01. Duties of Trustee............................................ 62 Section 7.02. Rights of Trustee............................................ 63 Section 7.03. Individual Rights of Trustee................................. 63 Section 7.04. Trustee's Disclaimer......................................... 64 Section 7.05. Notice of Defaults........................................... 64 Section 7.06. Reports by Trustee to Holders of the Notes................... 64 Section 7.07. Compensation and Indemnity................................... 64 Section 7.08. Replacement of Trustee....................................... 65 Section 7.09. Successor Trustee by Merger, etc............................. 66 Section 7.10. Eligibility; Disqualification................................ 66 Section 7.11. Preferential Collection of Claims Against the Company........ 66 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE..................... 67 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance..... 67 Section 8.02. Legal Defeasance and Discharge............................... 67 Section 8.03. Covenant Defeasance.......................................... 67 Section 8.04. Conditions to Legal Defeasance or Covenant Defeasance........ 68 Section 8.05. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions................ 69 ii Section 8.06. Reinstatement................................................ 70 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER............................. 70 Section 9.01. Without Consent of Holders of Notes.......................... 70 Section 9.02. With Consent of Holders of Notes............................. 71 Section 9.03. Compliance with TIA.......................................... 72 Section 9.04. Revocation and Effect of Consents............................ 72 Section 9.05. Notation on or Exchange of Notes............................. 72 Section 9.06. Trustee to Sign Amendments, etc.............................. 72 ARTICLE 10 SUBORDINATION................................................ 73 Section 10.01.Agreement to Subordinate..................................... 73 Section 10.02.Liquidation; Dissolution; Bankruptcy......................... 73 Section 10.03.Default on Designated Senior Debt............................ 73 Section 10.04.Acceleration of Securities................................... 74 Section 10.05.When Distribution Must Be Paid Over.......................... 74 Section 10.06.Notice by Company............................................ 75 Section 10.07.Subrogation.................................................. 75 Section 10.08.Relative Rights.............................................. 75 Section 10.09.Subordination May Not Be Impaired by Company................. 76 Section 10.10.Distribution or Notice to Representative..................... 76 Section 10.11.Rights of Trustee and Paying Agent........................... 76 Section 10.12.Authorization to Effect Subordination........................ 76 ARTICLE 11 SATISFACTION AND DISCHARGE................................... 77 Section 11.01.Satisfaction and Discharge of Indenture...................... 77 Section 11.02.Application of Trust Money.................................. 77 ARTICLE 12 SUBSIDIARY GUARANTEES........................................ 78 Section 12.01.Subsidiary Guarantee......................................... 78 Section 12.02.Execution and Delivery of Guarantee.......................... 79 Section 12.03.Guarantors May Consolidate, etc., on Certain Terms........... 79 Section 12.04.Releases From Guarantees..................................... 80 Section 12.05.Limitation on Guarantor Liability............................ 80 Section 12.06.Subordination of Subsidiary Guarantees....................... 81 ARTICLE 13 MISCELLANEOUS................................................ 81 Section 13.01.Conflict of Any Provision of Indenture with TIA.............. 81 Section 13.02.Notices...................................................... 81 Section 13.03.Communication by Holders of Notes with Other Holders of Notes............................................. 82 Section 13.04.Certificate and Opinion as to Conditions Precedent........... 82 Section 13.05.Legal Holidays............................................... 83 Section 13.06.No Personal Liability of Directors, Officers, Employees and Stockholders................................... 83 Section 13.07.Governing Law; Submission to Jurisdiction.................... 83 Section 13.08.No Adverse Interpretation of Other Agreements................ 83 Section 13.09.Successors and Assigns....................................... 84 Section 13.10.Severability................................................. 84 iii Section 13.11.Counterpart Originals........................................ 84 Section 13.12.Table of Contents, Headings, etc............................. 84 iv EXHIBITS Exhibit A-1 Form of Restricted Definitive Note, Regulation S Permanent Global Note and Rule 144A Global Note Exhibit A-2 Form of Regulation S Temporary Global Note Exhibit A-3 Form of Unrestricted Note Exhibit B Form of Certificate of Transfer Exhibit C Form of Certificate of Exchange Exhibit D Form of Certificate from Acquiring Institutional Accredited Investor Exhibit E Form of Subsidiary Guarantee Schedule I Schedule of Existing Indebtedness v CROSS-REFERENCE TABLE* Trust Indenture Indenture Section Act Section 310(a)(1)...................................................7.10 (a)(2)...................................................7.10 (a)(3)...................................................N.A. (a)(4)...................................................N.A. (a)(5)...................................................7.10 (b)......................................................7.10 (c)......................................................N.A. 311(a)......................................................7.11 (b)......................................................7.11 (c)......................................................N.A. 312(a)......................................................11.03 (b)......................................................11.03 (c)......................................................11.03 313(a)......................................................7.06 (b)(1)...................................................N.A. (b)(2)...................................................7.06; 7.07 (c)......................................................7.06; 10.02 (d)......................................................7.06 314(a)......................................................4.04; 11.02 (b)......................................................N.A. (c)(1)...................................................11.04 (c)(2)...................................................11.04 (c)(3)...................................................N.A. (d)......................................................N.A. (f)......................................................N.A. 315(a)......................................................7.01 (b)......................................................7.05; 11.02 (c)......................................................7.01 (d)......................................................7.01 (e)......................................................6.11 316(a)(last sentence).......................................2.09 (a)(1)(A)................................................6.05 (a)(1)(B)................................................6.04 (a)(2)...................................................N.A. (b)......................................................6.07 317(a)(1)...................................................6.08 (a)(2)...................................................6.09 (b)......................................................2.04 318(a)......................................................11.01 (b)......................................................N.A. (c)......................................................11.01 N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. vi INDENTURE dated as of June 13, 1997 among Precise Technology, Inc., a Delaware corporation (the "Company"), Precise TMP, Inc., a Virginia corporation ("Precise TMP"), Massie Tool, Mold & Die, Inc., a Florida corporation ("Massie"), Precise Polestar, Inc., a Virginia corporation ("Precise Polestar"), Precise Technology of Delaware Inc., a Delaware corporation ("Precise Delaware"), and Precise Technology of Illinois Inc., a Delaware corporation ("Precise Illinois") (each of Precise TMP, Massie, Precise Polestar, Precise Delaware and Precise Illinois a "Guarantor", and together with certain future Subsidiaries of the Company as set forth herein, the "Guarantors") and Marine Midland Bank, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 11 1/8% Senior Subordinated Notes due 2007 (the "Notes"). ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01.DEFINITIONS. "Accredited Investor" has the meaning set forth in Rule 501(a) (1), (2), (3) or (7) of the Securities Act. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness or preferred stock of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness or preferred stock incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "Agent Members" means members of, or participants in, the Depository. "Applicable Procedures" means applicable procedures of the Depository, Euroclear or Cedel Bank, as the case may be. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of Section 4.09 and/or the provisions of Section 5.01 and not by the provisions of Section 4.10), and (ii) the issuance of Equity Interests in any Restricted Subsidiary or the sale of Equity Interests in any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of assets or Equity Interests by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (iii) the disposal of obsolete equipment and machinery in the ordinary course of business and (iv) a Restricted Payment that is permitted to be made, and is made, under Section 4.11 will not be deemed to be Asset Sales. "Bankruptcy Law" means Title 11, U.S. Code or any similar foreign, federal or state law for the relief of debtors. "Board of Directors" means the board of directors of the Company or any duly authorized committee of such board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Borrowing Base" means, as of any date, an amount equal to the sum of (a) 85% of the face amount of all trade receivables owned by the Company and its Restricted Subsidiaries as of such date that are not more than 90 days past due, less the allowance for doubtful accounts, each of the foregoing determined in accordance with GAAP, and (b) 50% of the book value of all inventory owned by the Company and its Restricted Subsidiaries as of such date, less any applicable reserves, each of the foregoing determined in accordance with GAAP. To the extent that information is not available as to the amount of trade receivables or inventory as of a specific date, the Company may utilize the most recent available information for purposes of calculating the Borrowing Base. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York are authorized or obligated by law, regulation or executive order to close. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 2 "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper rated at least P-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Ratings Services and in each case maturing within six months after the date of acquisition and (vi) investment funds with total assets in excess of $500 million that invest at least 95% of their assets in securities of the types described in clauses (i) through (v) above. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is defined in Section 13(d)(3) of the Exchange Act) other than the Principals or their Related Parties; (ii) the adoption of a plan relating to the liquidation or dissolution of the Company; (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares); or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Code" means the Internal Revenue Code of 1986, as amended, or any successor thereto. "Company" means Precise Technology, Inc., a Delaware corporation, and any successor thereto pursuant to Section 5.01 hereof. "Company Request" or "Company Order" means a written request or order signed in the name of the Company (i) by its Chairman, a Vice Chairman, its President or a Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. 3 "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary, non-recurring or unusual loss plus any net loss realized in connection with an asset sale (to the extent such losses were deducted or otherwise excluded in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, plus (v) an amount equal to all premiums on prepayments of debt, minus (vi) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof that is a Guarantor and, for purposes of determining Consolidated Cash Flow only, shall not exceed the consolidated net income of such Person for such period, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (iv) the cumulative effect of a change in accounting principles shall be excluded and (v) the Net Income of any Person that is an Unrestricted Subsidiary shall be included only to the extent of the amount of cash dividends or cash distributions paid to such Person or a Restricted Subsidiary thereof. 4 "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of this Indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Restricted Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of this Indenture or (ii) was nominated by the Principals or any Related Party to serve on such Board of Directors. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means that certain Credit Agreement, dated as of June 13, 1997, by and among Parent, the Company and the Subsidiaries of the Company named therein, the lenders named therein and Fleet National Bank, as Agent and as issuing bank, providing for up to $30.0 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified (including any agreement extending the maturity of, increasing the total commitment under or otherwise restructuring all or any portion of the Indebtedness under such agreement or any successor or replacement agreement), renewed, refunded, replaced, restated, supplemented or refinanced from time to time. "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Definitive Notes" means Restricted Definitive Notes and Unrestricted Definitive Notes. "Depository" means, with respect to any Global Note, the Person specified in Section 2.03 hereof as the Depository with respect to such Note, until a successor shall have been appointed and become such pursuant to the applicable provision of this Indenture, and, thereafter, "Depository" shall mean or include such successor. "Designated Senior Debt" means (i) any Indebtedness outstanding under the Credit Agreement and (ii) any other Senior Debt, the principal amount of which is $5.0 million or more and that has been designated by a Board Resolution as "Designated Senior Debt." 5 "Disqualified Stock" means any Capital Stock 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 or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "Exchange Offer" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange Notes (as defined in the Registration Rights Agreement) for New Notes. "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Existing Indebtedness" means up to $6.8 million in aggregate principal amount of Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the date hereof and set forth on Schedule I hereto (including any refinancings thereof), until such amounts are permanently repaid. "Fixed Charges" means, with respect to any Person and its Restricted Subsidiaries for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) all dividend payments (including all dividend payments within 60 days of the measurement date for any period), whether or not in cash, on any series of (A) Disqualified Stock of such Person and (B) preferred stock of any Subsidiary of such Person, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company and other than payments to such Person and its Restricted Subsidiaries, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means with respect to any Person and its Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the 6 "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, and the application of the net proceeds thereof, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Global Note" means, individually and collectively, the Regulation S Global Note, the Rule 144A Global Note and the Unrestricted Global Note. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii). "Government Securities" means securities that are (a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantors" means each of (i) the Company's Subsidiaries listed in the preamble to this Indenture and future Restricted Subsidiaries (having either assets or stockholder's equity in excess of $50,000) and 7 (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, currency rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency values. "Holder" means a Person in whose name a Note is registered. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (but only to the extent of the fair market value of the assets subject to such Lien) (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time. "Initial Purchasers" means Bear, Stearns & Co. Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. "Interest Payment Date" means each June 15 and December 15, whether or not such day is a Business Day. "interest" means all interest payable with respect to the Notes, including, without limitation Special Interest. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including Guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; provided, however, that if the sole consideration for any such investment is Capital Stock of the Company or a Subsidiary that is not Disqualified Stock, then such investment shall not be deemed an Investment for purposes of this Indenture. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company 8 shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.11. "Issuance Date" means the closing date for the sale and original issuance of the Notes under this Indenture. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" has the meaning set forth in the Registration Rights Agreement. "Make-Whole Premium" means, with respect to a Note, an amount equal to the greater of (i) 5.563% of the outstanding principal amount of such Note and (ii) the excess of (a) the present value of the remaining interest, premium and principal payments due on such Note as if such Note were redeemed on June 15, 2002, computed using a discount rate equal to the Treasury Rate plus 75 basis points, over (b) the outstanding principal amount of such Note. "Management Agreement" means the agreement, dated as of March 15, 1996, between the Company and Mentmore, as amended from time to time. "Maturity" when used in respect to any Note means the date on which the principal of (and premium, if any) and interest on such Note becomes due and payable as therein or herein provided, whether at Stated Maturity or the applicable Redemption Date and whether by declaration of acceleration, call for redemption or otherwise. "Mentmore" means Mentmore Holdings Corporation, a Delaware corporation, or its successors. "Moody's" means Moody's Investors Service, Inc., or its successors. "Net Income" means, with respect to any Person for any period, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any asset sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). 9 "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale, any provision for permitted minority interests in any Restricted Subsidiary as a result of such Asset Sale and any reserve established in accordance with GAAP against any liabilities associated with the assets sold or disposed of in such Asset Sale, including, without limitation, sales price adjustments, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with the assets sold or disposed of in such Asset Sale or provision for minority interest holders in any Restricted Subsidiary as a result of such Asset Sale. "New Notes" has the meaning set forth in the Registration Rights Agreement. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries in excess of $5.0 million to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Notes" means $75,000,000 aggregate principal amount of the Company's 111/8% Senior Subordinated Notes due 2007 issued pursuant to the Offering Memorandum and any other 111/8% Senior Subordinated Notes due 2007 hereafter issued in compliance with the provisions of this Indenture (including Section 4.12). "Note Custodian" means the custodian for the Depository of the Global Notes, or any successor entity thereto. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering Memorandum" means that certain offering memorandum with respect to the Notes, dated June 10, 1997. "Officer" means the Chairman of the Board, the President, any Vice President, the Secretary or any Assistant Secretary of the Company or any Guarantor, as applicable. "Officers' Certificate" means a certificate signed on behalf of the Company or any Guarantor, as applicable, by two Officers of the Company or any Guarantor, as applicable, one of whom must be the 10 principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company or any Guarantor, as applicable, that meets the requirements set forth in Section 1.05. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company or any Guarantor, as applicable, and who shall be acceptable to the Trustee. Each such opinion shall include the statements provided for in TIA Section 314(e) to the extent applicable. "Parent" means Precise Holding Corporation, a Delaware corporation, or its successors. "Permitted Investments" means (a) any Investment in the Company or in a Wholly Owned Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the Company and a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the Company; (d) any Restricted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) reasonable and customary loans and advances made to employees in connection with their relocation (including related travel expenses) not to exceed $250,000 in the aggregate at any one time outstanding; (g) any Investment existing on the date of this Indenture; (i) any Investment acquired by the Company or any of its Restricted Subsidiaries (x) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such Investment or accounts receivable or (y) as the result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; and (j) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (j) that are at the time outstanding, not to exceed $5.0 million. "Permitted Junior Securities" means Equity Interests in the Company or debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Debt. "Permitted Liens" means (i) Liens securing Senior Debt that was permitted by the terms of this Indenture to be incurred; (ii) Liens in favor of the Company or any Restricted Subsidiary; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (v) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iii) of the second paragraph of Section 4.12 covering only the assets acquired with such Indebtedness; (vi) Liens existing on the date hereof; (vii) Liens for taxes, assessments or governmental charges or claims that 11 are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (viii) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries; (ix) statutory Liens or landlords', carriers', warehousemens', mechanics', suppliers' or similar Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company; (x) easements, minor title defects, irregularities in title or other charges or encumbrances on property not interfering in any material respect with the use of such property by the Company or a Subsidiary of the Company; (xi) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (xii) liens securing industrial revenue bonds or other tax-favored financing; (xiii) deposit arrangements entered into in connection with acquisitions or in the ordinary course of business; (xiv) other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $5.0 million at any one time outstanding; and (xv) any extensions, substitutions, replacements or renewals of the foregoing. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, other Indebtedness of the Company or any of its Restricted Subsidiaries; provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses and prepayment premiums incurred in connection therewith) (except to the extent such increase is a result of a simultaneous incurrence of additional Indebtedness permitted to be incurred under this Indenture); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Permitted Warrant Put Payment" means any payment or distribution (whether in cash or securities of the Company) made after March 29, 2001 and in accordance with the following sentence, by the Company or any of its Restricted Subsidiaries to Parent in order to enable Parent to satisfy Parent's obligations under the Warrant Agreement and/or the Shareholders Agreement to repurchase the Put Shares (as defined in the Warrant Agreement) or to repay indebtedness incurred by Parent to satisfy such obligations. If, after giving pro forma effect to any Permitted Warrant Put Payment by the Company, the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such Permitted Warrant Put Payment is made is (i) greater than 2.50 to 1 and less than 2.75 to 1, then the Company will be permitted to make a Permitted Warrant Put Payment in an amount not to exceed $5.0 million, (ii) greater than or equal to 2.75 to 1 and less than 3.00 to 1, then the Company will be permitted to make a Permitted Warrant Put Payment in an amount not to exceed $10.0 million and (iii) greater than or equal to 3.00 to 12 1, then the Company will be permitted to make a Permitted Warrant Put Payment in an amount not to exceed $15.0 million. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "preferred stock" means any Equity Interest with preferential right of payment of dividends or upon liquidation, dissolution, or winding up. "Principals" means Richard L. Kramer and/or William L. Remley. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i)(A) to be placed on all Notes issued under this Indenture except as permitted pursuant to Section 2.06(g)(i)(B). "Public Equity Offering" means a bona fide underwritten sale to the public of common stock of Parent or the Company pursuant to a registration statement (other than on Form S-8 or any other form relating to securities issuable under any benefit plan of Parent or the Company) that is declared effective by the SEC and results in aggregate gross equity proceeds to the Company of at least $20.0 million. "Redemption Date," when used with respect to any Note to be redeemed, means the date fixed for such redemption pursuant to this Indenture. "Redemption Price," when used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of June 13, 1997, by and among the Company, Precise TMP, Massie, Precise Polestar, Precise Delaware, Precise Illinois and the Initial Purchasers, as such agreement may be amended, modified or supplemented from time to time. "Regular Record Date" for the interest payable on any Interest Payment Date means the June 1 or December 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "Regulation S Permanent Global Note" means a permanent global Note substantially in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depository or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. 13 "Regulation S Temporary Global Note" means a temporary global Note substantially in the form of Exhibit A-2 hereto bearing the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depository or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Related Parties" with respect to any Principal means (A) any spouse or immediate family member of such Principal and any child or spouse of any spouse or immediate family member of such Principal, (B) a trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding, directly or indirectly, a controlling interest of which consist of any of such Principal and/or such other Persons referred to in the immediately preceding clause (A) or (C) the trustees of any trust referred to in clause (B). "Repurchase Offer" means an offer made by the Company to purchase all or any portion of a Holder's Notes pursuant to the provisions described under Sections 4.09 or 4.10. "Responsible Officer," when used with respect to the Trustee, means any officer in the Corporate Trust Office of the Trustee with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Restricted Definitive Notes" means Notes that are substantially in the form of the Notes attached hereto as Exhibit A-1, that do not include the information called for by footnotes 1 and 2 thereof. "Restricted Global Notes" means the Regulation S Global Notes and the Rule 144A Global Notes. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Period" means the 40-day restricted period as defined in Regulation S. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 144A Global Note" means a permanent global note that contains the paragraph referred to in footnote 1 and the additional schedule referred to in footnote 2 to the form of the Note attached hereto as Exhibit A-1, and that is deposited with the Note Custodian and registered in the name of the Depository, representing Notes sold to Accredited Investors or in reliance on Rule 144A, as applicable. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "S&P" means Standard and Poor's Ratings Services, or its successors. 14 "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Senior Debt" of any Person means (i) all Indebtedness of such Person under the Credit Agreement, including, without limitation, obligations to pay principal and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law), reimbursement obligations under letters of credit, fees, expenses and indemnities, and all Hedging Obligations with respect thereto, whether outstanding on the date of this Indenture or hereafter incurred, (ii) the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other Obligations with respect to, any other Indebtedness of such Person permitted to be incurred by such Person under the terms of this Indenture, whether outstanding on the date of this Indenture or hereafter incurred, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes and (iii) all Obligations of such Person with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (w) any liability for federal, state, local or other taxes owed or owing by such Person, (x) any Indebtedness of such Person to any of its Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of this Indenture. "Shareholders Agreement" means the shareholders agreement, dated as of March 29, 1996, as amended, among Parent, Sunderland, Hamilton Holdings Ltd. Corporation, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., Rice Partners II, L.P. and John Hancock Mutual Life Insurance Company, with respect to certain securities of Parent. "Shelf Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary which would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issuance Date. "Special Record Date" means a date fixed by the Trustee for the payment of any Defaulted Interest pursuant to Section 2.12. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subordinated Note Obligations" means any principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes payable pursuant to the terms of the Notes or upon acceleration, redemption, repurchase or other acquisition thereof, together with and including any amounts received 15 upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise, to the extent relating to the purchase price of the Notes or amounts corresponding to such principal, premium, if any, or interest and Liquidated Damages, if any, on the Notes. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Subsidiary Guarantee" means any guarantee of the obligations of the Company pursuant to Section 12 of this Indenture and the Notes by any Person in accordance with the provisions of this Indenture. "Sunderland" means Sunderland Industrial Holdings Corporation, a Delaware corporation, or its successors. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, then "TIA" means, to the extent required by such amendment, the Trust Indenture Act of 1939 as so amended. "Treasury Rate" means the yield to maturity at the time of the computation of United States Treasury securities with a constant maturity (as compiled by and published in the most recent Federal Reserve Statistical Release H.15(519)), which has become publicly available at least two Business Days prior to the date fixed for prepayment (or, if such Statistical Release is no longer published, any publicly available source of similar market data) most nearly equal to the then remaining average life to the first date on which the Notes are subject to optional redemption by the Company; provided, however, that if the average life of such Note is not equal to the constant maturity of the United States Treasury security for which weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the average life of the Notes is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trustee" means the party named as such above unless and until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means such successor. "Unrestricted Definitive Note" means Notes that are substantially in the form of the Notes attached hereto as Exhibit A-3 that do not include the information called for by footnotes 1 and 2 thereof. "Unrestricted Global Note" means a permanent global Note that contains the paragraph referred to in footnote 1 and the additional schedule referred to in footnote 2 to the form of the Note attached hereto as Exhibit A-3, and that is deposited with the Note Custodian and registered in the name of the Depository. 16 "Unrestricted Notes" means the Unrestricted Global Notes and the Unrestricted Definitive Notes. "Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 4.11. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.12, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.12, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Warrant Agreement" means the warrant agreement, dated as of March 29, 1996, as amended, among Parent, Rice Partners II, L.P., John Hancock Mutual Life Insurance Company, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc. and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., with respect to certain warrants of Parent. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person 100% of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) 17 shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02 OTHER DEFINITIONS. Term Defined in Section "Act"................................................ 1.07 "Affiliate Transaction".............................. 4.13 "Asset Sale Offer"................................... 3.10 "Cedel Bank"......................................... 2.01 "Change of Control Offer"............................. 4.09 "Change of Control Payment"........................... 4.09 "Change of Control Payment Date"...................... 4.09 "Covenant Defeasance"................................ 8.03 "Defaulted Interest".................................. 2.12 "DTC"................................................ 2.03 "Euroclear".......................................... 2.01 "Event of Default"................................... 6.01 "Excess Proceeds"..................................... 4.10 "Incur"............................................... 4.12 "Legal Defeasance".................................... 8.02 "Offer Amount"........................................ 3.10 "Offer Period"........................................ 3.10 "Paying Agent"........................................ 2.03 "Payment Blockage Notice"............................. 10.03 "Payment Default".................................... 6.01 "Permitted Debt"...................................... 4.12 "Purchase Date"....................................... 3.10 "QIB"................................................ 2.01 "Registrar".......................................... 2.03 "Restricted Payments"................................ 4.11 "Rule 144 A Global Notes"............................ 2.01 "Successor Company".................................. 5.01 SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: 18 "indenture securities" means the Notes and the Subsidiary Guarantees; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the Notes means the Company, each Guarantor and any successor obligors upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. SECTION 1.05. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion (other than the certificates required by Section 4.05(a)) with respect to compliance with a condition or covenant provided for in this Indenture shall comply with the provisions of TIA 314(e) and shall include: 19 (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (a) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (b) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (c) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 1.06 FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representation with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 1.07. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any 20 purpose of this Indenture and (subject to TIA Section 315) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any reasonable manner that the Trustee deems sufficient. (c) The ownership of Notes shall be proved by a register kept by the Registrar. (d) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of such Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act or to revoke any consent previously given, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), any such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not more than 30 days prior to the first solicitation of Holders generally in connection therewith and no later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act or revocation of any consent previously given may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Notes then outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Notes then outstanding shall be computed as of such record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other Act by the Holders on such recorded date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act by the Holder of any Note shall bind every future Holder of the same Note or the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note. ARTICLE 2 THE NOTES SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibits A-1, A-2 and A-3 attached hereto. The Subsidiary Guarantees shall be substantially in the form of Exhibit E, the terms of which are incorporated in and made part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage, as designated by the Company or its counsel. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof (subject to a minimum initial purchase requirement of $100,000 for Notes sold on original issuance by the Company to Accredited Investors other than in reliance on Rule 144A or Regulation S). 21 The Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of a Rule 144A Global Note. Notes offered and sold to Accredited Investors in transactions exempt from registration under the Securities Act not made in reliance on Rule 144A or Regulation S shall be issued initially in the form of a separate Rule 144A Global Note. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Note Custodian, at its New York office, as custodian for the Depository, and registered in the name of the Depository or the nominee of the Depository for the accounts of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depository or the Note Custodian, together with copies of certificates from Euroclear and Cedel Bank certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note, and (ii) an Officers' Certificate from the Company to the effect set forth in Section 13.04(a) hereof. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. Notes issued in global form shall be substantially in the form of Exhibits A-1, A-2 or A-3 attached hereto (including the Global Note Legend and the "Schedule of Exchanges in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A-1 or A-3 attached hereto (but without the Global Note Legend and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by the Agent Members through Euroclear or Cedel Bank. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. 22 The Trustee shall, upon a written order of the Company signed by two Officers, authenticate Notes for original issue in the aggregate principal amount of up to $200,000,000 in one or more series. The aggregate principal amount of Notes outstanding at any time may not exceed $200,000,000 except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depository with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest on the Notes, and will notify the Trustee of any default by the Company or any Guarantor in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company or any Guarantor, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company and/or the Guarantors shall furnish to the Trustee at least 23 seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company and/or the Guarantors shall otherwise comply with TIA ss. 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository, by a nominee of the Depository to the Depository or to another nominee of the Depository, or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depository that it is unwilling or unable to continue to act as Depository or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depository is not appointed by the Company within 120 days after the date of such notice from the Depository or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates certified in an Officers' Certificate to be required pursuant to Rule 903 under the Securities Act. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depository shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a); however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depository, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer described in the Private Placement Legend to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period transfers of beneficial interests in the Temporary Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred only to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). 24 (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests in a Global Note (other than a transfer of a beneficial interest in a Global Note to a Person who takes delivery thereof in the form of a beneficial interest in the same Global Note), the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from an Agent Member to the Depository in accordance with the Applicable Procedures directing the Depository to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Agent Member account to be credited with such increase or (B) (1) a written order from an Agent Member given to the Depository in accordance with the Applicable Procedures directing the Depository to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depository to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the registration of transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the registration of transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates certified in an Officers' Certificate to be required pursuant to Rule 903 under the Securities Act. Upon an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for registration of transfer or exchange of beneficial interests in Global Notes contained in this Indenture, the Notes and otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of clause (ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of clause (ii) above and: 25 (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Notes issues in the Exchange Offer or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Restricted Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. (v) Transfer and Exchange of Beneficial Interests in the Unrestricted Global Note for Beneficial Interests in a Restricted Global Note. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to, Persons who take delivery thereof in the form of a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests in Global Notes for Definitive Notes. (i) If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial 26 interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person (as defined in Regulation S of the Securities Act) in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Restricted Definitive Note in the appropriate principal amount. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depository and the Agent Member. The Trustee shall deliver such Restricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. 27 (ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be (A) exchanged for a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(B) under the Securities Act or (B) transferred to a Person who takes delivery thereof in the form of a Definiti ve Note prior to the conditions set forth in clause (A) above or unless the transfer is pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Notwithstanding 2.06(c)(i) hereof, a holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Notes issued in the Exchange Offer or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Restricted Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. (iv) If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note or to transfer such beneficial 28 interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Unrestricted Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depository and the Agent Member. The Trustee shall deliver such Unrestricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend. A beneficial interest in an Unrestricted Global Note cannot be exchanged for a Restricted Definitive Note or transferred to a Person who takes delivery thereof in the form of a Restricted Definitive Note. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests in Global Notes. (i) If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; or (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note. (ii) A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an 29 exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Notes issued in the Exchange Offer or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Restricted Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Restricted Definitive Notes are being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Restricted Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Unrestricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or registration of transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate 30 principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, pursuant to the provisions of this Section 2.06(e). (i) Restricted Definitive Notes may be transferred to and registered in the name of Persons who take delivery thereof if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Notes issued in the Exchange Offer or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Restricted Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: 31 (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Restricted Definitive Note is being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. (iii) A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. Unrestricted Definitive Notes cannot be exchanged for or transferred to Persons who take delivery thereof in the form of a Restricted Definitive Note. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letter of Transmittal that they are not (x) Broker-Dealers, (y) Persons participating in the distribution of the Notes issued in the Exchange Offer or (z) Persons who are Affiliates (as defined in Rule 144) of the Company and accepted for exchange in the Exchange Offer and (ii) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrent with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: 32 "THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF THE ISSUER SO REQUESTS, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS." (B) Notwithstanding the foregoing, any Unrestricted Global Note or Unrestricted Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), 33 (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS NOTE." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note, by the Trustee or by the Depository at the direction of the Trustee, to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note, by the Trustee or by the Depository at the direction of the Trustee, to reflect such increase. 34 (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of a Company Order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.07, 4.09, 4.10 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. 35 SECTION 2.07. REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee, or the Company and the Trustee and the Company receive evidence to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement Note if the Trustee's and the Company's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by an Affiliate of the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee has been informed of by the Company as being so owned shall be so disregarded. SECTION 2.10. TEMPORARY NOTES. Until permanent Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon a written order of the Company signed by two Officers of the Company. Temporary Notes shall be substantially in the form of permanent Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the 36 Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Note is registered at the close of business on the Regular Record Date for such interest. Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date and interest on such defaulted interest at the applicable interest rate borne by the Notes, to the extent lawful (such defaulted interest (and interest thereon) herein collectively called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder; and such Defaulted Interest shall be paid by the Company to the Persons in whose names the Notes are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall give the Trustee at least 15 days' written notice (unless a shorter period is acceptable to the Trustee for its convenience) of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held by the Trustee in trust for the benefit of the Persons entitled to such Defaulted Interest as in this subsection provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall not be more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date. In the name and at the expense of the Company, the Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Registrar, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Notes are registered at the close of business on such Special Record Date. 37 Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.01. APPLICABILITY OF ARTICLE. Redemption of Notes at the election of the Company shall be made in accordance with this Article 3. SECTION 3.02. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem any Notes pursuant to Section 3.08 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 45 but not more than 60 days prior to the Redemption Date fixed by it (unless a shorter notice period shall be satisfactory to the Trustee for its convenience), notify the Trustee of such Redemption Date and of the principal amount of Notes to be redeemed. SECTION 3.03. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed, or, if such Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. The Trustee shall promptly notify the Company and the Registrar in writing of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is to be redeemed. SECTION 3.04. NOTICE OF REDEMPTION. Notices of redemption shall be mailed by first class mail, postage prepaid, at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder's registered address. If any Note is to be redeemed in part only, any notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. All notices of redemption shall state: (a) the Redemption Date; 38 (b) the Redemption Price; (c) if less than all Notes then outstanding are to be redeemed, the identification (and, in the case of a Note to be redeemed in part, the principal amount) of the particular Notes to be redeemed; (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Note or portion thereof, and that (unless the Company shall default in payment of the Redemption Price) interest thereon shall cease to accrue on or after said date; (e) the places or places where such Notes are to be surrendered for payment of the Redemption Price; (f) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (g) the CUSIP number, if any, relating to such Notes, and (h) in the case of a Note to be redeemed in part, the principal amount of such Note to be redeemed and that after the Redemption Date upon surrender of such Note, a new Note or Notes in the aggregate principal amount equal to the unredeemed portion thereof will be issued. Notice of redemption of Notes to be redeemed at the election of the Company shall be given by the Company or, at its request, by the Trustee in the name and at the expense of the Company. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its owning Paying Agent, segregate and hold in trust as provided in Section 4.03) an amount of money in same day funds (or New York Clearing House funds if such deposit is made prior to the applicable Redemption Date) sufficient to pay the Redemption Price of, and accrued interest on, all the Notes or portions thereof which are to be redeemed on that date. SECTION 3.06. NOTES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Notes shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Company at the Redemption Price together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall by payable to the Holders of such Notes, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 2.12. If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Redemption Date at the rate borne by such Note. 39 SECTION 3.07. NOTES REDEEMED IN PART. Any Note which is to be redeemed only in part shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 4.02 (with, if the Company, the Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Registrar or the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and a new Note in principal amount equal to the unpurchased or unredeemed portion will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the purchase or redemption date, unless the Company defaults in payment of the purchase or redemption price, interest shall cease to accrue on Notes or portions thereof purchased or called for redemption. SECTION 3.08. OPTIONAL REDEMPTION. (a) Except as described in this Section 3.08, the Notes will not be redeemable at the Company's option prior to June 15, 2002. On and after June 15, 2002, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' written notice, at the Redemption Prices (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on June 15 of each of the years indicated below: REDEMPTION YEAR PRICE - ---- ---------- 2002........................................................... 105.563% 2003........................................................... 103.708% 2004........................................................... 101.854% 2005 and thereafter............................................ 100.000% In addition, at any time prior to June 15, 2000, the Company may on any one or more occasions redeem up to 33 1/3% of the aggregate principal amount of Notes originally issued (including, for this purpose, one or more series of Notes issued under this Indenture after the date hereof) at a Redemption Price of 111.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the Redemption Date, with the net cash proceeds of one or more Public Equity Offerings; provided that at least 66 2/3% of the Notes originally issued (including, for this purpose, one or more series of Notes issued under this Indenture after the date hereof) remain outstanding immediately after the occurrence of such redemption and provided, further, that such redemption occurs within 60 days of the date of the closing of such Public Equity Offering. In addition, at any time prior to June 15, 2002, the Company may, at its option, redeem the Notes, in whole or in part, at a Redemption Price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium. (b) Any redemption pursuant to this Section 3.08 shall be made pursuant to the provisions of Sections 3.01 through 3.07 hereof. SECTION 3.09. MANDATORY REDEMPTION. 40 Except as set forth under Sections 3.10, 4.09 and 4.10 hereof, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. SECTION 3.10 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. If the Purchase Date is on or after a Regular Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such Regular Record Date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.10 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice not later than the third Business Day preceding the end of the Offer Period; (f) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the Business Day preceding the end of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth 41 the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (g) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (h) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before 12:00 p.m. (New York City time) on each Purchase Date, the Company shall, irrevocably deposit with the Trustee or Paying Agent in immediately available funds the aggregate purchase price with respect to a principal amount of Notes equal to the Offer Amount, together with accrued and unpaid interest thereon to the Purchase Date, to be held for payment in accordance with the terms of this Section 3.10. On the Purchase Date, the Company shall, to the extent lawful, (i) accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, (ii) deliver or clause the Paying Agent or depositary, as the case may be, to deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an Officer's Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.10. The Company, the Depository or the Paying Agent, as the case may be, shall promptly (but in any case not later than three Business Days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, plus any accrued and unpaid interest, thereon to the Purchase Date, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company, shall authenticate and mail or deliver such new Note to such Holder, equal in principal amount to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall send a notice to each Holder a stating the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.10, any purchase pursuant to this Section 3.10 shall be made pursuant to the provisions of Sections 3.01 through 3.07 hereof. ARTICLE 4 COVENANTS SECTION 4.01 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately 42 available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain, in The City of New York, an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Notes may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation; provided, however, that no such designation or recession shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or recession and any change in the location of any such office or agency. SECTION 4.03. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of, premium, if any, or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for the Notes, it will, on or before each due date of the principal of, premium, if any, or interest on any Notes, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) sufficient to pay the principal, premium, if any, or interest so becoming due (or at the option of the Company, payment of interest may be mailed by check to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments with respect to Global Notes and Definitive Notes, the holders of which have given wire transfer instructions to the Company shall receive such payments of interest by wire transfer in same day funds) such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of su ch action or any failure so to act. 43 The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal, premium, if any, or interest; (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and (d) acknowledge, accept and agree to comply in all respects with the provisions of this Indenture relating to the duties, rights and obligations of such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Company on Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, shall at the expense of the Company cause notice to be promptly sent to each Holder that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 4.04. REPORTS. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of 44 the Unrestricted Subsidiaries of the Company) and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports; provided, however, that the Company shall not be required to make any such filings on or prior to the date on which the Company's quarterly report on Form 10-Q for the fiscal quarter ended June 30, 1997 would have been required to be filed if, at the time such filings would have been required to be made with the SEC, either (i) the Company shall have provided to each Holder the information that would have been required to be filed or (ii) the Exchange Offer Registration Statement has been filed with the SEC but has not yet been declared effective and copies of the Exchange Offer Registration Statement and any amendments thereto (to the extent such registration statement and/or amendments contain additional information not disclosed in the Offering Memorandum that would have been the subject of a filing required to be made under Section 13 or 15(d) of the Exchange Act) have been provided to each Holder, provided that any exhibits to the Exchange Offer Registration Statement (or any amendments thereto) need not be delivered to any Holder of the Notes, but sufficient copies thereto shall be furnished to the Trustee as reasonably requested to permit the Trustee to deliver any such exhibits to any Holder upon request. In addition, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information and reports with the SEC for public availability (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company and the Guarantors shall, for so long as any Notes remain outstanding, furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.05. STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT. (a) The Company and each Guarantor shall deliver to the Trustee, within 90 days after the end of each fiscal year ending after the date hereof, a brief certificate of its principal executive officer, principal financial officer or principal accounting officer stating whether, to such officer's knowledge, the Company and such Guarantor is in compliance with all covenants and conditions to be complied with by it under this Indenture (including with respect to any Restricted Payments made during such year, the basis upon which the calculations required by this Section 4.05 were computed, which calculations may be based on the Company's latest financial statements), and further stating, as to each Officer signing such certificate, that to the best of his or her knowledge each entity is not in default in the performance or observance of any terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. For purposes of this Section 4.05, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual reports delivered pursuant to Section 4.04 above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, 45 specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. In the event that, after the Company has used its best efforts to obtain the written statement of the Company's independent public accountants required by the provisions of this paragraph, such statement cannot be obtained, the Company shall deliver, in satisfaction of its obligations under this Section 4.05(b), an Officers' Certificate (A) certifying that it has used its best efforts to obtain such required statement but was unable to do so and (B) attaching the written statement of the Company's accountants that the Company received in lieu thereof. (c) The Company shall, within five Business Days, upon becoming aware of any Default or Event of Default or any default under any document, instrument or agreement representing Indebtedness of the Company or any Guarantor, deliver to the Trustee an Officer's Certificate specifying such Default or Event of Default. SECTION 4.06. PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or property of the Company or any of its Subsidiaries and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, might by law become a Lien upon the property of the Company or any of its Subsidiaries that could produce a material adverse effect on the consolidated financial condition of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and in respect of which appropriate reserves (in the good faith judgment of management of the Company) are being maintained in accordance with GAAP. SECTION 4.07. LIMITATION ON LIENS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness or trade payables on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. SECTION 4.08. CORPORATE EXISTENCE. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. 46 SECTION 4.09. OFFER TO REPURCHASE UPON CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, the Company shall make an offer to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Notes pursuant to the offer described below (the "Change of Control Offer") at a price in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. (b) Within 30 days following any Change of Control, the Company shall mail a notice to each Holder of Notes issued under this Indenture, with a copy to the Trustee, with the following statements and/or information: (1) a Change of Control Offer is being made pursuant to this Section 4.09 and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment; (2) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed, except as may be otherwise required by applicable law (the "Change of Control Payment Date"); (3) any Note not properly tendered will remain outstanding and continue to accrue interest; (4) unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date; (5) Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent and at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) Holders will be entitled to withdraw their tendered Notes and their election to require the Company to purchase such Notes, provided that the Paying Agent receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing his tendered Notes and his election to have such Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. 47 (c) Prior to complying with the provisions of this Section 4.09, but in any event within 30 days following a Change of Control, the Company shall either repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all such other Senior Debt and to repay the Indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer or obtain the requisite consents under the Credit Agreement and all such other Senior Debt to permit the repurchase of the Notes. (d) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described in this Indenture by virtue thereof. (e) On the Change of Control Payment Date, the Company shall, to the extent permitted by law, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officers' Certificate stating that the aggregate principal amount of Notes or portions thereof have been tendered to and purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (f) Notwithstanding the foregoing, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.09 applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. (g) The Change of Control provisions described in this Section 4.09 will be applicable whether or not any other provisions of this Indenture are applicable. SECTION 4.10. ASSET SALES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a Board Resolution and as set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash; provided that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or 48 any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability and (y) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to permanently reduce (or, in the case of letters of credit or Eurodollar loans under the Credit Agreement, cash collateralize) any Senior Debt (and to correspondingly reduce commitments with respect thereto in the case of revolving borrowings), or (b) to the acquisition of a controlling interest in another business, the making of a capital expenditure or the acquisition of other long-term assets, in each case, in the same line of business as the Company was engaged in on the date of this Indenture. Pending the final application of any such Net Proceeds, the Company may invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph shall be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall, within ten Business Days thereafter, be required to make an Asset Sale Offer to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase, in accordance with the procedures set forth in this Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof. SECTION 4.11. LIMITATION ON RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or dividends or distributions payable to the Company or any Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company or other Affiliate of the Company (other than any such Equity Interests owned by the Company 49 or any Wholly Owned Subsidiary of the Company); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes more than six months prior to any scheduled maturity, mandatory redemption, scheduled principal repayment or sinking fund payment date (other than regularly scheduled payments of interest); or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default would have occurred and be continuing or would occur as a consequence thereof; and (b) the Company shall, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.12 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (v), (vii) and (viii) of the next succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of this Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company from the issue or sale since the date of this Indenture of Equity Interests of the Company (other than Disqualified Stock) or of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) (but only to the extent not included in subclause (i) of this clause (c)), and (B) the initial amount of such Restricted Investment, plus (iv) $5.0 million. The foregoing provisions shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of scheduled dividends on or the redemption, repurchase, retirement, defeasance or other acquisition of, any Disqualified Stock issued after 50 the date hereof in compliance with the provisions of this Indenture; (v) after March 29, 2001, the Permitted Warrant Put Payment; (vi) payments made with respect to the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company, the Parent, Sunderland or any Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries'), Parent's or Sunderland's management pursuant to any management equity subscription agreement or stock option agreement in effect as of the date of this Indenture (provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in any twelve-month period); (vii) distributions to Parent in order to enable Parent to pay franchise taxes and other ordinary course operating expenses in an amount not to exceed $25,000 in any twelve-month period; and (viii) the application of the proceeds of the offering of the Notes pursuant to the Offering Memorandum in the manner contemplated in the section of the Offering Memorandum titled "Use of Proceeds"; provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (i) through (vii) no Default or Event of Default shall have occurred and be continuing. In addition, payments and transactions permitted pursuant to clauses (s) through (y) under Section 4.13 hereof shall not be deemed to be Restricted Payments. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted Payments at the time of such designation and shall reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments shall be deemed to constitute Investments in an amount equal to the greatest of (x) the net book value of such Investments at the time of such designation and (y) the fair market value of such Investments at the time of such designation. Such designation shall only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.11 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. SECTION 4.12. LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company shall not issue any Disqualified Stock and shall not permit any of its Subsidiaries to issue any shares of preferred stock (other than to the Company or a Restricted Subsidiary of the Company); provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if: (i) the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date 51 on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period; and (ii) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to, such incurrence or issuance. The provisions of the first paragraph of this Section 4.12 shall not apply to the incurrence of any of the following items of Indebtedness or the issuance of preferred stock or Disqualified Stock (collectively, "Permitted Debt"): (i) the incurrence by the Company and its Subsidiaries of Indebtedness arising under or in connection with the Credit Agreement; provided that the aggregate principal amount of all Indebtedness (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) outstanding under the Credit Agreement after giving effect to such incurrence, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (i), does not exceed an amount equal to the greater of $50.0 million or $30.0 million plus the Borrowing Base, in each case less the aggregate amount of all Indebtedness permanently repaid with the Net Proceeds of any Asset Sale; (ii) the incurrence by the Company and its Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount not to exceed the principal amount of such Capital Lease Obligations outstanding on the date hereof plus $15.0 million at any time outstanding; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Acquired Debt in connection with the acquisition of assets or a new Restricted Subsidiary; provided that such Acquired Debt was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by the Company or one of its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, such acquisition by the Company or one of its Restricted Subsidiaries; and provided further that the aggregate principal amount, accreted value or liquidation preference, as applicable, of such Acquired Debt, together with any other outstanding Indebtedness or preferred stock incurred pursuant to this clause (iv), does not exceed $5.0 million; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness that was permitted by this Indenture to be incurred; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned 52 Restricted Subsidiaries; provided, however, that (A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly Owned Restricted Subsidiary and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Restricted Subsidiary (other than any pledge of such Indebtedness to the lenders under the Credit Agreement) shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be; (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding, provided that the notional principal amount of any Hedging Obligations does not significantly exceed the principal amount of Indebtedness to which such agreement relates, or for the purpose of hedging against fluctuations in currency values; (viii) the Guarantee by the Company or any of the Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this covenant; (ix) the issuance by the Company's Unrestricted Subsidiaries of preferred stock or the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company; (x) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness represented by the $75,000,000 aggregate principal amount of Notes issued pursuant to the Offering Memorandum and the Subsidiary Guarantees and any Notes issued pursuant to Section 2.07 hereof; and (xi) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) or the issuance of preferred stock with an aggregate liquidation preference at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (xi), not to exceed $10.0 million. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xi) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify or reclassify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness shall be treated as having been incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness shall not be deemed to be an incurrence of Indebtedness for purposes of this covenant. SECTION 4.13 TRANSACTIONS WITH AFFILIATES. 53 The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a Board Resolution and an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; provided that (r) the application of the proceeds of the offering of the Notes pursuant to the Offering Memorandum and the transactions entered into in connection therewith in the manner contemplated in the section of the Offering Memorandum titled "Use of Proceeds", (s) capital contributions, advances, loans or other investments made by Parent to the Company or any of its Restricted Subsidiaries, (t) (I) payments under the Management Agreement in an amount not to exceed $300,000 in any twelve-month period and (II) after the first anniversary of the original issuance of the Notes, additional payments under the Management Agreement in an amount not to exceed $700,000 in any twelve-month period, provided that the Company's Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such payment under the Management Agreement is made, after giving pro forma effect to such payment, is equal to or greater than 2.25 to 1 (in each case, plus reasonable expenses incurred in connection with and reimbursable under the Management Agreement), (u) payments by the Company or any of its Restricted Subsidiaries to Mentmore and/or its Affiliates made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures, which payments are approved by a majority of the Board of Directors of the Company in good faith, (v) payments under tax sharing agreements to the extent such payments do not otherwise exceed the tax liability the Company would have had were it not part of a consolidated group, (w) any employment agreement, compensation agreement or employee benefit arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business, (x) transactions between or among Parent, the Company and/or its Restricted Subsidiaries, (y) any other payment or reimbursement of reasonable and customary fees and expenses incurred by an Affiliate for services rendered to the Company or any of its Subsidiaries not to exceed $100,000 in any twelve-month period (without duplication for any amounts paid pursuant to any other clause of this covenant) and (z) Restricted Payments that are permitted under Section 4.11 hereof, in each case, shall not be deemed Affiliate Transactions. SECTION 4.14 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any Indebtedness owed to the Company 54 or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the date of this Indenture, (b) the Credit Agreement as in effect as of the date of this Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive on a whole with respect to such dividend and other payment restrictions than those contained in the Credit Agreement as in effect on the date of this Indenture, (c) this Indenture and the Notes, (d) applicable law, (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person (including any Subsidiary of the Person), so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, (f) by reason of customary non-assignment and net worth provisions in leases or other agreements entered into in the ordinary course of business and consistent with past practices, (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, (i) customary restrictions in Capital Lease Obligations, security agreements or mortgages securing Indebtedness of the Company or a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such Capital Lease Obligations, security agreements or mortgages, (j) customary restrictions with respect to an agreement that has been entered into for the sale or disposition of assets or Capital Stock held by the Company or any Restricted Subsidiary, (k) customary restrictions contained in any agreements or documentation governing Indebtedness or preferred stock issued pursuant to clause (xi) of Section 4.12 hereof and (l) the Warrant Agreement and the Shareholders Agreement. SECTION 4.15. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED RESTRICTED SUBSIDIARIES. The Company (i) shall not, and shall not permit any Wholly Owned Restricted Subsidiary of the Company to, issue, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly Owned Restricted Subsidiary of the Company to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company), unless (a) such issuance, transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of such Wholly Owned Restricted Subsidiary and (b) the Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 4.10 hereof and (ii) shall not permit any Wholly Owned Restricted Subsidiary of the Company to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or a Wholly Owned Restricted Subsidiary of the Company. SECTION 4.16. LIMITATION ON LAYERING DEBT. 55 The Company shall not, incur, create, issue, assume, Guarantee or otherwise become liable for any Indebtedness that is by its terms subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes and the Guarantors shall not incur, create, issue, assume, Guarantee or otherwise become liable for any Indebtedness that is by its terms subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Subsidiary Guarantees. SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any of its Subsidiaries shall acquire or create another Subsidiary after the date hereof, then such newly acquired or created Subsidiary (at any time such Subsidiary has net assets or stock holder's equity in excess of $50,000) shall execute a Subsidiary Guarantee and deliver an Opinion of Counsel, in accordance with the terms of this Indenture; provided, however, that all Subsidiaries that have been properly designated as Unrestricted Subsidiaries in accordance with this Indenture shall not be subject to the preceding clause for so long as they continue to constitute Unrestricted Subsidiaries. SECTION 4.18. PAYMENTS FOR CONSENT. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. ARTICLE 5 SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. The Company shall not consolidate or merge with or into or wind up into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person unless: (i) the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia, (the Company or such Person, as the case may be, being herein called the "Successor Company"); (ii) the Successor Company (if other than the Company) assumes all the obligations of the Company under this Indenture and the Notes pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; 56 (iv) except in the case of a merger of the Company with or into a Wholly Owned Subsidiary of the Company, the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) shall have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) shall, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.12 hereof; and (v) the Company has delivered to the Trustee an Officers' Certificate stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Senior Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT AND NOTICE THEREOF. Each of the following constitutes an "Event of Default": (a) default for 30 days or more in the payment when due of interest on, or Liquidated Damages, if any, with respect to the Notes (whether or not prohibited by Article 10 hereof); (b) default in payment when due (whether payable at maturity, upon redemption or otherwise) of the principal of or premium, if any, on the Notes (whether or not prohibited by Article 10 hereof); (c) failure by the Company to comply with Sections 4.09, 4.10 and 5.01 hereof; 57 (d) failure by the Company for 30 days after receipt of written notice to comply with any of its other agreements in this Indenture or the Notes; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, which default (1) is caused by the failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") at its stated final maturity (after giving effect to any applicable grace periods) or (2) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (f) failure by the Company or any of its Restricted Subsidiaries to pay final and non-appealable judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (g) the Company or any Restricted Subsidiary that is a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability generally to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Restricted Subsidiary that is a Significant Subsidiary in an involuntary case in which it is the debtor, (ii) appoints a Custodian of the Company or any Restricted Subsidiary that is a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary that is a Significant Subsidiary; or (iii) orders the liquidation of the Company or any Restricted Subsidiary that is a Significant Subsidiary, 58 and the order or decree contemplated in clauses (i), (ii) or (iii) of this clause (h), remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid and such judgment has become final or non-appealable or shall cease for any other reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor shall deny or disaffirm its obligations under its Subsidiary Guarantee. A Default under Section 6.01(d) is not an Event of Default until the Trustee notifies the Company, or any Holder notifies the Company and the Trustee, of the Default and the Company does not cure the Default within 30 days after receipt of the notice. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." SECTION 6.02. ACCELERATION OF MATURITY; RESCISSION. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company and the Trustee; provided that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any such Indebtedness under the Credit Agreement or (ii) five Business Days after receipt by the Company and the Agent of written notice of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default specified in clause (g) or (h) of Section 6.01 occurring with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce this Indenture or the Notes except as provided in this Indenture. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. 59 Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on, any such Note held by a non-consenting Holder; provided, however, that the Holders of at least a majority in aggregate principal amount of the Notes then outstanding may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. The Trustee may take any other action which it deems proper which is not inconsistent with any such direction. SECTION 6.06. LIMITATION ON SUITS. No Holder of a Note will have any right to institute any proceeding with respect to this Indenture or for any remedy hereunder, unless (i) such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to the Notes, (ii) the Holders of at least 25% in aggregate principal amount of the Notes then outstanding shall have made written request to the Trustee to institute such proceeding and, if requested by the Trustee, provided reasonable indemnity to the Trustee, with respect to such proceeding and (iii) the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the Notes then outstanding a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on any Note, on or after the respective due dates expressed in any Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company or any Guarantor for the whole amount of principal of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee under Section 7.07 hereof. 60 SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, as administrative expenses associated with any such proceeding and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to holders of Senior Debt of the Company and the Guarantors to the extent required by Article 10 hereof or any Subsidiary Guarantee; Third: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and, if any, and interest, respectively; Fourth: without duplication, to the Holders for any other Obligations owing to the Holders under this Indenture and the Notes; and Fifth: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. 61 SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. SECTION 6.12. WAIVER OF STAY, EXTENSION OF USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (1) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, provided that the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: 62 (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture unless the Holders shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or documents, but the Trustee, in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company or any Guaranteeing Subsidiary, personally or by agent or attorney. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. 63 (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company or any Guarantor shall be sufficient if signed by an Officer of the Company or such Guarantor. A permissive right granted to the Trustee hereunder shall not be deemed an obligation to act. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be charged with knowledge of any Default or Event of Default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge of such Default or Event of Default or (ii) written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any Holder. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the direction of the Company under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief 64 report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA ss. 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA ss. 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee, from time to time as may be agreed upon between them, reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses (other than taxes based on the income of the Trustee) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extent applicable. 65 SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof, (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business (including the trust created by this Indenture) to, another corporation, the successor corporation without any further act shall be the successor Trustee. 66 SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has, or is a wholly owned subsidiary of a bank holding company that has, a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at its option by Board Resolution, at any time, with respect to the Notes, elect to have either Section 8.02 hereof or Section 8.03 hereof be applied to all Notes and Subsidiary Guarantees then outstanding upon compliance with the conditions set forth in this Article 8. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.02, the Company and the Guarantors, if any, shall be deemed to have been discharged from their respective obligations with respect to all Notes and Subsidiary Guarantees then outstanding on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such defeasance means that the Company and any Guarantor shall be deemed to have paid and discharged the entire indebtedness represented by the Notes and any Subsidiary Guarantees outstanding, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 and the other Sections of this Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under such Notes, Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Notes then outstanding to receive solely from the trust fund described in Section 8.04 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any), interest and Liquidated Damages, if any, on such Notes when such payments are due, or on the Redemption Date, as the case may be, (B) the Company's obligations with respect to such Notes under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 4.02 and 4.03, (C) the rights, powers, trusts, duties, indemnities and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (D) this Article 8. Subject to compliance with this 67 Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 with respect to the Notes. SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.03, the Company and each Guarantor shall be released from its obligations under the covenants contained in Article 5 and in Sections 4.04, 4.06, 4.07, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17 and 4.18 with respect to the outstanding Notes and Subsidiary Guarantees, if any, on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes and the Subsidiary Guarantees, if any, shall thereafter be deemed to be not "outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes and Subsidiary Guarantees, if any, shall not be deemed outstanding for financial accounting purposes). For this purpose, such covenant defeasance means that, with respect to the outstanding Notes and Subsidiary Guarantees, if any, the Company and any Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01(c) or Section 6.01(d), but, except as specified above, the remainder of this Indenture and such Notes and Subsidiary Guarantees, if any, shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 of the option applicable to Section 8.03, Sections 6.01(c) through 6.01(f) and Section 6.01(i) shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions to application of either Section 8.02 or Section 8.03 to the outstanding Notes and Subsidiary Guarantees: (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes and without retaining any legal interest in the corpus of such trust, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages, if any, due on the outstanding Notes on the Stated Maturity thereof or on the applicable Redemption Date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, (A) the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel in the United States shall confirm that, subject to customary assumptions and exclusions, the Holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal 68 income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or, insofar as Events of Default set forth in Sections 6.01(g) and (h), at any time in the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be satisfied until the expiration of such period); (v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions (which assumptions and exclusions shall not relate to the operation of Section 547 of the United States Bankruptcy Code or any analogous laws of the state governing the provisions of this Indenture) following the deposit the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally under any applicable U.S. federal or state law, and that the Trustee has a perfected security interest in such trust funds for the ratable benefit of the Holders; (vii) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; (viii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with; and (ix) the Trustee shall have received such other documents and assurances as the Trustee shall reasonably require. SECTION 8.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last paragraph of Section 4.03, all money and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, 69 collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 in respect of the Notes then outstanding shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or Government Securities deposited pursuant to Section 8.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Notes then outstanding. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government Securities held by it as provided in Section 8.04 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(i)), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or Government Securities in accordance with Section 8.02 or 8.03, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and any Guarantor's obligations under this Indenture, the Notes and the Subsidiary Guarantees, if any, shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03, as the case may be; provided, however, that if the Company or any Guarantor makes any payment of principal of (or premium, if any) or interest on any Note following the reinstatement of its obligations, the Company or any Guarantor shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or Notes, and with respect to a Subsidiary Guarantee, the Guarantor under such Subsidiary Guarantee and the Trustee may amend or supplement such Subsidiary Guarantee, without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; 70 (c) to comply with Article 5 hereof; (d) to provide for the assumption of the Company's or any Guarantor's obligations to the Holders of the Notes; (e) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any such Holder; (f) to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Company; (g) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; or (h) to add a Guarantor under this Indenture. Upon the written request of the Company accompanied by resolutions of the Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel in compliance with Section 1.05 hereof, the Trustee shall join with the Company and the Guarantors, if any, in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, this Indenture, the Notes and a Subsidiary Guarantee issued hereunder may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to Sections 6.02, 6.04 and 6.07 hereof, any existing default or compliance with any provision of this Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by resolutions of the Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel in compliance with Section 1.05 hereof, the Trustee shall join with the Company and any Guarantor in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. 71 The consent of the Holders is not necessary under this Section 9.02 to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture, the Notes or the Subsidiary Guarantees, if any. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Note or Subsidiary Guarantee held by a non-consenting Holder): (i) reduce the principal amount of the Notes whose Holders must consent to an amendment, supplement or waiver; (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described under Sections 4.09 and 4.10); (iii) reduce the rate of or change the time for payment of interest on any Note; (iv) waive a Default or Event of Default in the payment of principal of, premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of such Notes and a waiver of the payment default that resulted from such acceleration); (v) make any Note payable in money other than that stated in such Notes; (vi) make any change in Section 6.04 or 6.07; (vii) waive a redemption payment with respect to any Note (other than a payment required by Section 4.09 or Section 4.10); (viii) make any change in Article 10 or the subordination provisions of any Subsidiary Guarantee that would adversely affect the legal rights of the Holders of the Notes; or (ix) make any change in the foregoing amendment and waiver provisions of this Article 9. SECTION 9.03. COMPLIANCE WITH TIA. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. 72 Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may, but shall not be required to, place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In signing or refusing to sign any amended or supplemental indenture the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company and the Guarantors, if any, in accordance with its terms. ARTICLE 10 SUBORDINATION SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and each Holder by accepting a Note agrees, that the payment (by set-off or otherwise) of principal of, premium, if any and interest and Liquidated Damages, if any, on the Notes (including with respect to any repurchases of the Notes) shall be subordinated in right of payment, as set forth in this Article 10, to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents of all obligations in respect of Senior Debt, whether outstanding on the date hereof or thereafter incurred. SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company upon any total or partial liquidation, dissolution or winding up of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, whether voluntary or involuntary, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities, the holders of Senior 73 Debt will be entitled to receive payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents, of all Obligations due or to become due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before the Holders of Notes will be entitled to receive any payment of any kind or character with respect to the Notes, and until all Obligations with respect to Senior Debt are paid in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents, any distribution of any kind or character to which the Holders of Notes would be entitled shall be made to the holders of Senior Debt (except that Holders of Notes may receive Permitted Junior Securities and payments made from the trust described in Article 8 hereof). SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT. The Company shall not make, directly or indirectly, (x) any payment upon or in respect of the Notes (except in Permitted Junior Securities or from the trust described in Article 8 hereof) or (y) acquire any of the Notes for cash or property or otherwise or make any other distribution with respect to the Notes if: (i) any default occurs and is continuing (beyond any applicable grace period) in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Designated Senior Debt or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice" ) from the Company or the holders of any Designated Senior Debt. The Company may and shall resume payments on the Notes: (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No new period of payment blockage may be commenced unless and until (i) 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium, if any, and interest and Liquidated Damages, if any, on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such nonpayment default shall have been waived for a period of not less than 90 days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of delivery of any Payment Blockage Notice which, in either case, would give rise to a default pursuant to any provision under which a default previously existed or was continuing shall constitute a new default for this purpose). 74 SECTION 10.04. ACCELERATION OF SECURITIES. If the Company fails to make any payment on the Notes when due or within any applicable grace period, whether or not on account of the payment blockage provision referred to above, such failure shall constitute an Event of Default and shall entitle the holders of the Notes to accelerate the maturity thereof. The Company shall promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default. SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives any payment of any Subordinated Note Obligations at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 10.02 or 10.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. In the event that any Holder receives any payment or payments pursuant to this Indenture and the amount or total amount of such payment or payments exceeds the amount, if any, that such Holder would be entitled to receive upon the proper application of the subordination provisions of this Article 10, the payment of such excess amount shall be deemed null and void, and the Holder agrees that it will be obliged to return the amount of the excess payment to the Company, as instructed in a written notice of such excess payment, within ten days of receiving such notice. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. SECTION 10.06. NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Subordinated Note Obligations to violate this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article 10. SECTION 10.07. SUBROGATION. 75 After all Senior Debt is paid in full and until the Notes are paid in full in cash, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Senior Debt. SECTION 10.08. RELATIVE RIGHTS. This Article 10 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture shall: (1) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of, premium, if any, and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. If the Company fails because of this Article 10 to pay principal of, premium, if any, or interest on a Note on the due date, the failure is nevertheless a Default or an Event of Default. SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. 76 SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Subordinated Note Obligations to violate this Article 10. Only the Company or a representative may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, a representative of Designated Senior Debt is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. ARTICLE 11 SATISFACTION AND DISCHARGE SECTION 11.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall be discharged and will cease to be of further effect as to all Notes issued hereunder, when either (a) all such Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b) (i) all such Notes not theretofore delivered to such Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or a Guarantor, if any, has irrevocably deposited or caused to be deposited with such Trustee as trust funds in trust an amount of money sufficient to pay and discharge the entire Indebtedness on such Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption; 77 (ii) no Default or Event of Default with respect to this Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or a Guarantor, if any, is a party or by which the Company or a Guarantor, if any, is bound; (iii) the Company or a Guarantor, if any, has paid or caused to be paid all sums payable by it under this Indenture; and (iv) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of such Notes at maturity or the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. SECTION 11.02. APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 4.03, all money deposited with the Trustee pursuant to Section 11.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. If the Trustee or Paying Agent is unable to apply any money in accordance with Section 11.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though such deposit had occurred pursuant to Section 11.01; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 12 SUBSIDIARY GUARANTEES SECTION 12.01. SUBSIDIARY GUARANTEE. Each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the Obligations of the Company hereunder or thereunder, that: (a) the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, whether at maturity, by 78 acceleration, redemption or otherwise, and interest on overdue principal, premium, if any, and (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company or any Guarantor, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or any Guarantor, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6, such obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purpose of this Subsidiary Guarantee. Notwithstanding the foregoing, in the event that any Subsidiary Guarantee hereunder would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of a Guarantor under such Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. SECTION 12.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE. To evidence its Subsidiary Guarantee set forth in Section 12.01, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of Exhibit E shall be endorsed by an officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President or one of its Vice Presidents. Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 12.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 79 If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors. SECTION 12.03 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Subject to Section 12.04, no Guarantor may consolidate or merge with or into (whether or not such Guarantor is the surviving Person) another Person unless: (a) such Guarantor is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia and expressly assumes all the Obligations of such Guarantor pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes and this Indenture; (b) immediately after giving effect to such transaction no Default or Event of Default exists; (c) the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction (on a pro forma basis), to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.12 hereof; and (d) the Guarantor has delivered to the Trustee an Officers' Certificate stating that such consolidation or merger and such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. In case of any such consolidation or merger and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5, nothing contained in this Indenture shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. SECTION 12.04 RELEASES FROM SUBSIDIARY GUARANTEES. 80 In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or disposition of all of the Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all of the assets of such Guarantor) shall be released and relieved of its obligations under its Subsidiary Guarantee or Section 12.03, as the case may be; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are applied in accordance with the provisions of Section 4.10. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in this Article 12. SECTION 12.05. LIMITATION ON GUARANTOR LIABILITY. For purposes hereof, each Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and this Indenture and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the United States Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or (B) left such Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into; provided that, it will be a presumption in any lawsuit or other proceeding in which a Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of the Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the Guarantor is the amount set forth in clause (ii) above. In making any determination as to solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantor to contribution from other Guarantors, and any other rights such Guarantor may have, contractual or otherwise, shall be taken into account. SECTION 12.06. SUBORDINATION OF SUBSIDIARY GUARANTEES. The obligations of each Guarantor under its Subsidiary Guarantee pursuant to this Article 12 shall be junior and subordinated to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents of all obligations in respect of Senior Debt of such Guarantor, whether outstanding on the date hereof or thereafter incurred (including amounts for which the Guarantors will be liable for under the Subsidiary Guarantees issued from time to time with respect to Senior Debt of such Guarantor or the Company) on the same basis as the Notes are junior and subordinated to Senior Debt. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof. 81 ARTICLE 13 MISCELLANEOUS SECTION 13.01. CONFLICT OF ANY PROVISION OF INDENTURE WITH TIA. If any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall control. SECTION 13.02. NOTICES. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Guarantor: Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Attention: Secretary Facsimile: (412)823-4110 With, in the case of any notice of a Default or an Event of Default, a copy to: Winston & Strawn 200 Park Avenue, 42nd Floor New York, New York 10166 Attention: Robert W. Ericson, Esq. Facsimile: (212) 294-4700 and Mentmore Holdings Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 Attention: William L. Remley Facsimile (212) 391-1393 82 If to the Trustee: Marine Midland Bank 140 Broadway, 12th Floor New York, New York 10005 Attention: Corporate Trust Department -- Precise Technology, Inc. Facsimile: (212) 658-6425 The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA ss. 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, any Guarantor, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company and/or any Guarantor to the Trustee to take any action under this Indenture, the Company and/or any Guarantor, as the case may be, shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 1.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and 83 (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 1.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 13.05. LEGAL HOLIDAYS. In any case where any Interest Payment Date, any date established for payment of Defaulted Interest pursuant to Section 2.12, or any Maturity with respect to any Note shall not be a Business Day, then (notwithstanding any other provisions of this Indenture, the Notes or any Subsidiary Guarantee) payment of interest or principal (and premium, if any) need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or date established for payment of Defaulted Interest pursuant to Section 2.12 or Maturity, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date or date established for payment of Defaulted Interest pursuant to Section 2.12 or Maturity, as the case may be, to the next succeeding Business Day. SECTION 13.06. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No director, officer, employee, incorporator or stockholder of the Company or a Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Subsidiary Guarantees, if any, or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. SECTION 13.07. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, SHALL BE, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. BY THE EXECUTION AND DELIVERY OF THIS INDENTURE, EACH OF THE COMPANY AND THE GUARANTORS SUBMITS TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT IN THE STATE OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE. SECTION 13.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.09. SUCCESSORS AND ASSIGNS. 84 All covenants and agreements in this Indenture by the Company and the Guarantors shall bind their respective successors and assigns, whether so expressed or not. All covenants and agreements in this Indenture by the Trustee shall bind its respective successors and assigns, whether so expressed or not. SECTION 13.10. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 13.11. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 13.12. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 85 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed in New York, New York as of the day and year first above written. PRECISE TECHNOLOGY, INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: PRECISE TMP, INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: MASSIE TOOL, MOLD & DIE, INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: PRECISE POLESTAR, INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: PRECISE TECHNOLOGY OF DELAWARE INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: PRECISE TECHNOLOGY OF ILLINOIS INC. Dated: June 13, 1997 By: /s/ William L. Remley ----------------------------- Name: William L. Remley Title: MARINE MIDLAND BANK, as Trustee Dated: June 13, 1997 By: /s/ Eileen M. Hughes ----------------------------- Name: Eileen M. Hughes Title: Assistant Vice President EXHIBIT A-1 (Face of Note) 11 1/8% Senior Subordinated Notes due 2007 No. CUSIP No: PRECISE TECHNOLOGY, INC. promises to pay to ______ or registered assigns, the principal sum of $________ _______________________________ Dollars on June 15, 2007. Interest Payment Dates: June 15 and December 15 Record Dates: June 1 and December 1 Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. Dated: _______ PRECISE TECHNOLOGY, INC. By:______________________________ Name: Title: By:______________________________ Name: Title: This is one of the 11 1/8% Senior Subordinated Notes due 2007 referred to in the within-mentioned Indenture: Marine Midland Bank, A-1-1 as Trustee By: _____________________________ Authorized Signature A-1-2 (Back of Note) 11 1/8% Senior Subordinated Notes due 2007 [Unless and until it is exchanged in whole or in part for Notes in definitive form, this Note may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC") to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as may be requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.]1 "THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM - ----------------------- 1 This paragraph should be included only if the Note is a Global Note. A-1-3 THE TRUSTEE) AND, IF THE ISSUER SO REQUESTS, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS." "THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below. 1. INTEREST. Precise Technology, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 111/8% per annum from the Issuance Date until June 15, 2007 and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on June 15 and December 15 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issuance Date; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 15, 1997. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate equal to the per annum rate on the Notes then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. A-1-4 2. METHOD OF PAYMENT. The Company shall make payments in respect of Global Notes (including principal, premium, if any, and interest and Liquidated Damages, if any) by wire transfer of immediately available funds to the accounts specified by the Note Custodian or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes. Notwithstanding the foregoing, all payments with respect to the Notes (the Holders of which have provided wire transfer instructions to the Company at least ten Business Days prior to the applicable payment date), will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Such payment shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of June 13, 1997 ("Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are general unsecured obligations of the Company limited to $200,000,000 in aggregate principal amount. 5. OPTIONAL REDEMPTION. Except as set forth in the following paragraphs, the Notes will not be redeemable at the Company's option prior to June 15, 2002. On and after June 15, 2002, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' written notice, at the Redemption Prices (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on June 15 of each of the years indicated below: REDEMPTION Year PRICE ----- 2002 ........................................... 105.563% 2003 ........................................... 103.708% 2004 ........................................... 101.854% 2005 and thereafter.............................. 100.000% In addition, at any time prior to June 15, 2000, the Company may on any one or more occasions redeem up to 33 1/3% of the aggregate principal amount of Notes originally issued A-1-5 (including, for this purpose, one or more series of Notes issued under the Indenture after the date of the Indenture) at a Redemption Price of 111.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the Redemption Date, with the net cash proceeds of one or more Public Equity Offerings; provided that at least 662/3% of the Notes originally issued (including, for this purpose, one or more series of Notes issued under the Indenture after the date of the Indenture) remain outstanding immediately after the occurrence of such redemption and provided, that such redemption occurs within 60 days of the date of the closing of each such Public Equity Offering. The Trustee shall select the Notes to be purchased in the manner described in the Indenture. In addition, at any time prior to June 15, 2002, the Company may, at its option, redeem the Notes, in whole or in part, at a Redemption Price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 8, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder's registered address. If any Note is to be redeemed in part only, any notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. On or after the Redemption Date, unless the Company defaults in making the redemption payments, interest ceases to accrue on the Notes or portions thereof called for redemption. 8. REPURCHASE AT OPTION OF HOLDERS. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase (the "Change of Control Payment"). Prior to complying with the provisions of Section 4.09 of the Indenture, but in any event within 30 days following a Change of Control, the Company shall either repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all such other Senior Debt and to repay the Indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer or obtain the requisite consents under the Credit Agreement and all such other Senior Debt to permit the repurchase of the Notes. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder of Notes issued under the Indenture, with a copy to the Trustee, containing the information set forth in Section 4.09 of the Indenture. Holders of Notes that are subject to an offer to purchase may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. (b) When the aggregate amount of Excess Proceeds in connection with Asset Sales by the Company exceeds $5.0 million, the Company shall make an offer to all Holders of Notes (an A-1-6 "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in Section 3.10 of the Indenture. The Company will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceeds $5.0 million by mailing by first class mail the notice required pursuant to the terms Section 3.10 of the Indenture, with a copy to the Trustee. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof (subject to a minimum initial purchase requirement of $100,000 for Notes sold to institutional investors that qualify as accredited investors as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act other than in reliance on Rule 144A or Regulation S). The transfer of Notes may be registered and Notes may be exchanged only as provided in Article 2 of the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents (including legal opinions) and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. SUBORDINATION. Each Holder by accepting a Note agrees that the payment (by set-off or otherwise) of principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes (including with respect to any repurchases of the Notes) is subordinated in right of payment, to the extent and in the manner provided in Article 10 of the Indenture, to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents of all obligations in respect of Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes or any Subsidiary Guarantee may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to the terms of the Indenture and any applicable Subsidiary Guarantee, any existing default or compliance with any provision of the Indenture, the Notes or any Subsidiary A-1-7 Guarantee may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Without the consent of any Holder of a Note, the Indenture, the Notes and any Subsidiary Guarantee may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to comply with Article 5 of the Indenture, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Company, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA or to add a Guarantor under the Indenture. 13. DEFAULTS AND REMEDIES. Each of the following constitutes an "Event of Default": (a) default in payment when due (payable at maturity, upon redemption or otherwise), of principal of or premium, if any, on the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture); (b) default for 30 days or more in the payment when due of interest on, or Liquidated Damages, if any, with respect to the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture; (c) failure by the Company to comply with Sections 4.09, 4.10 and 5.01 of the Indenture; (d) failure by the Company for 30 days after receipt of written notice to comply with any of its other agreements in the Indenture or the Notes; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (1) is caused by the failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") at its stated final maturity (after giving effect to any applicable grace periods) or (2) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (f) failure by the Company or any of its Restricted Subsidiaries to pay final and non-appealable judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (g) the Company or any Restricted Subsidiary that is a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability generally to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Restricted Subsidiary that is a Significant Subsidiary in an involuntary case in which it is the debtor, (ii) appoints a Custodian of the Company or any Restricted Subsidiary that is a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary that is a Significant Subsidiary; or (iii) orders the liquidation of the Company or any Restricted Subsidiary that is a Significant Subsidiary, and the A-1-8 order or decree contemplated in clauses (i), (ii) or (iii) of this clause (h), remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid and such judgment has become final or non-appealable or shall cease for any other reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company and the Trustee; provided that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any such Indebtedness under the Credit Agreement or (ii) five Business Days after receipt by the Company and the Agent of written notice of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company with the same rights it would have if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under these Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of these Notes waives and releases all such liability. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of the Notes under the Indenture, Holders of Transferred Restricted Securities (as defined in the Registration Rights Agreement) shall have all the rights set forth in the A-1-9 Registration Rights Agreement, dated as of the date hereof, among the Company, the Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). 19. SUBSIDIARY GUARANTEES. Payment of principal, premium, if any, and interest (including interest on overdue principal and overdue interest, if lawful) and Liquidated Damages, if any, is unconditionally guaranteed by certain subsidiaries of the Company. Such guaranties are junior and subordinated to the guaranties of such subsidiaries on the same basis as the Notes are junior and subordinated to Senior Debt. 20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company have caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Attention: Secretary Facsimile: (412)823-4110 A-1-10 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint__________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: __________ Your Signature:___________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. A-1-11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.09 or 4.10 of the Indenture, check the box below: |_| Section 4.09 |_| Section 4.10 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.09 or Section 4.10 of the Indenture, state the amount you elect to have purchased: $_____________ Date: __________ Your Signature:___________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: Signature Guarantee. A-1-12 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE2 The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made: Principal Amount of Amount of Amount decrease in increase in of this Principal Principal Global Note Signature of Amount Amount following such authorized officer of this of this decrease of Trustee or Date of Exchange Global Note Global Note (or increase) Note Custodian - ---------------- ----------- ----------- ------------- -------------- - --------------------- 2 This should be included only if the Note is a Global Note. A-1-13 EXHIBIT A-2 (Face of Regulation S Temporary Global Note) 11 1/8% Senior Subordinated Notes due 2007 No. CUSIP No: PRECISE TECHNOLOGY, INC. promises to pay to Cede & Co. or registered assigns, the principal sum of _______________________________ Dollars on __________, 2007. Interest Payment Dates: June 15 and December 15 Record Dates: June 1 and December 1 Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as of set forth at this place. Dated: __________ PRECISE TECHNOLOGY, INC. By:______________________________ Name: Title: By:______________________________ Name: Title: This is one of the 11 1/8% Senior Subordinated Notes due 2007 referred to in the within-mentioned Indenture: Marine Midland Bank, As Trustee By: _____________________________ Authorized Signature A-2-1 (Back of Regulation S Temporary Global Note) 11 1/8% Senior Subordinated Notes due 2007 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS NOTE. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. "THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO A-2-2 ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF THE ISSUER SO REQUESTS, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS." Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below. 1. INTEREST. Precise Technology, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 111/8% per annum from the Issuance Date until June 15, 2007 and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on June 15 and December 15 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issuance Date; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 15, 1997. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate equal to the per annum rate on the Notes then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. A-2-3 2. METHOD OF PAYMENT. The Company shall make payments in respect of Global Notes (including principal, premium, if any, and interest and Liquidated Damages, if any) by wire transfer of immediately available funds to the accounts specified by the Note Custodian or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes. Notwithstanding the foregoing, all payments with respect to the Notes (the Holders of which have provided wire transfer instructions to the Company at least ten Business Days prior to the applicable payment date), will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Such payment shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of June 13, 1997 ("Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are general unsecured obligations of the Company limited to $200,000,000 in aggregate principal amount. 5. OPTIONAL REDEMPTION. Except as set forth in the following paragraphs, the Notes will not be redeemable at the Company's option prior to June 15, 2002. On and after June 15, 2002, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' written notice, at the Redemption Prices (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on June 15 of each of the years indicated below: Year REDEMPTION PRICE ----- 2002 .................................... 105.563% 2003 .................................... 103.708% 2004 .................................... 101.854% 2005 and thereafter............................... 100.000% In addition, at any time prior to June 15, 2000, the Company may on any one or more occasions redeem up to 331/3% of the aggregate principal amount of Notes originally issued (including, for this purpose, one or more series of Notes issued under the Indenture after the date of the Indenture) at a Redemption Price of 111.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the Redemption Date, with the net cash proceeds of one or more Public Equity Offerings; provided that at least 66 2/3% A-2-4 of the Notes originally issued (including, for this purpose, one or more series of Notes issued under the Indenture after the date of the Indenture) remain outstanding immediately after the occurrence of such redemption and provided, that such redemption occurs within 60 days of the date of the closing of each such Public Equity Offering. The Trustee shall select the Notes to be purchased in the manner described in the Indenture. In addition, at any time prior to June 15, 2002, the Company may, at its option, redeem the Notes, in whole or in part, at a Redemption Price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 8, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder's registered address. If any Note is to be redeemed in part only, any notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. On or after the Redemption Date, unless the Company defaults in making the redemption payments, interest ceases to accrue on the Notes or portions thereof called for redemption. 8. REPURCHASE AT OPTION OF HOLDERS. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase (the "Change of Control Payment"). Prior to complying with the provisions of Section 4.09 of the Indenture, but in any event within 30 days following a Change of Control, the Company shall either repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all such other Senior Debt and to repay the Indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer or obtain the requisite consents under the Credit Agreement and all such other Senior Debt to permit the repurchase of the Notes. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder of Notes issued under the Indenture, with a copy to the Trustee, containing the information set forth in Section 4.09 of the Indenture. Holders of Notes that are subject to an offer to purchase may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. (b) When the aggregate amount of Excess Proceeds in connection with Asset Sales by the Company exceeds $5.0 million, the Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in Section 3.10 of the Indenture. The Company will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceeds $5.0 million by mailing by first class mail the notice required pursuant to the terms Section 3.10 of the Indenture, with a copy to the Trustee. To the extent that A-2-5 the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof (subject to a minimum initial purchase requirement of $100,000 for Notes sold to institutional investors that qualify as accredited investors as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act other than in reliance on Rule 144A or Regulation S). The transfer of Notes may be registered and Notes may be exchanged only as provided in Article 2 of the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents (including legal opinions) and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. SUBORDINATION. Each Holder by accepting a Note agrees that the payment (by set-off or otherwise) of principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes (including with respect to any repurchases of the Notes) is subordinated in right of payment, to the extent and in the manner provided in Article 10 of the Indenture, to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents of all obligations in respect of Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes or any Subsidiary Guarantee may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to the terms of the Indenture and any applicable Subsidiary Guarantee, any existing default or compliance with any provision of the Indenture, the Notes or any Subsidiary Guarantee may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Without the consent of any Holder of a Note, the Indenture, the Notes and any Subsidiary Guarantee may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to comply with Article 5 of the Indenture, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Company, to comply with the requirements A-2-6 of the SEC in order to effect or maintain the qualification of the Indenture under the TIA or to add a Guarantor under the Indenture. 13. DEFAULTS AND REMEDIES. Each of the following constitutes an "Event of Default": (a) default in payment when due (payable at maturity, upon redemption or otherwise), of principal of or premium, if any, on the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture); (b) default for 30 days or more in the payment when due of interest on, or Liquidated Damages, if any, with respect to the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture; (c) failure by the Company to comply with Sections 4.09, 4.10 and 5.01 of the Indenture; (d) failure by the Company for 30 days after receipt of written notice to comply with any of its other agreements in the Indenture or the Notes; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (1) is caused by the failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") at its stated final maturity (after giving effect to any applicable grace periods) or (2) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (f) failure by the Company or any of its Restricted Subsidiaries to pay final and non-appealable judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (g) the Company or any Restricted Subsidiary that is a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability generally to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Restricted Subsidiary that is a Significant Subsidiary in an involuntary case in which it is the debtor, (ii) appoints a Custodian of the Company or any Restricted Subsidiary that is a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary that is a Significant Subsidiary; or (iii) orders the liquidation of the Company or any Restricted Subsidiary that is a Significant Subsidiary, and the order or decree contemplated in clauses (i), (ii) or (iii) of this clause (h), remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid and such judgment has become final or non-appealable or shall cease for any other reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company and the Trustee; provided that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any such Indebtedness under the Credit Agreement or (ii) five Business Days after receipt by the Company and the Agent A-2-7 of written notice of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company with the same rights it would have if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under these Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of these Notes waives and releases all such liability. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of the Notes under the Indenture, Holders of Transferred Restricted Securities (as defined in the Registration Rights Agreement) shall have all the rights set forth in the Registration Rights Agreement, dated as of the date hereof, among the Company, the Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). 19. SUBSIDIARY GUARANTEES. Payment of principal, premium, if any, and interest (including interest on overdue principal and overdue interest, if lawful) and Liquidated Damages, if any, is unconditionally guaranteed by certain subsidiaries of the Company. Such guaranties are junior and subordinated to the guaranties of such subsidiaries on the same basis as the Notes are junior and subordinated to Senior Debt. 20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company have caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: A-2-8 Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Attention: Secretary Facsimile: (412) 823-4110 A-2-9 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint__________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: __________ Your Signature:___________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. A-2-10 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made: Principal Amount of Amount of Amount decrease in increase in of this Principal Principal Global Note Signature of Amount Amount following such authorized officer of this of this decrease of Trustee or Date of Exchange Global Note Global Note (or increase) Note Custodian - ---------------- ----------- ----------- ------------- -------------- A-2-11 EXHIBIT A-3 (Face of Unrestricted Note) 111/8% Senior Subordinated Notes due 2007 No. CUSIP No. PRECISE TECHNOLOGY, INC. promises to pay to Cede & Co. or registered assigns, the principal sum of _______________________________ Dollars on __________, 2007. Interest Payment Dates: June 15 and December 15 Record Dates: June 1 and December 1 Reference is made for the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. Dated: ____________ PRECISE TECHNOLOGY, INC. By:______________________________ Name: Title: By:______________________________ Name: Title: This is one of the 11 1/8% Senior Subordinated Notes due 2007 referred to in the within-mentioned Indenture: Marine Midland Bank, as Trustee By: _____________________________ Authorized Signature A-3-1 (Back of Unrestricted Note) 11 1/8% Senior Subordinated Notes due 2007 [Unless and until it is exchanged in whole or in part for Notes in definitive form, this Note may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC") to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as may be requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.]1 "THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below. 1. INTEREST. Precise Technology, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 111/8% per annum from the Issuance Date until June 15, 2007 and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on June 15 and December 15 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issuance Date; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 15, 1997. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate equal to the per annum rate on the Notes then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on - -------------------- 1. This paragraph should be included only if the Note is a Global Note. A-3-2 overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company shall make payments in respect of Global Notes (including principal, premium, if any, and interest and Liquidated Damages, if any) by wire transfer of immediately available funds to the accounts specified by the Note Custodian or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes. Notwithstanding the foregoing, all payments with respect to the Notes (the Holders of which have provided wire transfer instructions to the Company at least ten Business Days prior to the applicable payment date), will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Such payment shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of June 13, 1997 ("Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are general unsecured obligations of the Company limited to $200,000,000 in aggregate principal amount. 5. OPTIONAL REDEMPTION. Except as set forth in the following paragraphs, the Notes will not be redeemable at the Company's option prior to June 15, 2002. On and after June 15, 2002, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' written notice, at the Redemption Prices (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on June 15 of each of the years indicated below: Year REDEMPTION PRICE 2002 .................................... 105.563% 2003 .................................... 103.708% 2004 .................................... 101.854% 2005 and thereafter............................... 100.000% In addition, at any time prior to June 15, 2000, the Company may on any one or more occasions redeem up to 331/3% of the aggregate principal amount of Notes originally issued (including, for this purpose, one or more series of Notes issued under the Indenture after A-3-3 the date of the Indenture) at a Redemption Price of 111.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the Redemption Date, with the net cash proceeds of one or more Public Equity Offerings; provided that at least 662/3% of the Notes originally issued (including, for this purpose, one or more series of Notes issued under the Indenture after the date of the Indenture) remain outstanding immediately after the occurrence of such redemption and provided, that such redemption occurs within 60 days of the date of the closing of each such Public Equity Offering. The Trustee shall select the Notes to be purchased in the manner described in the Indenture. In addition, at any time prior to June 15, 2002, the Company may, at its option, redeem the Notes, in whole or in part, at a Redemption Price equal to 100% of the principal amount thereof plus the applicable Make-Whole Premium. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 8, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder's registered address. If any Note is to be redeemed in part only, any notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. On or after the Redemption Date, unless the Company defaults in making the redemption payments, interest ceases to accrue on the Notes or portions thereof called for redemption. 8. REPURCHASE AT OPTION OF HOLDERS. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase (the "Change of Control Payment"). Prior to complying with the provisions of Section 4.09 of the Indenture, but in any event within 30 days following a Change of Control, the Company shall either repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full in cash all Indebtedness under the Credit Agreement (and terminate all commitments thereunder) and all such other Senior Debt and to repay the Indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer or obtain the requisite consents under the Credit Agreement and all such other Senior Debt to permit the repurchase of the Notes. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder of Notes issued under the Indenture, with a copy to the Trustee, containing the information set forth in Section 4.09 of the Indenture. Holders of Notes that are subject to an offer to purchase may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. (b) When the aggregate amount of Excess Proceeds in connection with Asset Sales by the Company exceeds $5.0 million, the Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in Section 3.10 of the Indenture. The Company will A-3-4 commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceeds $5.0 million by mailing by first class mail the notice required pursuant to the terms Section 3.10 of the Indenture, with a copy to the Trustee. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse side of this Note. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof (subject to a minimum initial purchase requirement of $100,000 for Notes sold to institutional investors that qualify as accredited investors as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act other than in reliance on Rule 144A or Regulation S). The transfer of Notes may be registered and Notes may be exchanged only as provided in Article 2 of the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents (including legal opinions) and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. SUBORDINATION. Each Holder by accepting a Note agrees that the payment (by set-off or otherwise) of principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes (including with respect to any repurchases of the Notes) is subordinated in right of payment, to the extent and in the manner provided in Article 10 of the Indenture, to the prior payment in full in cash, or at the option of the holders of Senior Debt, in Cash Equivalents of all obligations in respect of Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes or any Subsidiary Guarantee may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and, subject to the terms of the Indenture and any applicable Subsidiary Guarantee, any existing default or compliance with any provision of the Indenture, the Notes or any Subsidiary Guarantee may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Without the consent of any Holder of a Note, the Indenture, the Notes and any Subsidiary Guarantee may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to comply with Article 5 of the Indenture, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal A-3-5 rights under the Indenture of any such Holder, to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Company, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA or to add a Guarantor under the Indenture. 13. DEFAULTS AND REMEDIES. Each of the following constitutes an "Event of Default": (a) default in payment when due (payable at maturity, upon redemption or otherwise), of principal of or premium, if any, on the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture); (b) default for 30 days or more in the payment when due of interest on, or Liquidated Damages, if any, with respect to the Notes (whether or not such payment shall be prohibited by Article 10 of the Indenture; (c) failure by the Company to comply with Sections 4.09, 4.10 and 5.01 of the Indenture; (d) failure by the Company for 30 days after receipt of written notice to comply with any of its other agreements in the Indenture or the Notes; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (1) is caused by the failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") at its stated final maturity (after giving effect to any applicable grace periods) or (2) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (f) failure by the Company or any of its Restricted Subsidiaries to pay final and non-appealable judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (g) the Company or any Restricted Subsidiary that is a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability generally to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Restricted Subsidiary that is a Significant Subsidiary in an involuntary case in which it is the debtor, (ii) appoints a Custodian of the Company or any Restricted Subsidiary that is a Significant Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary that is a Significant Subsidiary; or (iii) orders the liquidation of the Company or any Restricted Subsidiary that is a Significant Subsidiary, and the order or decree contemplated in clauses (i), (ii) or (iii) of this clause (h), remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid and such judgment has become final or non-appealable or shall cease for any other reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company and the Trustee; provided that so long as any Indebtedness permitted to be incurred pursuant to the Credit Agreement shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any such Indebtedness A-3-6 under the Credit Agreement or (ii) five Business Days after receipt by the Company and the Agent of written notice of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary that is a Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company with the same rights it would have if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under these Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of these Notes waives and releases all such liability. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of the Notes under the Indenture, Holders of Transferred Restricted Securities (as defined in the Registration Rights Agreement) shall have all the rights set forth in the Registration Rights Agreement, dated as of the date hereof, among the Company, the Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). 19. SUBSIDIARY GUARANTEES. Payment of principal, premium, if any, and interest (including interest on overdue principal and overdue interest, if lawful) and Liquidated Damages, if any, is unconditionally guaranteed by certain subsidiaries of the Company. Such guaranties are junior and subordinated to the guaranties of such subsidiaries on the same basis as the Notes are junior and subordinated to Senior Debt. 20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company have caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: A-3-7 Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Attention: Secretary Facsimile: (412) 823-4110 A-3-8 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Marine Midland Bank 140 Broadway, 12th Floor New York, New York 10005 Re: 11 1/8% Senior Subordinated Notes due 2007 Reference is hereby made to the Indenture, dated as of June 13, 1997 (the "Indenture"), between Precise Technology, Inc., as issuer (the "Company"), and Marine Midland Bank, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to __________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1.|_|Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Restricted Definitive Note Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Restricted Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Restricted Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Restricted Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act. 2.|_|Check if Transferee will take delivery of a beneficial interest in the Temporary Regulation S Global Note, the Regulation S Global Note or a Restricted Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting B-1 on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Restricted Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3.|_|Check and complete if Transferee will take delivery of a Restricted Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a)|_|such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b)|_|such Transfer is being effected to the Company or a Subsidiary thereof; or (c)|_|such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d)|_|such Transfer is being effected to an Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that the Transfer complies with the transfer restrictions applicable to Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if the Company so requests, an Opinion of Counsel reasonably acceptable to the Company provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Restricted Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Notes and in the Indenture and the Securities Act. B-2 4.|_|Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note. (a)|_|Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Unrestricted Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b)|_|Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Unrestricted Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c)|_|Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Unrestricted Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. --------------------------- [Insert Name of Transferor] By: ------------------------ Name: Title: Dated: , ------------------ ---- B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: |_|a beneficial interest in the: (i) |_| 144A Global Note (QIB Global Note) (CUSIP No. 74018P AA7), or (ii) 144A Global Note |_| (Accredited Investor Global Note) (CUSIP No. 74018P AB5). 2. After the Transfer, the Transferee will hold: [CHECK ONE] (a)|_|a beneficial interest in the: (i) |_| 144A Global Note (QIB Global Note) (CUSIP No. 74018P AA7), or (ii) |_| 144A Global Note (Accredited Investor Global Note) (CUSIP No. 74018P AB5), or (iii) |_| Unrestricted Global Note (CUSIP_); or (b)|_|a Restricted Definitive Note; or (c)|_|an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Marine Midland Bank 140 Broadway, 12th Floor New York, New York 10005 Re: 11 1/8% Senior Subordinated Notes due 2007 (CUSIP ) ---------------------------------------------------------------------- Reference is hereby made to the Indenture, dated as of June 13, 1997 (the "Indenture"), between Precise Technology, Inc., as issuer (the "Company"), and Marine Midland Bank, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. _________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note (a)|_|Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b)|_|Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. C-1 (c)|_|Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d)|_|Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes (a)|_|Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b)|_|Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] |_| 144A Global Note or |_| Regulation S Global Note, with an equal principal amount, the Owner hereby certifies (i) such Owner acquired such Restricted Definitive Note in a transaction pursuant to Rule 144A or Regulation S, (ii) the beneficial interest is being acquired for the Owner's own account without transfer and (iii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. C-2 [Insert Name of Owner] By: ---------------------------- Name: Title: Dated: , ---------------- ---- C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 Marine Midland Bank 140 Broadway, 12th Floor New York, New York 10005 Re: 11 1/8% Senior Subordinated Notes due 2007 Reference is hereby made to the Indenture, dated as of June 13, 1997 (the "Indenture"), between Precise Technology, Inc., as issuer (the "Company"), and First Trust of New York, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of Restricted Definitive Notes we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of each account for which we acquire any Notes (for which are acting as hereinafter stated), that such Notes may be offered, resold, pledged or otherwise transferred only (i) to a person whom we reasonably believe to be a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, outside the United States in a transaction meeting the requirements of Rule 904 under the Securities Act, or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an Opinion of Counsel if the Company so Requests), (ii) to the Company or (iii) pursuant to an effective registration statement, and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction. We further agree to provide to any person purchasing the Definitive Note or a beneficial interest in a Global Note from us in a transaction meeting the requirements of (i) or (ii) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. D-1 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Notes or beneficial interest therein acquired by us must be effected through one of the Placement Agents. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1),(2),(3) or(7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes without a view to distribution thereof in violation of the Securities Act for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ------------------------------------ [Insert Name of Accredited Investor] ------------------------------------ By: Name: Title: Dated: , ----------------- ---- D-2 EXHIBIT E SUBSIDIARY GUARANTEE Each Guarantor hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes and the Obligations of the Company under the Notes or under the Indenture, that: (a) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on overdue principal, premium, if any, (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes and all other payment Obligations of the Company to the Holders or the Trustee under the Indenture or under the Notes will be promptly paid in full and performed, all in accordance with the terms thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other payment Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. The obligations of the Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 12 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The terms of Article 12 of the Indenture are incorporated herein by reference. This Subsidiary Guarantee is subject to release as and to the extent provided in Section 12.04 of the Indenture. This is a continuing Subsidiary Guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Subsidiary Guarantee of payment and not a guarantee of collection. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. For purposes hereof, each Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and the Indenture and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the State of New York) or (B) left such Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into; provided that, it will be a presumption in any lawsuit or other proceeding in which a Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of such Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the Guarantor is limited to the amount set forth in clause (ii) above. The Indenture provides that, in making any determination as to the solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantors to contribution from other Guarantors and any other rights such Guarantors may have, contractual or otherwise, shall be taken into account. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. PRECISE TMP, INC. By: ----------------------------- Name: Title: MASSIE TOOL, MOLD & DIE, INC. By: ----------------------------- Name: Title: PRECISE POLESTAR, INC. By: ----------------------------- Name: Title: PRECISE TECHNOLOGY OF DELAWARE INC. By: ----------------------------- Name: Title: PRECISE TECHNOLOGY OF ILLINOIS INC. By: ----------------------------- Name: Title: SCHEDULE I Term Loans: Delaware State Loan $112,604.00 Concord Comm. Corp. (Phg tool EDM) $186,339.21 Concord Comm. Corp. (TMP EDM) $171,942.12 ----------- SUBTOTAL: $470,885.33 Cap Leases: Phoenixcor (Del Presses) $1,184,237.24 Heller Financial (LAF Presses) $778,009.22 TM Acceptance (PGH Presses) $2,519,605.18 US Bancorp. (Polestar Presses) $382,964.99 Concord Comm. Corp. (TMP S. Graf.) $408,317.06 Pencader Assoc. (Del) $118,102.47 OTHER CAPITAL LEASES: Vision Fin. (PGH fork trk) $3,031.51, Iron & Glass Bank (Eng Software) $40,081.00 Concord Capital Lease (Various Equip) $271,014.89 Concord Comm. (Pgh tooling grinder) $57,701.18 Concord Comm. (Unity Tooling EDM) $118,908.64 Concord Comm. (PHG Tool CNC) $145,262.01 Concord Comm. (Massie Grinder $223,410.00 ------------- $6,250,645.39 ------------- Totals $6,721,530.72 EXHIBIT I SUBSIDIARY GUARANTEE Each Guarantor hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes and the Obligations of the Company under the Notes or under the Indenture, that: (a) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on overdue principal, premium, if any, (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes and all other payment Obligations of the Company to the Holders or the Trustee under the Indenture or under the Notes will be promptly paid in full and performed, all in accordance with the terms thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other payment Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. The obligations of the Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 12 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The terms of Article 12 of the Indenture are incorporated herein by reference. This Subsidiary Guarantee is subject to release as and to the extent provided in Section 12.04 of the Indenture. This is a continuing Subsidiary Guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Subsidiary Guarantee of payment and not a guarantee of collection. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. For purposes hereof, each Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and the Indenture and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the State of New York) or (B) left such Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into; provided that, it will be a presumption in any lawsuit or other proceeding in which a Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of such Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the Guarantor is limited to the amount set forth in clause (ii) above. The Indenture provides that, in making any determination as to the solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantors to contribution from other Guarantors and any other rights such Guarantors may have, contractual or otherwise, shall be taken into account. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. PRECISE TMP, INC. By: ----------------------------- Name: Title: MASSIE TOOL, MOLD & DIE, INC. By: ----------------------------- Name: Title: PRECISE POLESTAR, INC. By: ----------------------------- Name: Title: PRECISE TECHNOLOGY OF DELAWARE INC. By: ----------------------------- Name: Title: PRECISE TECHNOLOGY OF ILLINOIS INC. By: ----------------------------- Name: Title: EXHIBIT J EXECUTION COPY ================================================================================ PRECISE TECHNOLOGY, INC. PRECISE TMP, INC. MASSIE TOOL, MOLD & DIE, INC. PRECISE POLESTAR, INC. PRECISE TECHNOLOGY OF DELAWARE INC. PRECISE TECHNOLOGY OF ILLINOIS INC. 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007 REGISTRATION RIGHTS AGREEMENT June 13, 1997 BEAR, STEARNS & CO. INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ================================================================================ This Registration Rights Agreement (this "Agreement") is made and entered into as of June 13, 1997 by and among Precise Technology, Inc., a Delaware corporation (the "Company"), Precise TMP, Inc., a Virginia corporation, Massie Tool, Mold & Die, Inc., a Florida corporation, Precise Polestar, Inc., a Virginia corporation, Precise Technology of Delaware Inc., a Delaware corporation, and Precise Technology of Illinois Inc., a Delaware corporation (collectively, the "Guarantors"), Bear, Stearns & Co. Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (each a "Purchaser" and, collectively, the "Purchasers"), each of whom has agreed to purchase the Company's 11 1/8% Senior Subordinated Notes due 2007 (the "Notes") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated June 10, 1997 (the "Purchase Agreement"), by and among the Company, the Guarantors and the Purchasers. In order to induce the Purchasers to purchase the Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Purchasers set forth in Sections 2 and 3 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Act: The Securities Act of 1933, as amended. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Broker-Dealer Transfer Restricted Securities: New Notes that are acquired by a Broker-Dealer in the Exchange Offer in exchange for Notes that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Notes acquired directly from the Company or any of its affiliates). Closing Date: The date of this Agreement. Commission: The Securities and Exchange Commission. Consummate: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the New Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of New Notes in the same aggregate principal amount as the aggregate principal amount of Notes that were tendered by Holders thereof pursuant to the Exchange Offer. Damages Payment Date: With respect to the Notes, each Interest Payment Date. Effectiveness Target Date: As defined in Section 5. Exchange Act: The Securities Exchange Act of 1934, as amended. Exchange Offer: The registration by the Company under the Act of the New Notes pursuant to a Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for New Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Exempt Resales: The transactions in which the Purchasers propose to sell the Notes to (i) certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act, (ii) certain institutional "accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Act ("Accredited Institutions") and (iii) non-U.S. persons permitted to purchase the Notes in offshore transactions in reliance upon Regulation S under the Act. Holders: As defined in Section 2(b) hereof. Indenture: The Indenture, dated as of June 13, 1997, between the Company, the Guarantors and Marine Midland Bank, as trustee (the "Trustee"), pursuant to which the Subordinated Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. Interest Payment Date: As defined in the Indenture and the Subordinated Notes. NASD: National Association of Securities Dealers, Inc. New Notes: The Company's 11 1/8% New Senior Subordinated Notes due 2007 to be issued pursuant to the Indenture in the Exchange Offer. Person: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Purchasers: As defined in the preamble hereto. Record Holder: With respect to any Damages Payment Date relating to Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Company relating to (a) an offering of New Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer Transfer Restricted Securities. Shelf Filing Deadline: As defined in Section 4 hereof. Shelf Registration Statement: As defined in Section 4 hereof. Subordinated Notes: The Notes and the New Notes. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. Transfer Restricted Securities: Each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Note has been effectively registered under the Act and disposed of in accordance with a Shelf Registration Statement and (c) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act or by a Restricted Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein). Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 45 days after the Closing Date, a Registration Statement under the Act relating to the New Notes and the Exchange Offer, (ii) use their best efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 150 days after the Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the New Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) promptly following the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the New Notes to be offered in exchange for the Transfer Restricted Securities and to permit sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers as contemplated by Section 3(c) below. (b) The Company shall use its best efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. Without the consent of the Purchasers, no securities other than the Subordinated Notes and the Subsidiary Guarantees shall be included in the Exchange Offer Registration Statement. The Company shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 business days thereafter. (c) The Company shall indicate in a "Plan of Distribution" section contained in the Prospectus contained in the Exchange Offer Registration Statement that any Restricted Broker-Dealer who holds Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company or an affiliate of the Company), may exchange such Notes pursuant to the Exchange Offer; however, such Restricted Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with any resales of the New Notes received by such Restricted Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Restricted Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Restricted Broker-Dealer or disclose the amount of Notes held by any such Restricted Broker-Dealer, except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. The Company and the Guarantors shall use their best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers, and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the date on which the Exchange Offer Registration Statement is declared effective. The Company shall provide sufficient copies of the latest version of such Prospectus to such Restricted Broker-Dealers promptly upon request at any time during such one-year period in order to facilitate such resales. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company is not required to file an Exchange Offer Registration Statement or to consummate the Exchange Offer because, in the reasonable determination of the Company, the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) any Holder of Transfer Restricted Securities shall notify the Company within 20 business days of the Consummation of the Exchange Offer, in its reasonable discretion, (A) that such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) that such Holder may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) that such Holder is a Broker-Dealer and holds Notes acquired directly from the Company or one of its affiliates, then the Company and the Guarantors shall (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement") on or prior to the earliest to occur of (1) the 30th day after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement, (2) the 30th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above, and (3) the 60th day after the Closing Date (such earliest date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use their best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 60th day after the Shelf Filing Deadline. The Company and the Guarantors shall use their best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of two years following the Closing Date, or such shorter period ending when (i) all Notes covered by the Shelf Registration Statement have been sold in the manner set forth therein or (ii) a subsequent Shelf Registration Statement relating to the Notes has been declared effective under the Act. Notwithstanding the foregoing, the Company shall not be required to file a Shelf Registration Statement with respect to the Notes of any Holder (other than Notes of a Purchaser) as a result of such Holder not being able to make the representations required by Section 6(a) in connection with the Exchange Offer. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 business days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Guarantors hereby jointly and severally agree to pay liquidated damages ("Liquidated Damages") to each Holder of Transfer Restricted Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the Liquidated Damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued Liquidated Damages shall be paid to the affected Record Holders by the Company by wire transfer of immediately available funds or by federal funds check on each Damages Payment Date, as provided in the Indenture. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of Liquidated Damages with respect to such Transfer Restricted Securities will cease. Notwithstanding the foregoing, the Company may issue a notice that the Shelf Registration Statement is unusable pending the announcement of a material corporate transaction and may issue any notice suspending the use of the Shelf Registration Statement required under applicable securities laws to be issued and, in the event that the aggregate number of days in any consecutive twelve-month period for which all such notices are issued and effective does not exceed 45 days in the aggregate, then Liquidated Damages will not be payable as described above as a result of such suspension. All obligations of the Company and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Security shall have been satisfied in full. If the Company has complied with the provisions of Sections 3, 4 and 6 hereof, the accrual and payment of Liquidated Damages, as set forth above, shall be the sole and exclusive remedy of the Holders against the Company and the Guarantors for the events constituting a Registration Default. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Company and the Guarantors hereby agree, to the extent reasonably practicable, to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for Notes. The Company and the Guarantors each hereby agrees to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Company and the Guarantors each hereby agrees, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate, directly or indirectly, of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the New Notes to be issued in the Exchange Offer, (C) it is acquiring the New Notes in its ordinary course of business and (D) it is not acting on behalf of any Person who could not make the foregoing representations. Such Holder shall also make such other representations as may be required to comply with applicable law or policy of the Commission with respect to the Exchange Offer. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Restricted Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of New Notes obtained by such Holder in exchange for Notes acquired by such Holder directly from the Company. The Company shall not be required to register the Notes of any Holder (other than Notes of a Purchaser) that fails to furnish the representations required by the first sentence of this paragraph. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above and (B) including a representation that neither the Company nor any of the Guarantors has entered into any arrangement or understanding with any Person to distribute the New Notes to be received in the Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Exchange Offer is acquiring the New Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the New Notes received in the Exchange Offer. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company will as expeditiously as possible (in accordance with Section 4 hereof) prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof. (c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Exchange Offer Registration Statement and the related Prospectus, to the extent that the same are required to be available to permit sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the Company shall: (i) use its best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Act or any regulation thereunder, financial statements of the Guarantors) for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company shall, upon becoming aware thereof, file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold or a subsequent Registration Statement has been declared effective; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, advise the managing underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, furnish to each of the selling Holders specifically named in or covered by any Registration Statement or Prospectus and each of the managing underwriter(s) in connection with such sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review of such Holders and underwriter(s) in connection with such sale, if any, for a period of at least five business days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which selling Holders of 25% or more in aggregate principal amount of Transfer Restricted Securities covered by such Registration Statement or the managing underwriter(s) in connection with such sale, if any, shall reasonably object within five business days after the receipt thereof. A selling Holder or managing underwriter, if any, shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (v) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders covered by such Registration Statement and to the managing underwriter(s) in connection with such sale, if any, make the Company's representatives available (and representatives of the Guarantors) for discussion of such document and other customary due diligence matters on reasonable prior notice, and include such information in such document prior to the filing thereof as such selling Holders or managing underwriter(s), if any, reasonably may request within five business days of the receipt of the proposed filing; (vi) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, make available at reasonable times, and at the offices where normally kept, for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees, as applicable, to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness, in each case to the extent reasonably necessary to enable them to exercise any applicable due diligence responsibilities; (vii) in the event that a Shelf Registration Statement is filed, if requested by any selling Holders covered by such Registration Statement or the underwriter(s) in connection with such sale, if any, as promptly as practicable incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided that, if any such Holder or underwriter had the opportunity to review a filing pursuant to clause (iv) or clause (v) above and the information proposed to be included was available at the time of and could have been included in such earlier filing, all costs relating to the inclusion of such information pursuant to a supplement or post-effective amendment to such Registration Statement shall be paid for by the party(ies) requesting such inclusion; (viii) use its best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Subordinated Notes covered thereby or the underwriter(s), if any; (ix) in the event that a Shelf Registration Statement is filed, furnish to each selling Holder covered by such Registration Statement, on request, and each of the managing underwriter(s) in connection with such sale, if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto provided that the Company has not advised such Persons otherwise pursuant to Section 6(c)(iii); (xi) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, enter into, and cause the Guarantors to enter into, such customary agreements (including an underwriting agreement), and make, and cause the Guarantors to make, such customary representations and warranties, and take all such other reasonable actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be reasonably requested by any Holder of Transfer Restricted Securities or managing underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Guarantors shall: (A) furnish to each selling Holder and each managing underwriter, if any, upon the effectiveness of the Shelf Registration Statement and to each Restricted Broker-Dealer upon Consummation of the Exchange Offer: (1) such representations and warranties with respect to the business of the Company and the Guarantors and the Registration Statement, Prospectus and documents, if any, incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in primary underwritten offerings of debt securities similar to the Subordinated Notes, and confirm the same if and when requested; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Guarantors, covering the matters customarily covered in opinions requested in underwritten offerings of debt securities similar to the Subordinated Notes and such other matters as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, the Purchasers' representatives and the Purchasers' counsel in connection with the preparation of such Registration Statement and the related Prospectus and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to a large extent upon facts provided to such counsel by officers and other representatives of the Company and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) provided that the requesting Holders, underwriter(s), if any, or other such financial intermediary furnish the undertaking required in SAS 72, if required, a customary comfort letter in form and substance reasonably satisfactory to the requesting Holders, underwriter(s), if any, or other financial intermediary, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with primary underwritten offerings; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company pursuant to this clause (xi), if any. If at any time the representations and warranties of the Company and the Guarantors contemplated in clause (A)(1) above cease to be true and correct, the Company or the Guarantors shall so advise the Purchasers and the underwriter(s), if any, each selling Holder and Restricted Broker-Dealers, if any, promptly and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities provided for under this Agreement, cooperate with, and cause the Guarantors to cooperate with, the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the state securities or Blue Sky laws of such domestic jurisdictions as the selling Holders or underwriter(s), if any, may reasonably request in writing and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that neither the Company nor any of the Guarantors shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii) in the event that a Shelf Registration Statement is filed, shall issue, upon the request of any Holder of Notes covered by the Shelf Registration Statement contemplated by this Agreement, Notes not bearing legends restricting their transfer, having an aggregate principal amount equal to the aggregate principal amount of Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such New Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Subordinated Notes, as the case may be; in return, the Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) in the event that a Shelf Registration Statement is filed, in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with, and cause the Guarantors to cooperate with, the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may reasonably request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use its best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, except as may be required solely as a consequence of the nature of such seller's business and subject to the proviso contained in clause (xii) above; (xvi) in the event that a Shelf Registration Statement is filed or a Restricted Broker-Dealer would be required to deliver a Prospectus contained in an Exchange Offer Registration Statement, if any fact or event contemplated by clause 6(c)(iii)(D) hereof shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the first Registration Statement required by this Agreement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with The Depositary Trust Company; (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use its reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning on the first day of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate, and cause the Guarantors to cooperate, with the Trustee and the Holders of Subordinated Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute, and cause the Guarantors to execute, and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xxi) use its best efforts to cause all Transfer Restricted Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed if requested by the Holders of a majority in aggregate principal amount of Notes or the managing underwriter(s), if any. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any amendments or supplements thereto. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's or the Guarantors performance of or compliance with this Agreement will be borne by the Company or the Guarantors, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the New Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing Subordinated Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Guarantor's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company will reimburse the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. The Company and the Guarantors shall not have any obligation to pay any underwriting fees, discounts or commissions attributable to the sale of any New Notes pursuant to this Agreement. SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors, jointly and severally, agree to indemnify and hold harmless (i) each Holder, (ii) each person, if any, who controls any Holder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (each a "Participant") to the fullest extent lawful, from and against any and all losses, liabilities, claims, damages and expenses whatsoever (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any investigation or litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus, or in any supplement thereto or amendment thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company and the Guarantors will not be liable in any such case to the extent, but only to the extent, that (i) any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company or the Guarantors by or on behalf of any Holder, underwriter or other Purchaser expressly for use therein and (ii) the foregoing indemnity with respect to any untrue statement contained in or omitted from a Registration Statement or the Prospectus shall not inure to the benefit of any Holder (or any person controlling such Holder), from whom the person asserting any such loss, liability, claim, damage or expense purchased any of the Subordinated Notes which are the subject thereof if it is finally judicially determined that such loss, liability, claim, damage or expense resulted solely from the fact that the Holder sold Subordinated Notes to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Registration Statement and the Prospectus, as amended or supplemented, and (x) the Company shall have previously and timely furnished sufficient copies of the Registration Statement or Prospectus, as so amended or Supplemented, to such Holder in accordance with this Agreement and (y) the Registration Statement or Prospectus, as so amended or supplemented, would have corrected such untrue statement or omission of a material fact. This indemnity agreement will be in addition to any liability which the Company and the Guarantors may otherwise have, including, under this Agreement. (b) Each Participant (and each underwriter in an underwritten offering pursuant to a Shelf Registration Statement) will be required to agree (and each Holder hereby agrees), severally and not jointly, to indemnify and hold harmless the Company, the Guarantors and each person, if any, who controls the Company or the Guarantors within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any investigation or litigation, commenced or threatened, or any claim whatsoever and any and all amounts paid in settlement of any claim or litigation), to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company or the Guarantors by or on behalf of such Participant expressly for use therein. This indemnity will be in addition to any liability which a Holder may otherwise have, including under this Agreement. In no event, however, shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon its sale of the Transfer Restricted Securities giving rise to such indemnification obligation. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent that it has been prejudiced in any material respect by such failure or from any liability which it may otherwise have). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have been advised in writing that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying party or parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses of counsel shall be borne by the indemnifying parties; provided, however, that the indemnifying party under subsection (a) or (b) above, shall only be liable for the legal expenses of one counsel (in addition to any local counsel) for all indemnified parties in each jurisdiction in which any claim or action is brought; provided, however, that the indemnifying party shall be liable for separate counsel for any indemnified party in a jurisdiction, if counsel to the indemnified party or parties shall have reasonably concluded in writing that there may be defenses available to such indemnified party that are different from or additional to those available to one or more of the other indemnified parties and that separate counsel for such indemnified party is prudent under the circumstances. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its prior written consent; provided, however, that such consent was not unreasonably withheld. (d) In order to provide for contribution in circumstances in which the indemnification provided for in this Section 8 is for any reason held to be unavailable to an indemnified party or is insufficient to hold harmless a party indemnified thereunder, the Company, the Guarantors and each Participant (or other indemnifying person) shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company, any contribution received by the Company from Persons, other than the Holders, who may also be liable for contribution, including Persons who control the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) to which the Company and any Participant (or other indemnifying person) may be subject, in such proportion as is appropriate to reflect the relative benefits received by the Company and any Participant from their sale of Transfer Restricted Securities or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having received notice as provided in this Section 8, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Guarantors, on the one hand, and the Participants (or other indemnifying person), on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and any Participant shall be deemed to be in the same proportion as (x) the total proceeds from the offering (net of discounts but before deducting expenses) of the Subordinated Notes received by the Company and (y) the total proceeds received by such Participant upon its sale of Subordinated Notes which would otherwise give rise to the indemnification obligation, respectively. The relative fault of the Company and the Guarantors and of the Participant (or other indemnifying person) shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Participants and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to above. Notwithstanding the provisions of this Section 8, (i) no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total value of the Subordinated Notes held by such Holder exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, (A) each person, if any, who controls a Holder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the respective officers, directors, partners, employees, representatives and agents of a Holder or any controlling Person shall have the same rights to contribution as such Holder, and each Person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as the Company, subject in each case to clauses (i) and (ii) of this Section 8(d). Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 8, notify such party or parties from whom contribution may be sought, but the failure to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 8 or otherwise (except to the extent it has been prejudiced in any material respect by such failure). No party shall be liable for contribution with respect to any action or claim settled without its prior written consent; provided, however, that such written consent was not unreasonably withheld. SECTION 9. RULE 144A Unless the Company is then subject to Section 13 or 15(d) of the Exchange Act, the Company hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available, upon request, to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements, which, in any event, shall be reasonably satisfactory to the Company and customary in connection with underwritten securities offerings. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. Except as expressly provided for herein, neither the Company nor the Guarantors shall be responsible for any fees, costs or expenses of such bankers or managers or their respective advisors or representatives. SECTION 12. MISCELLANEOUS (a) Remedies. The Company and the Guarantors agree that monetary damages (including the Liquidated Damages contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate; provided, however, if the Company has complied with the provisions of Sections 3, 4 and 6 hereof, the accrual and payment of Liquidated Damages, as set forth in Section 5 above, shall be the sole and exclusive remedy of the Holders against the Company and the Guarantors for the events constituting a Registration Default. (b) No Inconsistent Agreements. The Company will not, and will cause the Guarantors not to, on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of the Guarantors has previously entered into any agreement granting any registration rights with respect to its securities to any Person which would permit such Person to (i) include its securities in any Registration Statement or (ii) participate in any Underwritten Registration or Underwritten Offering. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Subordinated Notes. The Company and the Guarantors will not take any action with respect to the Subordinated Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are sold or exchanged pursuant to a Registration Statement and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being sold or exchanged pursuant to such Registration Statement. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company: Precise Technology, Inc. 501 Mosside Boulevard North Versailles, Pennsylvania 15137 Telecopier No.: (412) 823-4110 Attention: Secretary With a copy to: Mentmore Holdings Corporation 1430 Broadway 13th Floor New York, New York 10018-3308 Telecopier No.: (212) 391-1393 Attention: William L. Remley and Winston & Strawn 200 Park Avenue New York, New York 10166 Telecopier No.: (212) 294-4700 Attention: Robert W. Ericson, Esq. (iii) notice to the Company shall be deemed notice to any and every Guarantor. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the other Operative Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Precise Technology, Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Precise TMP, Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Massie Tool, Mold & Die, Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Precise Polestar, Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Precise Technology of Delaware Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Precise Technology of Illinois Inc. By: /s/ William L. Remley ----------------------------- Name: Title: Bear, Stearns & Co. Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: Bear, Stearns & Co. Inc. By: /s/ J. Andrew Bugas ----------------------------- Name: J. Andrew Bugas Title: Senior Managing Director EX-10.2 18 CONSENT AGREEMENT CONSENT AGREEMENT This Consent Agreement is entered into as of the 13th day of June, 1997 by and among Precise Technology, Inc., a Delaware corporation (the "Company"), Precise Holding Corporation, a Delaware corporation ("Parent"), Sunderland Industrial Holdings Corporation, a Delaware corporation ("Sunderland"), Hamilton Holdings Ltd. Corporation, a Texas corporation ("Hamilton"), John Hancock Mutual Life Insurance Company, a Massachusetts mutual life insurance company ("John Hancock"), Rice Partners II, L.P., a Delaware limited partnership ("Rice"), Delaware State Employees' Retirement Fund, a Delaware corporation ("Delaware"), Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., a Delaware corporation ("Zeneca"), and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc., a Delaware corporation ("ICI"). Capitalized terms used in this Consent Agreement and not otherwise defined herein are as defined in the Note Agreement (as hereinafter defined). WITNESSETH WHEREAS, the Company, John Hancock and Rice are parties to that certain Note Purchase Agreement dated as of March 29, 1996 (the "Note Agreement"); WHEREAS, Parent, John Hancock, Rice and Pecks are parties to that certain Warrant Purchase Agreement dated as of March 29, 1996 (the "Warrant Agreement"); WHEREAS, Parent, Sunderland, Hamilton, Pecks, John Hancock and Rice are parties to that certain Shareholder Agreement dated as of March 29, 1996 (the "Shareholder Agreement"); WHEREAS, Parent, the Company and Pecks are parties to that certain Securities Purchase Agreement dated as of March 29, 1996 (the "Securities Purchase Agreement"); WHEREAS, the Company is contemplating prepayment of the Senior Debt, prepayment of the Senior Subordinated Notes, redemption of the Pecks Preferred Stock, redemption of the Seller Preferred Stock, repurchase of 124 shares of Common Stock from Parent, and making an approximate $6.4 million distribution to Parent; WHEREAS, Parent is contemplating redemption of the Hamilton Preferred Stock (as defined in the Shareholder Agreement) and declaration and payment of a dividend; WHEREAS, in order to fund the foregoing transactions, the Company intends to enter into a $30 million revolving credit facility with Fleet National Bank, as agent (the "New Senior Debt") and issue $75 million of Senior Subordinated Notes due 2007 (the "New Subordinated Notes"); WHEREAS, in connection with the foregoing transactions, the Company is also contemplating amendment of the Management Agreement, payment of investment banking fees to Mentmore in connection with the entering into of the New Senior Debt and issuance of the New Subordinated Notes, amendment of the Warrant Agreement and Shareholder Agreement, and termination of the Note Agreement. NOW, THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Consent to Transactions by the Company. To the extent that any agreement, consent, or notice is required under the Note Agreement, Warrant Agreement, Shareholder Agreement or Securities Purchase Agreement, or under any other ancillary document to which the parties hereto, or one or more of them, are parties or by which they are governed, the parties hereto hereby consent and agree to, and waive any required notice of, the following transactions by the Company: a. Prepayment of the entire outstanding principal amount of the Senior Debt, plus (i) accrued unpaid interest on the principal amount so prepaid, plus (ii) the amount of any loss incurred by the Senior Lender as provided in Section 2.15 of the Senior Loan Agreement, plus (iii) any other amounts due the Senior Lender under the Senior Loan Documents, in accordance with the terms of the Senior Loan Documents; b. Prepayment of the entire outstanding principal amount of the Senior Subordinated Notes, plus (i) accrued unpaid interest on the principal amount so prepaid, plus (ii) the aggregate amount of all other Senior Subordinated Obligations, if any, plus (iii) the applicable Prepayment Fee, in accordance with the terms of the Note Agreement, and termination of the Note Agreement; c. Redemption of 575 shares of Pecks Preferred Stock for a redemption price of $10,000 per share, plus an amount equal to all dividends accrued thereon and unpaid; d. Redemption of 250 shares of Seller Preferred Stock for a redemption price of $10,000 per share, plus an amount equal to all dividends thereon accrued and unpaid; e. Repurchase of 124 shares of Common Stock from Parent for an aggregate price of approximately $3,315,000; f. Distribution of approximately $6,441,000 to Parent; g. Execution, delivery and performance of the Credit Agreement and other documents related to the New Senior Debt and all other related documents, including the granting of any security interest in connection therewith and the entering into by any of the Company's subsidiaries of any guarantee of such New Senior Debt; 2 h. Issuance of the New Subordinated Notes and execution, delivery and performance of the Purchase Agreement, Registration Rights Agreement, and Indenture in connection therewith and any related documents, including the entering into by any of the Company's subsidiaries of any guarantee of such New Subordinated Notes; i. Amendment and restatement of the Management Agreement, in the form attached hereto as Exhibit A and payment of an investment banking fee to Mentmore in the amount of $500,000; j. Amendment of the Warrant Agreement, in the form attached hereto as Exhibit B; k. Amendment of the Shareholder Agreement, in the form attached hereto as Exhibit C. 2. Consent to Transactions by Parent. To the extent that any agreement, consent, or notice is required under the Note Agreement, Warrant Agreement, Shareholder Agreement or Securities Purchase Agreement, or under any other ancillary document to which the parties hereto, or one or more of them, are parties or by which they are governed, the parties hereto hereby consent and agree to, and waive any required notice of, the following transactions by Parent: a. Redemption of 331.46 shares of Hamilton Preferred Stock for a redemption price of $10,000 per share, plus an amount equal to all dividends thereon accrued and unpaid; b. Upon formal action of Parent's Board of Directors, declaration and payment of a dividend on the common stock (and the related Dilution Dividend (as defined in the Shareholder Agreement)) in an aggregate amount of approximately $6.0 million (subject to reduction for appropriate provision for payment of any taxes for which Parent may be liable on such dividend), payable (subject to any withholding obligations) as follows: % of Total To In Respect Of Dividend - -- ------------- -------- Sunderland 8,035 shares of common stock 80.3500% NAP & Company, as nominee 167.67 shares of common stock 1.6767% for Delaware Fuelship & Company, as 33.33 shares of common stock 0.3333% nominee for Zeneca Northman & Co., as nominee 49 shares of common stock 0.4900% for ICI 3 NAP & Company, as nominee Warrants to purchase 385 shares of 3.8500% for Delaware common stock Fuelship & Company, as Warrants to purchase 77 shares of 0.7700% nominee for Zeneca common stock Northman & Co., as Nominee Warrants to purchase 113 shares of 1.1300% for ICI common stock John Hancock Warrants to purchase 371 shares of 3.7100% common stock John Hancock Warrants to purchase 199 shares of 1.9900% common stock Rice Warrants to purchase 570 shares of 5.7000% common stock c. Sale of 124 shares of Common Stock of the Company to the Company for an aggregate price of $3,315,000; d. Execution, delivery and performance of the Credit Agreement and other documents related to the New Senior Debt and all other related documents to be entered into by Parent, including the granting of any security interest in Common Stock of the Company held by Parent and the entering into by Parent of any guarantee of such New Senior Debt; e. Amendment of the Warrant Agreement, in the form attached hereto as Exhibit B; f. Amendment of the Shareholder Agreement, in the form attached hereto as Exhibit C. 3. The effectiveness of this Consent Agreement is conditioned upon consummation of the Refinancing Transactions, as that term is defined in the Preliminary Offering Memorandum, dated May 19, 1997, relating to the New Subordinated Notes. 4. The parties acknowledge the terms of the Registration Rights Agreement between the Company, the subsidiaries of the Company and the Initial Purchasers named therein in the offering of the New Subordinated Notes, and waive any rights to participate or have securities registered under, or to receive notice of or consent rights to, any Registration Statement filed with the Securities and Exchange Commission pursuant thereto. 5. This Consent Agreement shall be construed in accordance with and governed by the laws of the State of New York, without regard to its conflict of laws provisions. 4 IN WITNESS WHEREOF, the undersigned, through their duly authorized representatives, have set hereunto their hands as of the date first above written. PRECISE TECHNOLOGY, INC. By: /s/ William L. Remley --------------------------------------- Its: --------------------------------------- PRECISE HOLDING CORPORATION By: /s/ William L. Remley --------------------------------------- Its: --------------------------------------- SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION By: /s/ William L. Remley --------------------------------------- Its: --------------------------------------- HAMILTON HOLDINGS LTD. CORPORATION By: /s/ William L. Remley --------------------------------------- Its: --------------------------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ Sandeep Alva --------------------------------------- Sandeep Alva, Senior Investment Officer 5 RICE PARTNERS II, L.P. By: Rice Capital Group IV, L.P., its general partner By: RMC Fund Management, L.P., its general partner By: Rice Mezzanine Corporation, its general partner By: /s/ James P. Wilson ------------------------------ James P. Wilson, Managing Director DELAWARE STATE EMPLOYEES' RETIREMENT FUND By: Pecks Management Partners, Ltd., its investment advisor By: /s/ Robert J. Cresci --------------------------------------- Robert J. Cresci, Managing Director DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS, INC. By: Pecks Management Partners, Ltd., its investment advisor By: /s/ Robert J. Cresci --------------------------------------- Robert J. Cresci, Managing Director DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC. By: Pecks Management Partners, Ltd., its investment advisor By: /s/ Robert J. Cresci --------------------------------------- Robert J. Cresci, Managing Director 6 EX-10.3 19 SECURITIES PURCHASE AGEEMENT EXECUTION COPY ================================================================================ PRECISE HOLDING CORPORATION Common Stock PRECISE TECHNOLOGY, INC. Cumulative Exchangeable Preferred Stock ----------------------------- SECURITIES PURCHASE AGREEMENT ----------------------------- Dated as of March 29, 1996 ================================================================================ TABLE OF CONTENTS Page No. -------- 1. AUTHORIZATION OF ISSUE OF SECURITIES......................................1 1A. Common Stock.....................................................1 1B. Cumulative Exchangeable Preferred Stock..........................1 2. PURCHASE AND SALE OF SECURITIES...........................................1 2A. Purchase and Sale................................................1 2B. Closing..........................................................2 3. CONDITIONS OF CLOSING.....................................................2 3A. Opinion of Counsel to Holdings and the Company...................2 3B. Representations and Warranties...................................2 3C. Certificate of Incorporation and By-laws.........................3 3D. Purchase Permitted by Applicable Laws............................3 3E. Shareholder Agreement............................................3 3F. Compliance with Securities Laws..................................3 3G. Proceeding.......................................................4 3H. No Adverse U.S. Legislation, Action or Decision..................4 3I. Approval and Consents............................................4 3J. Material Changes.................................................4 3K. Board Nominee....................................................5 3L. Use of Proceeds..................................................5 3M. Warrants.........................................................5 3N. Acquisition Agreements...........................................5 3O. Debt Financing...................................................5 3P. Certificate of Designation.......................................5 4. COVENANTS.................................................................6 4A. Financial Statement..............................................6 4B. Use of Proceeds..................................................7 4C. Inspection of Property...........................................7 4D. Books and Records................................................8 4E. Additional Covenant Pending the Closing..........................8 4F. Stock to Be Reserved.............................................8 4G. Compliance With Laws, etc........................................8 4H. ERISA............................................................9 4I. Corporate Existence; Maintenance of Properties..................10 4J. Insurance.......................................................10 4K. Further Assurances..............................................10 4L. Filing of Reports Under the Exchange Act........................10 4M. Securities Act Registration Statements..........................11 4N. Notices of Certain Events.......................................12 4O. Board Nominee...................................................12 4P. Special Purpose Corporation.....................................13 4Q. Environmental Laws..............................................13 4R. Confidentiality.................................................14 5. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE COMPANY...............15 5A. Organization, Qualification and Authority.......................15 5B. Financial Statements............................................16 5C. Capital Stock and Related Matters...............................16 (i) 5D. Actions Pending.................................................17 5E. Outstanding Debt; Defaults......................................17 5F. Title to Properties.............................................18 5G. Taxes...........................................................18 5H. Conflicting Agreements..........................................18 5I. Offering of Securities..........................................19 5J. Broker's or Finder's Commissions................................19 5K. Regulation G, etc...............................................19 5L. Environmental Matters...........................................19 5M. ERISA...........................................................20 5N. Possession of Franchises, Licenses, etc.........................21 5O. Patents, etc....................................................21 5P. Holding Company and Investment Company Status...................21 5Q. Governmental Consents...........................................21 5R. Insurance Coverage..............................................22 5S. Subsidiaries....................................................22 5T. Disclosure......................................................22 5U. Registration Rights.............................................22 5V. Absence of Foreign or Enemy Status..............................23 5W. Agreements With Affiliates......................................23 5X. Equity of Holdings..............................................23 6. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS..........................23 7. DEFINITIONS..............................................................24 8. MISCELLANEOUS............................................................28 8A. Home Office Payment.............................................28 8B. Indemnification.................................................29 8C. Consent to Amendments...........................................29 8D. Provisions Applicable if any of the Securities are Sold......................................................30 8E. Restrictive Legends.............................................30 8F. Survival of Representations and Warranties......................31 8G. Successors and Assigns..........................................31 8H. Notices.........................................................31 8I. Descriptive Headings............................................32 8J. GOVERNING LAW: CONSENT TO JURISDICTION..........................32 8K. Delay Fees......................................................33 8L Remedies........................................................33 8M. Entire Agreement................................................34 8N. Severability....................................................34 8O. Amendments......................................................34 8P. WAIVER OF TRIAL BY JURY.........................................34 8Q. Counterparts....................................................34 (ii) EXHIBITS Exhibit A Form of Certificate of Designation Exhibit B-1 Form of Opinion of Counsel to Holdings and the Company Exhibit B-2 Form of Opinion of Special New York Counsel to Holdings and the Company Exhibit C Form of Warrant Purchase Agreement Exhibit D Form of Shareholder Agreement (iii) PRECISE HOLDING CORPORATION and PRECISE TECHNOLOGY, INC. SECURITIES PURCHASE AGREEMENT --------------- Dated as of March 29, 1996 --------------- To the Investors named on the signature pages hereto: Each of the undersigned, PRECISE HOLDING CORPORATION ("Holdings"), a Delaware corporation, and PRECISE TECHNOLOGY, INC. (the "Company"), a Delaware corporation, and each of the investors named on the signature pages hereto (the "Investors"), hereby agree as follows: 1. AUTHORIZATION OF ISSUE OF SECURITIES. 1A. Common Stock. Holdings will authorize the issuance, sale and delivery to the Investors of 250 shares of its common stock, without par value (herein called the "Common Stock", representing 2.5% of the Fully Diluted Outstanding Shares of Common Stock. 1B. Cumulative Exchangeable Preferred Stock. The Company will authorize the issuance, sale and delivery to the Investors of 575 shares of its Cumulative Exchangeable Preferred Stock (herein called the "Exchangeable Preferred Stock" and together with the Common Stock referred to herein collectively as the "Securities"). The powers, designations, preferences and relative participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the Exchangeable Preferred Stock are set forth in the Certificate of Designation of the Exchangeable Preferred Stock in the form of Exhibit A attached hereto (the "Certificate of Designation"). 2. PURCHASE AND SALE OF SECURITIES. 2A. Purchase and Sale. Holdings and the Company hereby agree to sell to the Investors and, subject to the terms and conditions herein set forth, the Investors severally agree to purchase from Holdings and the Company, the Securities set forth opposite the name of each of the Investors on the signature pages hereof. The purchase price of the shares of Common Stock purchased and sold hereunder and for the issuance of the Warrants to the Investors shall be $750,000. The purchase price of each share of Exchangeable Preferred Stock purchased and sold hereunder shall be $10,000 per share. 1 2B. Closing. The purchase and delivery of the Securities to be purchased by the Investors shall take place at a closing (the "Closing") at the offices of Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022, at 10:00 a.m., local time, on March 29, 1996 (or at such other time and place or on such other Business Day thereafter as the parties hereto shall agree) (herein called the "Closing Date"). On the Closing Date, Holdings and the Company will deliver the Securities to be purchased by the Investors payable to or registered in the names of the Investors and/or the Investors' nominees or other designees specified on the signatures pages hereof in the amounts set forth opposite the name of the Investors on the signature pages hereof, against receipt of the purchase price therefor by wire transfer to NationsBank, N.A., Dallas Texas, ABA #: 111-000-012, Account #: 375-0637717, in the case of Holdings, and 375-0637364, in the case of the Company. If at the Closing, the Company shall, in breach of this Agreement, fail to tender to the Investors any of the Securities to be purchased by them or if any of the conditions specified in Section 3 hereof shall not have been satisfied or waived by the Investors, the Investors shall, at their election, be relieved of all further obligations under this Agreement without thereby waiving any ocher rights they may have by reason of such failure or such non-fulfillment. Notwithstanding anything to the contrary, the obligation of Holdings and the Company to deliver any Securities to any Investor at the Closing shall be conditioned on their concurrent receipt of the purchase price of all of the Securities from the Investors. 3. CONDITIONS OF CLOSING. The Investors' obligation to purchase and pay for the Securities to be purchased by them hereunder is subject to the satisfaction, on or before the Closing Date, of the following conditions: 3A. Opinion of Counsel to Holdings and the Company. The Investors shall have received an opinion, dated the Closing Date (a) from Kelly, McCann & Livingstone, counsel to Holdings and the Company, substantially in the form of Exhibit B-1 attached hereto and (b) from Winston & Strawn, special New York counsel to Holdings and the Company, substantially in the form of Exhibit B-2 attached hereto. Such opinions shall also cover such other matters incident to the matters herein contemplated as the Investors may reasonably request, including the form of all papers and the validity of all proceedings. 3B. Representations and Warranties. The representations and warranties contained in Section 5 hereof and those otherwise made in writing by or on behalf of Holdings or the Company and contained in any document, certificate or other written statement provided to the Investors, in connection with the transactions contemplated by this Agreement shall be true and correct in all material respects when made and on and as of the 2 Closing Date, except to the extent of changes caused by the transactions herein contemplated; all of the covenants and obligations of Holdings and the Company hereunder to be performed or observed on or prior to the Closing shall have been duly performed or observed; and Holdings and the Company shall have delivered to the Investors an Officer's Certificate, dated the Closing Date, to the foregoing effects. 3C. Certificate of Incorporation and By-laws. The Investors shall have received certificates, dated the Closing Date, from each of the Assistant Secretary of Holdings and its Subsidiaries attaching (i) true and complete copies of the Certificate of Incorporation of Holdings and its Subsidiaries as filed with the appropriate state officials of its jurisdiction of incorporation with all amendments thereto, (ii) true and complete copies of the By-laws of Holdings and its Subsidiaries in effect as of such date, (iii) copies of certificates of good standing of the appropriate officials of the jurisdiction of incorporation of Holdings and its Subsidiaries and of each state in which each of Holdings and its Subsidiaries is required to be qualified to do business as a foreign corporation, (iv) resolutions of the Board of Directors of each of Holdings and the Company authorizing (a) the execution, delivery and performance of the Related Documents, as necessary, (b) the issuance and delivery of the Securities and (c) in the case of Holdings, the reservation for issuance of a sufficient number of shares of Common Stock subject to the Warrants to permit the exercise of such Warrants and (v) certificates as to the incumbency of the officers of Holdings and the Company executing this Agreement or any other Related Document. 3D. Purchase Permitted by Applicable Laws. The purchase of and payment for the Securities shall not be prohibited by any applicable law or governmental regulation (including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System) and shall not subject the Investors to any tax, penalty, liability or other onerous condition under or pursuant to any applicable law or governmental regulation, and the Investors shall have received such certificates or other evidence as they may request to establish compliance with this condition. 3E. Shareholder Agreement. The Investors shall have received a fully executed counterpart of the Shareholder Agreement and such Shareholder Agreement shall be in full force and effect and no term or condition thereof shall have been amended, modified or waived. 3F. Compliance with Securities Laws. The offering and sale of the Securities under this Agreement shall have complied with all applicable requirements of federal and state securities laws, and the Investors shall have received evidence of such compliance in form and substance reasonably satisfactory to them. 3 3G. Proceeding. All required corporate and other proceedings taken or required to be taken in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in form and substance to the Investors and their counsel, and the Investors and their counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. 3H. No Adverse U.S. Legislation, Action or Decision. No legislation, order, rule, ruling or regulation shall have been enacted or made by or on behalf of any governmental body, department or agency of the United States, nor shall any legislation have been introduced and favorably reported for passage to either House of Congress by any committee of either such House to which such legislation has been referred for consideration, nor shall any decision of any court of competent jurisdiction within the United States have been rendered which, in the Investors' reasonable judgment, would materially and adversely affect their investment in the Securities. There shall be no action, suit, investigation or proceeding, pending or threatened, against or affecting Holdings, its Subsidiaries or any of their respective properties or rights, or any of their respective affiliates, associates, officers or directors, before any court, arbitrator or administrative or governmental body which (i) seeks to restrain, enjoin, prevent the consummation of or otherwise affect the transactions contemplated by any of the Related Documents or (ii) questions the validity or legality of any such transaction or seeks to recover damages or to obtain other relief in connection with any such transaction, and there shall be no valid basis for any such action, proceeding or investigation. 3I. Approval and Consents. Each of Holdings and the Company shall have duly received all authorizations, consents, approvals, licenses, franchises, permits and certificates by or of all federal, state and local governmental authorities necessary or advisable for the issuance of the Securities and the consummation of the transactions contemplated hereby and by the Related Documents, and all thereof shall be in full force and effect at the time of the Closing. Each of Holdings and the Company shall have delivered to the Investors an Officer's Certificate, dated the Closing Date, to such effect. 3J. Material Changes. Since December 31, 1995 there shall not have been any changes in the business of the Company or any of its Subsidiaries which have or could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, nor shall there have been any development or discovery or any material contingency or other liability which could have such effect. Except as set forth on Schedule 3J hereto, there shall exist no material defaults under the provisions of any instrument evidencing Indebtedness of Holdings or any of its Subsidiaries and Holdings shall have delivered to 4 the Investors an Officer's Certificate, dated the Closing Date, to such effect. 3K. Board Nominee. The Board of Directors of Holdings shall be constituted as contemplated by Section 4.11 of the Warrant Purchase Agreement and Sections 10.01 and 10.02 of the Shareholder Agreement and the nominee designated by the Investors shall have been appointed to the Board of Directors effective upon the Closing. 3L. Use of Proceeds. The Investors shall have received evidence in form and substance reasonably satisfactory to them with respect to the use of proceeds by Holdings and the Company in accordance with paragraph 4B. 3M. Warrants. Each Investor shall have received warrants ("Warrants") to purchase Common Stock of Holdings, which if exercised on the Closing Date would represent 5.75% of the Fully Diluted Outstanding Shares of Common Stock of Holdings, pursuant to a Warrant Purchase Agreement substantially in the form of Exhibit C attached hereto. 3N. Acquisition Agreements. The Company shall have executed all agreements necessary to consummate the purchase of all of the outstanding capital stock of Tredegar Molded Products Company (the "Acquisition"), and all of the conditions precedent to such purchase shall have been satisfied or waived to the reasonable satisfaction of the Investors. 3O. Debt Financing. The Company and each other party thereto shall have executed(i) the Credit Agreement, dated as of March 28, 1996, between the Company, certain lenders and NationsBank, N.A., as agent (as amended from time to time, the "Senior Credit Agreement") and all the conditions set forth in Section 4.01 thereof shall have been satisfied or waived to the reasonable satisfaction of the Investors and (ii) the Note Purchase Agreement dated March 29, 1996 (the "Note Purchase Agreement") and all other agreements necessary to consummate the sale of $20,000,000 of the Company's 12.25% Senior Subordinated Notes, due 2006 (the "Subordinated Debt"), and all of the conditions precedent to such sale shall have been satisfied or waived to the reasonable satisfaction of the Investors. 3P. Certificate of Designation. The Certificate of Designation shall have been filed with the Secretary of State of the State of Delaware and the Investors shall have received a certificate, dated the Closing Date, of the Assistant Secretary of the Company attaching a true and complete copy of the Certificate of Designation as filed with the Secretary of State of the State of Delaware. 5 4. COVENANTS. 4A. Financial Statement. From and after the date hereof, Holdings shall deliver to each of the Investors so long as such Investor owns any Securities: (i) as soon as practicable and in any event within 45 days after the end of each month in each fiscal year commencing with March 31, 1996, unaudited management reports of the Company and its Subsidiaries setting forth the financial, operational and other performance data of the Company and its Subsidiaries in reasonable detail and reasonably satisfactory to the Investors, which shall include at least a consolidated statement of operations, a consolidated statement of cash flows and a consolidated balance sheet for or as at the end of such month, and to the extent available, comparable information from the same month in the preceding fiscal year and management's budget; (ii) as soon as practicable and in any event within 45 days after the end of each quarterly period in each fiscal year, consolidated and consolidating statements of income, changes in stockholders' equity and cash flow of the Company and its Subsidiaries for such quarterly period and for the period from the beginning of the current fiscal year to the end of such quarterly period and a consolidated and consolidating balance sheet of the Company and its Subsidiaries as at the end of the most recent year and at the end of such quarterly period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and reasonably satisfactory in scope to the holders of Securities and prepared in accordance with GAAP on a basic consistent with past practice and certified by the chief financial officer or chief executive officer of the Company as fairly presenting the financial condition of the Company and its Subsidiaries, subject to the changes resulting from audit and year-end adjustments; (iii) as soon as practicable and in any event within 90 days after the end of each fiscal year, consolidated and consolidating statements of income, changes in stockholders' equity and cash flow of the Company and its Subsidiaries for such year, and a consolidated and consolidating balance sheet of the Company and its Subsidiaries as at the end of such year, setting forth in each case in comparative form corresponding figures from the preceding annual audit, all in reasonable detail and reasonably satisfactory in scope to the holders of Securities, and in each case audited by Ernst & Young or such other independent public accountants of recognized national standing selected by the Company, and reasonably satisfactory to the holders of Securities, whose report in each case shall state that such consolidated financial statements present fairly the results of 6 operations and cash flows of the Company and its Subsidiaries, in accordance with GAAP on a basic consistent with prior years and that the examination by such accountants has been made in accordance with generally accepted auditing standards then in effect in the United States; (iv) as soon as practicable and in any event by the end of each fiscal year beginning with fiscal year 1996, a budget for the Company and its Subsidiaries, as approved by the Board of Directors of the Company and each Subsidiary, for the following fiscal year setting forth in comparative form corresponding figures from the preceding fiscal year, in reasonable detail and certified as to its good-faith preparation by the chief financial officer or chief executive officer of the Company and the Company; (v) promptly upon transmission thereof, copies of all financial statements, information circulars, proxy statements and reports as the Company or any Subsidiary shall send to its stockholders that are material to the business of the Company and its Subsidiaries, taken as a whole and copies of all registration statements and prospectuses and all reports which it or any of its officers or directors file with the Commission (or any governmental body or agency succeeding to the functions of the Commission) or with any securities exchange on which any of its securities are listed or with NASDAQ, and copies of all press releases and other statements made available generally by the Company or its Subsidiaries to the public concerning material developments in the business of the Company and its Subsidiaries; (vi) promptly upon receipt thereof, a copy of each other report submitted to the Company or any of its Subsidiaries by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company or any of its Subsidiaries; and (vii) with reasonable promptness, such other financial and/or operating data as the holders of Securities may reasonably request. 4B. Use of Proceeds. The proceeds of the sale of the Securities shall be used solely (a) to fund the purchase price for the Acquisition on the Closing Date, (b) to pay fees and expenses incurred in connection with the Acquisition and (c) to refinance existing indebtedness of the Company and its Subsidiaries. 4C. Inspection of Property. As long as an Investor owns at least 100 shares of Exchangeable Preferred Stock, Holdings will, upon reasonable advance notice, permit any Person representing such Investor and designated in writing by such 7 Investor, at such Investor's expense, to visit and inspect any of the properties of Holdings and its Subsidiaries during normal business hours in a manner which does not unduly interrupt the normal course of business, to examine the corporate, financial and operating records of Holdings or any of its Subsidiaries and make copies thereof or extracts therefrom and to discuss the affairs, finances and accounts of any of such corporations with the directors, officers and independent accountants of Holdings and its Subsidiaries, all at such reasonable times and as often as such Investor may reasonably request. Notwithstanding the foregoing, no visitation and/or inspection of any of the properties of Holdings and its Subsidiaries will be permitted if such visitation and/or inspection would violate any federal or state laws. 4D. Books and Records. Holdings will keep, and will cause each of its Subsidiaries to keep, proper books of record and account in which full, true and correct entries in conformity in all material respects with GAAP shall be made of all material dealings and transactions in relation to their business and activities. 4E. Additional Covenant Pending the Closing. Pending the Closing, neither Holdings nor the Company will, without the prior written consent of the Investors, take any action which would result (i) in any of the representations or warranties contained in this Agreement not being true and correct in all material respects at and as of the time immediately after such action or (ii) in any of the covenants contained in this Agreement becoming incapable of performance. Pending the Closing, Holdings and the Company will promptly advise the Investors of any action or event of which either becomes aware which has the effect of making incorrect, in any material respect, any of such representations or warranties or which has the effect of rendering any of such covenants incapable of performance. Holdings and the Company will duly perform, in all material respects, all of its respective obligations required to be performed under each of the Related Documents to which it is a party. 4F. Stock to Be Reserved. Holdings covenants that all shares of Common Stock that may be issued upon exercise of the Warrants will, upon issuance, be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof. Holdings further covenants that during the period within which Warrants are outstanding, Holdings will at all times have authorized and reserved a sufficient number of shares of Common Stock to permit the exercise of all of the outstanding Warrants. 4G. Compliance With Laws, etc. Holdings will, and will cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority, and obtain and maintain in 8 good standing all licenses, permits and approvals from any and all governments, governmental commissions, boards or agencies of jurisdictions in which they carry on business required in respect of the operations of Holdings and its Subsidiaries, except for those with which the failure to comply or maintain would not have a Material Adverse Effect. 4H. ERISA. Promptly (and in any event within 30 days) after Holdings or any of its Subsidiaries knows or has reason to know that a Reportable Event with respect to any Pension Plan has occurred, that any Pension Plan is or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA or that Holdings or any of its Subsidiaries will or may incur any liability to or on account of a Pension Plan under Sections 4062, 4063, 4064, 4201 or 4204 of ERISA or promptly upon becoming aware of the occurrence of any (i) event requiring Holdings or any of its Subsidiaries to provide security to a Pension Plan under Section 401(a)(29) of the Code, (ii) "prohibited transaction", as such term is defined in Section 4975 of the Code or in Section 406 of ERISA, in connection with any Pension Plan or any trust created thereunder for which a statutory or administrative exemption is not available, (iii) notice of intent to terminate a Pension Plan or Pension Plans having been filed under Title IV of ERISA by Holdings or any of its Subsidiaries, any Pension Plan administrator or any combination of the foregoing, (iv) institution of proceedings by the PBGC to terminate or to cause a trustee to be appointed to administer any Pension Plan, (v) partial or complete withdrawal by Holdings or a Subsidiary from any multiemployer Pension Plan, (vi) institution of proceedings by a fiduciary of any Pension Plan against Holdings or any of its Subsidiaries to enforce Section 515 of ERISA and such proceeding shall not have been dismissed within 30 days thereafter, (vii) failure of Holdings or a Subsidiary to make a required installment under Section 412(m) of the Code or any other payment required under Section 412 of the Code or to pay any amount which it shall have become liable to pay to the PBGC or to a Pension Plan under Title IV of ERISA on or before the due date, (viii) application by Holdings or a Subsidiary for a waiver of the minimum funding standard under Section 412 of the Code or Section 302 of ERISA, or (ix) "reorganization" (as defined in Section 418 of the Code or Title IV of ERISA) of any Pension Plan which is a multiemployer Pension Plan, Holdings will deliver to each holder of Securities, a certificate of the chief financial officer of Holdings, setting forth information as to such occurrence and what action, if any, Holdings is required or proposes to take with respect thereto, together with any notices concerning such occurrences which are (a) required to be filed by Holdings or the plan administrator of any such Pension Plan controlled by Holdings or any of its Subsidiaries with the PBGC, or (b) received by Holdings or any of its Subsidiaries from any plan administrator of a multiemployer or other Pension Plan not under their control. Holdings shall furnish to each holder of Securities a copy of each annual report (Form 5500 Series) of any Pension Plan received or prepared by it 9 or any of its Subsidiaries. Each annual report and any notice required to be delivered hereunder shall be delivered no later than 30 days after the later of the date such report or notice is filed with the Internal Revenue Service or the PBGC or the date such report or notice is received by Holdings or any of its Subsidiaries, as the case may be. 4I. Corporate Existence; Maintenance of Properties. Holdings (i) will do or cause to be done all things reasonably necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and the corporate existence, rights and franchises of its Subsidiaries, (ii) will cause its material properties and the material properties of its Subsidiaries to be maintained and kept in good condition, repair and working order (ordinary wear and tear excepted) and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereto, and (iii) will, and will cause each of its Subsidiaries to, qualify and remain qualified to conduct business in each jurisdiction where the nature of the business of or ownership of property by Holdings or such Subsidiary may require such qualification, except where the failure to so qualify would not have a Material Adverse Effect. Notwithstanding the foregoing, (x) any Wholly owned Subsidiary of the Company may merge into the Company in a transaction in which the Company is the surviving corporation, (y) any Wholly owned Subsidiary of the Company may merge into or consolidate with any other Wholly owned Subsidiary of the Company in a transaction in which the surviving entity is a Wholly owned Subsidiary and (z) Holdings shall not be required to preserve the existence of any of its Subsidiaries which have less than $10,000 in assets and which are not engaged in any activities relating to Holdings' business. 4J. Insurance. Holdings will maintain, and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurance companies, funds or underwriters, insurance for itself and its Subsidiaries of the kinds, covering the risks and in the relative proportionate amounts usually carried by companies conducting business activities similar to those of Holdings and its Subsidiaries. From and after a Public Offering, Holdings will use its best efforts to obtain and maintain directors and officers liability insurance similar to the insurance usually carried by companies conducting business activities similar to those of Holdings and its Subsidiaries. 4K. Further Assurances. Holdings and the Company shall cooperate with any of the Investors and execute such further instruments and documents as the Investors shall reasonably request to carry out to the satisfaction of such Investors the transactions contemplated by this Agreement. 4L. Filing of Reports Under the Exchange Act. Holdings shall, and shall cause each of its Subsidiaries to, give prompt notice to each Investor of the filing of any registration 10 statement (an "Exchange Act Registration Statement") pursuant to the Exchange Act relating to any class of securities of Holdings or any of its Subsidiaries and the effectiveness of such Exchange Act Registration Statement and, with respect to equity securities, the number of shares of such class o(pound) equity security outstanding as reported in such Exchange Act Registration Statement. If and for so long as Holdings or any of its Subsidiaries has a class of equity securities required to be registered under the Exchange Act, Holdings and such Subsidiaries shall (i) comply in all material respects with the reporting requirements of the Exchange Act, and (ii) comply in all material respects with all other public information reporting requirements of the Commission that are a condition to the availability of an exemption from the Securities Act (under Rule 144 thereof, as amended from time to time, or successor rule thereto or otherwise) for the sale of shares of Common Stock by any Investor. Holdings shall, and shall cause each of its Subsidiaries to, cooperate with each Investor in supplying such information as may be reasonably necessary for such Investor to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act (under Rule 144 thereunder or otherwise) for the sale of shares of Common Stock by any Investor. 4M. Securities Act Registration Statements. Holdings covenants that it shall not, and shall cause each of its Subsidiaries not to, file any registration statement under the Securities Act covering any securities unless it shall first have given to each Investor 20 days written notice thereof. Holdings further covenants that each Investor shall have the right, at any time when it may reasonably be deemed by such Investor or Holdings or any of its Subsidiaries to be a controlling person of Holdings or any of its Subsidiaries, to participate in the preparation of such registration statement (regardless of whether or not an Investor will be a selling security holder in connection with such registration statement) and to request the insertion therein of material furnished to Holdings or any of its Subsidiaries in writing which in such Investor's reasonable judgment should be included. In connection with any registration statement referred to in this paragraph 4M, Holdings will indemnify each Investor, its partners, officers and directors and each person, if any, who controls such Investor within the meaning of Section 15 of the Securities Act (collectively, the "Investor Parties"), against all losses, claims, damages, liabilities and expenses caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus or any preliminary prospectus or any amendment thereof or supplement thereto or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any untrue statement or alleged untrue statement or omission or 11 alleged omission contained in written information furnished to Holdings or any of its Subsidiaries by such Investor Parties expressly for use in such registration statement. If, in connection with any such registration statement, such Investor Parties shall furnish written information to Holdings or any of its Subsidiaries expressly for use in the registration statement, such Investor will indemnify Holdings, its directors, each of its officers who signs such registration statement and each person, if any, who controls Holdings within the meaning of the Securities Act against all losses, claims, damages, liabilities and expenses caused by any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission of a material fact required to be stated in the registration statement or prospectus or any preliminary prospectus or any amendment thereof or supplement thereto or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or alleged untrue statement or such omission or alleged omission is contained in information so furnished in writing by such Investor for use therein. The provisions of this paragraph 4M are in addition to, and not in limitation of, the provisions of the Shareholder Agreement. 4N. Notices of Certain Events. Holdings shall promptly give notice to each holder of Securities (i) of any default or event of default under any contractual obligation of Holdings or any of its Subsidiaries if such default or event of default, individually or in the aggregate, relates to a contractual obligation equal to or in excess of $250,000 or (ii) of any pending or threatened litigation, investigation or proceeding to which Holdings or any of its Subsidiaries is or is threatened to be a party which, if such pending or threatened litigation, investigation or proceeding were adversely determined, would create a liability of Holdings or its Subsidiaries equal to or in excess of $250,000 that is not fully covered by insurance held by Holdings or its Subsidiaries. Any notice delivered pursuant to this paragraph 4N shall be accompanied by an Officer's Certificate specifying the details of the occurrence referred to therein and stating what action Holdings proposes to take with respect thereto. 4O. Board Nominee. As long as the Investors as a group hold either (i) fifteen percent (15%) of the sum of (A) the shares of Common Stock issued to them on the Closing Date and (B) the Warrants and/or the underlying shares of Common Stock issued to them on the Closing Date or (ii) twenty five percent (25%) of the shares of Exchangeable Preferred Stock issued to them on the Closing Date, then the Investors shall collectively have the right to designate one (1) member to the Board of Directors of Holdings. Any director designated by the Investors shall receive (A) all materials distributed to the Board of Directors of Holdings whether provided to directors in advance of, during or after, any meeting of the applicable Board of Directors, regardless of whether such director shall be in attendance at any such meeting, (B) the same compensation other 12 outside members of the Board of Directors of Holdings shall receive in his or her capacity as a director and (C) reimbursement of the reasonable out-of-pocket expenses of such director incurred in attending the meetings of the Board of Directors of Holdings. For purposes of this paragraph, the term "Investors" shall mean the Investors on the Closing Date. 4P. Special Purpose Corporation. Holdings will not engage in any activity, issue any securities, incur any Indebtedness for borrowed money or incur any other material liability, or create or permit to exist any Lien on its assets, other than the ownership of the Common Stock and related de minimus activities incidental thereto. Notwithstanding the foregoing sentence, Holdings may (i) engage in any activity incidental to the maintenance of the corporate existence of Holdings and compliance with applicable law, (ii) enter into and perform the obligations of Holdings under the Related Documents (including without limitation the incurrence of any Indebtedness pursuant to the Shareholder Agreement), (iii) enter into (or issue, as applicable), perform the obligations of Holdings under and exercise the rights of Holdings under the Hamilton Preferred Stock and stock options exercisable for common stock of Holdings or Sunderland Industrial Holdings Corporation granted to employees of the Company and (iv) issue additional shares of Common Stock, so long as 100% of the net cash proceeds of any such issuance are contributed by Holdings to the capital of the Company or are used to repay any Indebtedness incurred pursuant to the Shareholder Agreement. 4Q. Environmental Laws. (i) Holdings will comply with, and will cause each of its Subsidiaries to comply with, and use its reasonable best efforts to ensure compliance by all tenants and subtenants and with respect to all of its assets with, all licenses, permits and other authorizations required under all applicable laws, regulations and other lawful requirements of Governmental Authorities relating to pollution or to the protection of the environment (the "Environmental Laws") and obtain and comply with and maintain, and use its best efforts to ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, registrations or permits required by Environmental Laws, except to the extent that failure to so comply or to obtain and comply with and maintain such licenses, approvals, registrations and permits does not have, and could not reasonably be expected to result in, a Material Adverse Effect. (ii) Holdings will, and will cause each of its Subsidiaries to, conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions, required under Environmental Laws and timely comply with all lawful orders and directives of all Governmental Authorities with respect to Environmental Laws, except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings 13 would not have a Material Adverse Effect. (iii) Holdings will, and will cause each of its Subsidiaries to, notify the holders of the Securities of any of the following that is reasonably likely to have a Material Adverse Effect: (a) any claim with respect to any Environmental Law that Holdings or any of its Subsidiaries receives, including one to take or pay for any remedial, removal, response or cleanup or other action with respect to any hazardous substance, hazardous waste, contaminant, pollutant or toxic substance (as such terms are defined in any applicable Environmental Law) (collectively, "Hazardous Substances") contained on or generated from any property owned or leased by Holdings or any of its Subsidiaries; (b) any notice of any alleged violation of or knowledge by Holdings or any of its Subsidiaries of a condition that might reasonably result in a violation of any Environmental Law; and (c) any commencement of or receipt of written intent to commence any judicial or administrative proceeding or investigation alleging a violation or potential violation of any requirement of any Environmental Law by Holdings or any of its Subsidiaries. (b) Without limiting the generality of paragraph 8B, Holdings will, and will cause each of its Subsidiaries to, indemnify the Investors and each holder from time to time of the Securities and each of their respective directors, officers, employees, agents, partners and Affiliates (each such person being called an "Indemnitee" and collectively, the "Indemnitees") against, and hold each Indemnitee harmless from, any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses (including reasonable counsel fees, charges and disbursements) of whatever kind or nature arising out of, or in any way relating to, the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of Holdings or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, attorneys' and consultants' fees, investigation and laboratory fees, Response Costs (as such term is defined in CERCLA), court costs and litigation expenses, except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Indemnitee seeking indemnification therefor. 4R. Confidentiality. As to so much of the information and other material furnished under or in connection with this Agreement (whether furnished before, on or after the date hereof, including without limitation information furnished pursuant to 14 paragraphs 4A and 4C hereof) as constitutes or contains confidential business, financial or other information of Holdings and its Subsidiaries, each of the Investors covenants for itself and its directors, officers and partners that it will use due care to prevent its officers, directors, partners, employees, counsel, accountants and other representatives from disclosing such information to Persons other than their respective authorized employees, counsel, accountants, stockholders, partners, limited partners and other authorized representatives; provided, however, that each Investor may disclose or deliver any information or other material disclosed to or received by it should such Investor be advised by its counsel that such disclosure or delivery is required by law, regulation or judicial or administrative order. For purposes of this paragraph 4Q, "due care" means at least the same level of care that such Investor would use to protect the confidentiality of its own sensitive or proprietary information. 5. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE COMPANY. Each of Holdings and the Company represents and warrants to each Investor, in each case after giving effect to the Acquisition, that: 5A. Organization, Qualification and Authority. Each of Holdings and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly qualified to do business as a foreign corporation and in good standing in each jurisdiction in which the character of its properties or the nature of its business makes such qualification necessary, except where the failure to so qualify would not have a Material Adverse Effect. Each of Holdings and its Subsidiaries has the corporate power to own its properties and to carry on its business as now being conducted. Each of Holdings and the Company has all requisite corporate power and authority to enter into this Agreement and to issue and sell its respective Securities hereunder. Holdings has all requisite corporate power and authority to enter into the Warrant Purchase Agreement and the Shareholder Agreement and to issue and sell its Warrants under the Warrant Purchase Agreement. The Company has all requisite corporate power and authority to file the Certificate of Designation with the Secretary of State of the State of Delaware. Holdings has the requisite corporate power and authority to issue the shares of Common Stock upon exercise of the Warrants. Each of Holdings and the Company has the requisite corporate power and authority to carry out the transactions contemplated hereby and thereby to be performed by it, and the execution, delivery and performance hereof and thereof have been duly authorized by all necessary corporate action. This Agreement constitutes, and each other agreement (including the Warrant Purchase Agreement and the Shareholder Agreement) or instrument (including the Securities) executed and delivered by Holdings and the Company pursuant hereto or thereto or in connection herewith or therewith will constitute, legal, valid and binding obligations of Holdings and 15 the Company enforceable against Holdings and the Company in accordance with their respective terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5B. Financial Statements. (i) The Company has furnished the Investors with the audited balance sheet of the Company and its Subsidiaries as of December 31, 1995, together with the related statements of income, changes in stockholders' equity and cash flow of the Company and its Subsidiaries for such period. Such financial statements (including any related schedules and notes) have been prepared in accordance with GAAP consistently applied throughout the period in question and show all material liabilities, except as set forth on Schedule 5B hereto, direct or contingent, required to be shown in accordance with GAAP consistently applied throughout the period in question and fairly present, in all material respects, the financial condition of the Company and its Subsidiaries. (ii) The Company has furnished the Investors with the unaudited balance sheet of the Company and its Subsidiaries as of the Closing Date, after giving pro forma effect to the Acquisition. Such pro forma balance sheet has been prepared by the Company in good faith, based upon assumptions used to prepare the pro forma financial information contained in the Confidential Information Memorandum (which assumptions are believed by the Company on the date hereof and on the Closing Date to be reasonable), is based on the best information available to the Company as of the date of delivery thereof, accurately reflects all material adjustments required to be made to give effect to the Acquisition and presents fairly on a pro forma basis the estimated consolidated financial position of the Company and its Subsidiaries as of December 31, 1995, assuming that the Acquisition had actually occurred on that date. The Company has no reason to believe that such pro forma balance sheet is misleading in any material respect in light of the circumstances existing at the time of the preparation thereof. (iii) There has been no material adverse change in the business, condition (financial or other), assets, properties, rights, operations or prospects of the Company and its Subsidiaries, taken as a whole, since December 31, 1995. 5C. Capital Stock and Related Matters. As of the Closing Date, and after giving effect to the transactions contemplated hereby and pursuant to the Related Documents, the capitalization of Holdings and each of its Subsidiaries is set forth on Schedule 5C. All issued and outstanding shares of 16 Holdings and the Company shall have been duly and validly issued, fully paid and non-assessable and no shares of capital stock of Holdings will be owned or held by or for the account of Holdings or any of its Subsidiaries. Except as set forth on Schedule 5C hereto, (i) neither Holdings nor any of its Subsidiaries will have outstanding any securities convertible into or exchangeable for any shares of capital stock or any rights (either preemptive or other) to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any other character relating to the issuance of, any capital stock, or any stock or securities convertible into or exchangeable for any capital stock and (ii) neither Holdings nor any of its Subsidiaries will be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or warrants or options to purchase shares of its capital stock. Neither Holdings nor any of its Subsidiaries (i) is a party to any agreement (other than this Agreement and the Shareholder Agreement) restricting the transfer of any shares of its capital stock except as set forth on Schedule 5C hereto or (ii) will have filed or be required to file, pursuant to Section 12 of the Exchange Act, a registration statement relating to any class of debt or equity securities as of the date hereof. 5D. Actions Pending. Except as set forth on Schedule 5D hereto, there is no action, suit, investigation or proceeding upon which service of process or other actual notice has been received that is pending or, to the knowledge of Holdings or the Company, threatened against Holdings or any of its respective Subsidiaries or any of their properties or rights, by or before any court, arbitrator or administrative or governmental body, which if adversely decided, could have a Material Adverse Effect. 5E. Outstanding Debt; Defaults. Except as set forth on Schedule 5E hereto, neither Holdings nor any of its Subsidiaries (i) is in default under the provisions of any instrument evidencing Indebtedness or of any agreement relating thereto, (ii) is in default under its Certificate of Incorporation (as amended to date) or By-laws, (iii) is in violation of or in default under or with respect to any indenture, mortgage, lease or any other contract or agreement to which it is a party or by which it or any of its property is bound or affected in any respect which could have a Material Adverse Effect or (iv) is in material default with respect to any order, writ, injunction or decree of any court or any Federal, state, municipal or other domestic or foreign governmental department, commission, board, bureau, agency or instrumentality, and there exists no condition, event or act which constitutes, or which after notice, lapse of time, or both, would constitute, such a violation or default under any of the foregoing. 17 5F. Title to Properties. Each of Holdings and its Subsidiaries has (i) marketable, sufficient and legal title to its real property (other than real properties which it leases from others) and (ii) good title to all of its other properties and assets (other than properties and assets which it leases from others), in both cases subject to no Lien of any kind except Liens permitted pursuant to Section 6.02 of the Senior Credit Agreement. Each of Holdings and its Subsidiaries enjoys peaceful and undisturbed possession under all leases necessary in any material respect for the operation of its properties and assets and all such leases are valid and subsisting and in full force and effect. 5G. Taxes. Each of Holdings and its Subsidiaries has filed all Federal, state and other income tax returns which are required to be filed, and each has paid all taxes as shown on said returns and on all assessments received by it to the extent that such taxes have become due, or except such as any of the foregoing are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP; and no tax lien has been filed and no claim is being asserted with respect to any tax or other similar charge. To the extent (and only to the extent) that the foregoing representations of this paragraph 5G apply to liabilities related to the Acquired Companies, which liabilities constitute "Retained Liabilities" under the Stock Purchase Agreement, dated March 11, 1996, by and between Tredegar Investments, Inc. and Precise Technology, Inc., such representations are made to the knowledge of Holdings and the Company and shall not be deemed violated by any matter that would not have a Material Adverse Effect, notwithstanding the express terms of such representations. 5H. Conflicting Agreements. Except as set forth on Schedule 5H hereto, neither the execution or delivery of the Related Documents nor the offering, issuance and sale of the Securities or the shares of Common Stock issuable upon exercise of the Warrants, nor fulfillment of or compliance with the terms and provisions hereof and thereof, will conflict in any material respect with, or result in a material breach of the terms, conditions or provisions of, or constitute a material default under, or result in any material violation of, or result in the creation of any material Lien upon any of the properties or assets of Holdings or any of its Subsidiaries pursuant to (i) the Certificate of Incorporation or By-laws of Holdings or any of its Subsidiaries, or (ii) any award of any arbitrator or any material agreement (including any agreement with stockholders), instrument, order, judgment, decree, statute, law, rule or regulation to which Holdings or any of its Subsidiaries is subject. Except as set forth on Schedule 5H hereto, neither Holdings nor any of its Subsidiaries is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of Holdings or any of its Subsidiaries, any material 18 agreement relating thereto or any other contract or agreement (including its Certificate of Incorporation and By-laws) which contains dividend or redemption limitations on any capital stock of Holdings or any of its Subsidiaries, except for the Related Documents. 5I. Offering of Securities. The offer, sale and issuance of the Securities pursuant to this Agreement and the issuance of the Common Stock upon exercise of the Warrants, do not require registration of such securities under the Securities Act or registration or qualification under any applicable state "blue sky" or securities laws (or if so required, has been so registered or qualified). Neither Holdings nor the Company have taken any action which would subject the issuance or sale of any of the Securities to the provisions of Section 5 of the Securities Act or violate the provisions of any securities or "blue sky" law of any applicable jurisdiction. 5J. Broker's or Finder's Commissions. Except for the fee to be paid to Donaldson, Lufkin & Jenrette Securities Corporation for services rendered by it as placement agent, no broker's or finder's fee or commission will be payable by Holdings or any of its Subsidiaries with respect to the issuance and sale of the Securities or the transactions contemplated hereby or under the Related Documents. 5K. Regulation G, etc. Neither Holdings nor any of its Subsidiaries owns or has any present intention of acquiring, any "margin stock" as defined in Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve System (herein called a "margin stock"). None of the proceeds resulting from the sale of the Securities will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of Regulation G. Neither Holdings nor any of its Subsidiaries nor any agent acting on its behalf has taken or will take any action which might cause this Agreement or the Securities to violate Regulation G, Regulation T, Regulation X or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange Act, in each case as in effect now or as the same may hereafter be in effect. 5L. Environmental Matters. Except as set forth on Schedule 5L hereto, to the best knowledge of Holdings or the Borrower: (i) Holdings and each of its Subsidiaries is in compliance with all licenses, permits and other authorizations required under all Environmental Laws, with the exceptions of instances that will not in the aggregate result in any Material Adverse Effect. 19 (ii) Neither Holdings nor any of its Subsidiaries has received written notice of any failure to comply with any applicable Environmental Law that has not been fully satisfied so as to bring the subject property into material compliance with, all Environmental Laws. (iii) All licenses, permits or registrations (or any extensions thereof) required under any Environmental Law for the business of Holdings or any of its Subsidiaries have been obtained and Holdings and its Subsidiaries will be in compliance therewith, except in such instances as will not in the aggregate result in a Material Adverse Effect. (iv) Neither Holdings nor any of its Subsidiaries is in noncompliance with, breach of or default under any applicable writ, order, judgment, injunction or decree where such noncompliance, breach or default would materially and adversely affect the ability of Holdings or any of its Subsidiaries to operate any real property owned or leased by them and no event has occurred and is continuing that, with the passage of time or the giving of notice or both, would constitute such noncompliance, breach or default thereunder. (v) Except in such instances that will not in the aggregate result in a Material Adverse Effect, (A) no Hazardous Substance has been Released (as such term is defined in CERCLA) (and no oral or written notification of such Release has been filed) (whether or not in a reportable or threshold planning quantity) at, on or under any property owned or leased by Holdings or any of its Subsidiaries, or to be acquired or leased by Holdings or any of its Subsidiaries, during the period of Holdings' or any of its Subsidiaries' ownership or lease of such property, or to the knowledge of holdings at any time previous to such ownership or lease, under conditions that require remedial action under applicable Environmental Laws and (B) no property now or previously owned or leased by Holdings or any of its Subsidiaries has, directly or indirectly, transported or arranged for the transportation of any Hazardous Substances to any site listed, or proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any similar Federal, state or foreign list of sites requiring investigation or cleanup. Neither Holdings nor any of its Subsidiaries is aware of any event, condition or circumstance involving environmental pollution or contamination, or employee safety or health relating to the use or handling of, or exposure to, Hazardous Substances, that could result in a Material Adverse Effect. 5M. ERISA. Each of Holdings and its Subsidiaries has fulfilled their respective obligations under the minimum funding standards of ERISA and the Code with respect to each Pension Plan and is in compliance in all material respects with the provisions of ERISA and the Code. Neither Holdings nor any of its Subsidiaries has incurred any liability to the PBGC (other than 20 annual premiums due to the PBGC) or a Pension Plan under Title IV of ERISA. The execution and delivery by Holdings and the Company of this Agreement and the purchase and delivery of the Securities will not involve any prohibited transaction within the meaning of ERISA or Section 4975 of the Code for which a statutory or administrative exemption is not available. Holdings has delivered to the Investors a complete list and accurate description of each Pension Plan or ocher employee benefit plan covered by ERISA maintained or contributed to by Holdings and each of its Subsidiaries. 5N. Possession of Franchises, Licenses, etc. Holdings and each of its Subsidiaries possesses all franchises, certificates, licenses, permits and other authorizations from governmental political subdivisions or regulatory authorities, that are necessary for the ownership, maintenance and operation of its properties and assets, except where the failure to be in such compliance would not have a Material Adverse Effect, and Holdings and each of its Subsidiaries is not in violation of any thereof in any material respect. 5O. Patents, etc. Holdings and each of its Subsidiaries owns or has the right to use all patents, trademarks, service marks, trade names, copyrights, industrial designs, licenses and other rights, free from non-customary burdensome restrictions, which are necessary for the operation of its business substantially as presently conducted. No product, process, method, substance, part or other material presently sold by or employed by Holdings in connection with its business may infringe any patent, trademark, service mark, trade name, copyright, industrial design, license or other right owned by any other Person. No claim or litigation is pending or threatened against or affecting Holdings or any of its Subsidiaries contesting their right to sell or use any such product, process, method, substance, part or other material which would prevent, inhibit or render obsolete the production or sale of any products of, or substantially reduce the projected revenues of, Holdings or any of its Subsidiaries, or otherwise have a Material Adverse Effect. 5P. Holding Company and Investment Company Status. Neither Holdings nor 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", or a "public utility", within the meaning of the Public Utility Holding Company Act of 1935, as amended, or a "public utility" within the meaning of the Federal Power Act, as amended. Neither Holdings nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or an "investment adviser" within the meaning of the Investment Advisers Act of 1940, as amended. 5Q. Governmental Consents. Neither the nature of 21 Holdings or any of its Subsidiaries nor any of their businesses or properties, nor any relationship between Holdings or any of its Subsidiaries and any other Person, nor any circumstance in connection with the offer, issue, sale or delivery of the Securities being purchased by the Investors hereunder is such as to require on behalf of Holdings or any of its Subsidiaries any consent, approval or other action by or any notice to or filing with any court or administrative or governmental body in connection with the execution, delivery and performance of this Agreement, the other Related Documents, the offer, issue, sale or delivery of the Securities being purchased hereunder, the issuance of the shares of Common Stock upon exercise of the Warrants or fulfillment of or compliance with the terms and provisions hereof or the Securities being purchased hereunder, except (i) for such filings or consents all of which have been heretofore made or obtained and (ii) any filings that may be required in connection with the registration of the Securities under federal and state securities laws in connection with any transfer of Securities after the Closing Date. 5R. Insurance Coverage. The business and properties of Holdings and each of its Subsidiaries are insured for the benefit of Holdings, each of its Subsidiaries and the lenders party from time to time to the Senior Credit Agreement in amounts deemed adequate by Holdings' management against risks usually insured against by Persons operating businesses similar to those of Holdings and each of its Subsidiaries in the localities where such properties are located. 5S. Subsidiaries. Schedule 5S hereto sets forth as of the Closing Date a list of all the Subsidiaries (including the Acquired Companies) after giving effect to the Acquisition and the respective jurisdictions of organization thereof. All the outstanding shares of stock of such Subsidiaries have been validly issued and are fully paid and non-assessable and are owned directly or indirectly by Holdings free and clear of any Lien or claim, subject to the pledge by Holdings of all of the Common Stock of the Company and its Subsidiaries pursuant to the Senior Credit Agreement. 5T. Disclosure. This Agreement and the other Related Documents, and the other documents, certificates and written statements furnished to the Investors by or on behalf of Holdings in connection herewith or therewith do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein and therein not misleading. 5U. Registration Rights. Except as contemplated by the Shareholder Agreement and the Pledge Agreement, dated March 28, 1996, between Holdings and NationsBank, N.A., no Person has the right to cause Holdings or any of its Subsidiaries to effect the registration under the Securities Act of any shares of Common Stock or any other securities (including debt securities) of 22 Holdings or any of its Subsidiaries. 5V. Absence of Foreign or Enemy Status. Neither Holdings nor any of its Subsidiaries is (i) a "national" of a foreign country designated in Executive Order No. 8389, as amended, or of any "designated enemy country" as defined in Executive Order No. 9193, as amended, of the President of the United States of America within the meaning of said Executive Orders, as amended, or of any regulation issued thereunder, or a "national" of any "designated foreign country" within the meaning of the Foreign Assets Control regulations, 31 CFR, Part 500, as amended, or of the Cuban Assets Control Regulations, 31 CFR, Part 515, as amended, of the United States Treasury Department; or (ii) an "Iranian entity" or a "person subject to the jurisdiction of the United States" in which an "Iranian entity" has any "interest" within the meaning of the Iranian Assets Control Regulations, 31 CFR, Part 535, as amended. 5W. Agreements With Affiliates. Except as set forth on Schedule 5W hereto, neither Holdings nor any of its Subsidiaries is a party to any contract or agreement with, or any other commitment to, an Affiliate of Holdings or any of its Subsidiaries. 5X. Equity of Holdings. As of the Closing Date, the shares of Common Stock purchased pursuant hereto together with the shares of Common Stock obtained through such exercise of the Warrants would represent in the aggregate the percentage of the Fully Diluted Outstanding Shares of Holdings' Common Stock set forth on Schedule 5X hereto. 6. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor represents and warrants that it is an "accredited investor," as such term is defined in Regulation D under the Securities Act and that it is acquiring the Securities to be purchased by it hereunder for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof in violation of the Securities Act; provided, however, that nothing herein contained shall prevent the Investors from selling or transferring any Securities (i) pursuant to Rule 144 of the Commission promulgated under the Securities Act (or any similar rule or rules then in force) if such rule is available or (ii) in any other transaction that, in the opinion of Willkie Farr & Gallagher (or such other special counsel selected by the Investors and reasonably acceptable to Holdings) addressed to Holdings and the Company, is exempt from the registration provisions of the Securities Act and applicable state securities laws. The fees and expenses of counsel in connection with any such opinion shall be borne by Holdings. In addition, each Investor represents and warrants that it has full power and authority to enter into and perform its obligations under this Agreement and that this Agreement has been duly authorized, executed and delivered by a Person authorized to do so. 23 7. DEFINITIONS. For the purpose of this Agreement, and in addition to terms defined elsewhere in this Agreement, the following terns shall have the following meanings. In addition, all terms of an accounting character not specifically defined herein shall have the meanings assigned thereto by accounting principles generally accepted in the United States of America. "Acquired Companies" shall mean Tredegar Molded Products Company, a Virginia corporation, and its direct and indirect subsidiaries. "Affiliate" shall mean, with respect to any Person, a Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. The Investors shall not be deemed to be an Affiliate of Holdings or any of its Subsidiaries. "Business Day" shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of North Carolina, New York or Pennsylvania) on which banks are open for business in Charlotte, North Carolina, New York City and Pittsburgh. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. ss.ss. 9601 et seq.) and any regulations promulgated thereunder. "Certificate of Designation" shall have the meaning set forth in paragraph 1B. "Closing" shall have the meaning specified in paragraph 2B. "Closing Date" shall have the meaning specified in paragraph 2B. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commission" shall mean the United States Securities and Exchange Commission. "Common Stock" shall have the meaning specified in paragraph 1A. "Company" shall have the meaning specified in the preamble. 24 "Confidential Information Memorandum" shall mean the Confidential Information Memorandum, dated February 1996, delivered to the Investors by the Company's agent, Donaldson, Lufkin & Jenrette Securities Corporation. "Current Indebtedness" means any obligation for borrowed money (including notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money) payable on demand or within a period of one year from the date of creation thereof; provided that any obligation shall be treated as Funded Indebtedness, regardless of its term, if such obligation is renewable pursuant to the terms thereof or of a revolving credit or similar agreement effective for more than one year after the date of the creation of such obligation, or may be payable out of the proceeds of a similar obligation pursuant to the terms of such obligation or of any such agreement. Any obligation secured by a Lien on, or payable out of the proceeds of production from, property of the Corporation or any Subsidiary shall be deemed to be Funded or Current Indebtedness, as the case may be, of the Corporation or such Subsidiary even though such obligation shall not be assumed by the Corporation or such Subsidiary. "Environmental Laws" shall have the meaning specified in paragraph 4P. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. Section references to ERISA are to ERISA as in effect at the date of this Agreement and any subsequent provisions of ERISA amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each trade or business (whether or not incorporated) which together with Holdings or a Subsidiary would be deemed to be a "single employer" within the meaning of Section 4001 of ERISA immediately following the Closing. "Exchange Act" shall mean the United States Securities Exchange Act of 1934, as amended. "Exchange Act Registration Statement" shall have the meaning specified in paragraph 4L. "Exchangeable Preferred Stock" shall have the meaning specified in paragraph 1B. "Fully Diluted Outstanding Shares" shall mean, when used with reference to Common Stock on any date of determination, all shares of Common Stock of Holdings Outstanding at such date and all shares of Common Stock of Holdings issuable in respect of the Warrants issued pursuant to the Warrant Purchase Agreement and any other warrants, options or convertible securities. 25 "Funded Indebtedness" shall mean and include without duplication any obligation payable more than one year from the date of the creation thereof (including the current portion of Funded Indebtedness), which under generally accepted accounting principles is shown on the balance sheet as a liability (including, without limitation, capitalized lease obligations and excluding reserves for deferred income taxes and other reserves to the extent that such reserves do not constitute an obligation). "GAAP" shall mean generally accepted accounting principles consistently applied throughout the period or periods in question. "Governmental Authority" shall mean any governmental agency, authority, instrumentality or regulatory body, other than a court or other tribunal, in each case whether federal, state, local or foreign. "Hamilton Preferred Stock" means the 331.46 shares of 9- 1/2% Preferred Stock, $10,000 per share stated value, of Holdings issued to Hamilton Holdings Ltd. Corporation. "Hazardous Substances" shall have the meaning specified in paragraph 4P. "Indebtedness" shall mean Funded Indebtedness and/or Current Indebtedness. "Indemnitee" shall have the meaning specified in paragraph 4P. "Investor Parties" shall have the meaning set forth in paragraph 4M. "Investors" shall have the meaning set forth in the preamble. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to file any financing statement under the Uniform Commercial Code of any jurisdiction. "margin stock" shall have the meaning set forth in paragraph 5K. "Material Adverse Effect" shall mean (i) a material adverse effect on the business, condition (financial or other), assets, properties, rights, operations or prospects of Holdings and its Subsidiaries taken as a whole or (ii) any effect which could materially adversely affect the ability of Holdings or the 26 Company to perform their respective obligations under any of the Related Documents. "Note Purchase Agreement" shall have the meaning set forth in paragraph 3O. "Officer's Certificate" of a Person shall mean a certificate of the President, one of the Vice Presidents or the Treasurer or Controller of such Person. "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor entity thereto. "Pension Plan" shall mean any single-employer plan, as defined in Section 4001 of ERISA and subject to Title IV of ERISA, which is maintained or contributed to (or previously maintained or contributed to during the five calendar years preceding the Closing) for employees of Holdings, any of its Subsidiaries or any ERISA Affiliates. "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. "Property" shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Public Offering" shall mean the closing of a public offering of securities pursuant to a registration statement declared effective under the Securities Act, except that a Public Offering shall not include an offering made in connection with a business acquisition or an employee benefit plan. "Related Documents" shall mean this Agreement, the Certificate of Designation, the Warrant Purchase Agreement, the Shareholder Agreement, the Note Purchase Agreement and the Senior Credit Agreement. "Released" shall have the meaning set forth in paragraph 5L. "Reportable Event" shall mean an event described in Section 4043(b) of ERISA with respect to which the 30-day notice requirement has not been waived by the PBGC. "Securities" shall have the meaning set forth in paragraph 1B. 27 "Securities Act" shall mean the United States Securities Act of 1933, as amended. "Senior Credit Agreement" shall have the meaning set forth in paragraph 3O. "Shareholder Agreement" shall mean the Shareholder Agreement between Holdings, certain shareholders thereof and the Investors in the form of Exhibit E hereto. "Subordinated Debt" shal1 have the meaning specified in paragraph 3O. "Subsidiary" as to any Person shall mean a corporation or other entity of which shares or similar stock having ordinary voting power to elect a majority of the board of directors or other managers of such corporation or entity are at the time owned, directly or indirectly, through one or more intermediaries, by such Person. Except as otherwise expressly indicated herein, references to Subsidiaries shall mean any Subsidiaries of Holdings. "Warrants" shall have the meaning set forth in paragraph 3M. "Wholly owned" shall mean with respect to any designated Person that all of the shares or similar stock having ordinary voting power to elect the board of directors and Indebtedness in respect of borrowing of such Person is owned by the specified Person or by one or more wholly owned subsidiaries of such specified Person, or both. 8. MISCELLANEOUS. 8A. Home Office Payment. Holdings and the Company agree that, so long as the Investors shall hold any Exchangeable Preferred Stock and/or Warrants, all payments of dividends of redemption or otherwise shall be made not later than 12:00 noon, New York time, on the date such payment is due, by transfer of immediately available funds for credit to the Investors. Such payments shall be made to the account of the Investors specified on the attachments to the signature pages hereto or such other account in the United States as the Investors may designate in writing, notwithstanding any contrary provision contained herein or in the Certificate of Incorporation of Holdings or the Company with respect to the place of payment. Dividends on the shares of Common Stock shall be paid to the holders thereof at the registered address of such holders as shown on the records of Holdings. Each of Holdings and the Company agrees to afford the benefits of this paragraph 8A to any institutional investor of recognized standing which is the direct or indirect transferee of any Security. 28 8B. Indemnification. Holdings and the Company agree, whether or not the transactions hereby contemplated shall be consummated, to pay, and save the Indemnitees harmless against liability for the payment of, all reasonable out-of-pocket expenses arising in connection with the transactions and other agreements and instruments contemplated by this Agreement, including all taxes, together in each case with interest and penalties, if any, and any income tax payable by the Indemnitees in respect of any reimbursement of amounts payable pursuant to this paragraph 8B (but not if such income tax is payable by an Indemnitee solely because it has deducted from income the expenses so reimbursed to it), which may be payable in respect of the execution and delivery of this Agreement including reasonable fees, expenses and disbursement of counsel incurred in connection with the preparation and negotiation of this Agreement, any other agreement or instrument to be executed and delivered in connection with this Agreement, any subsequent modification hereof or thereof or consent hereunder or thereunder (regardless of whether any such modifications or consent becomes effective) or the execution, delivery or acquisition of capital stock issued under or pursuant to this Agreement, printing, reproduction and similar costs, and the reasonable cost and expenses, including reasonable attorneys' fees, incurred by any Indemnitee in enforcing any of its rights hereunder or thereunder, including without limitation reasonable costs and expenses incurred in any bankruptcy case (including reasonable fees and expenses of the Indemnitee's counsel in connection with such bankruptcy case). The fees of counsel to the Investors incurred in connection with the preparation and negotiation of this Agreement shall be paid at the Closing. Each of Holdings and the Company agrees jointly and severally to indemnify the Indemnitees and hold them harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind (including, without limitation, the reasonable fees and disbursements of the Indemnitees' counsel in connection with any investigative, administrative or judicial proceeding, whether or not the Indemnitees be designated a party thereto) which may be incurred by the Indemnitees, relating to or arising out of this Agreement or the Securities or any actual or proposed use of the proceeds of the sale of Securities hereunder, provided that no Indemnitee shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. The obligations of Holdings and the Company under this paragraph 8B shall survive the transfer of any Security or shares of Common Stock issuable upon exercise of any Warrant and the redemption and/or exchange of shares of Exchangeable Preferred Stock. The indemnification required by this paragraph 8B shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liabilities are incurred. 8C. Consent to Amendments. This Agreement may be amended and the observance of any term of this Agreement may be 29 waived with (and only with) the written consent of Holdings, the Company and the holders of at least 66-2/3% of each of the outstanding Exchangeable Preferred Stock and Warrants (voting as a separate class); provided that this Agreement may be amended and the observance of any terms of this Agreement may be waived solely with respect to the holders of either the Exchangeable Preferred Stock or Warrants, as the case may be, with (and only with) the written consent of Holdings, the Company and the holders of at least 66-2/3% of the outstanding Exchangeable Preferred Stock or Warrants, as applicable. 8D. Provisions Applicable if any of the Securities are Sold. The parties acknowledge that, subject to compliance with applicable securities laws, the Investors shall be free to transfer the Securities without restriction. In the event that the Investors should sell or otherwise transfer any of the Securities or any part thereof to any Person other than Holdings or the Company, if any Security shall have been transferred to another holder and such holder shall have designated in writing the address to which communications with respect to Security shall be mailed, all notices, certificates, requests, statements and other documents required to be delivered to the Investors by any provision hereof by reason of the holding of the transferred Security shall also be delivered to such holder at such address. 8E. Restrictive Legends. Each Security and any security issued in exchange therefore shall bear the following (or substantially equivalent) legend on the face or reverse side thereof: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (A) REGISTRATION UNDER OR EXEMPTION FROM THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS AND THE RESPECTIVE RULES AND REGULATIONS THEREUNDER AND (B) UNDER CERTAIN CIRCUMSTANCES, IF REQUESTED BY [PRECISE HOLDING CORPORATION/PRECISE TECHNOLOGY, INC.] (THE "COMPANY"), AN OPINION OF COUNSEL, WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER DOES NOT VIOLATE THE ACT OR ANY APPLICABLE STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND PROVISIONS (INCLUDING TRANSFER RESTRICTIONS) OF A [SECURITIES PURCHASE AGREEMENT, DATED AS OF MARCH 29, 1996, BY AND 30 AMONG PRECISE HOLDING CORPORATION, PRECISE TECHNOLOGY, INC. AND CERTAIN INVESTORS IDENTIFIED THEREIN/SECURITIES PURCHASE AGREEMENT, DATED AS OF MARCH 29, 1996, BY AMONG PRECISE HOLDING CORPORATION, PRECISE TECHNOLOGY, INC. AND THE INVESTORS IDENTIFIED THEREIN AND/OR A WARRANT PURCHASE AGREEMENT, DATED AS OF MARCH 29, 1996, BY AND AMONG PRECISE HOLDING CORPORATION AND CERTAIN OTHER PARTIES IDENTIFIED THEREIN][AND A SHAREHOLDER AGREEMENT, DATED AS OF MARCH 29, 1996, BY AND AMONG PRECISE HOLDING CORPORATION AND CERTAIN OTHER PARTIES IDENTIFIED THEREIN] (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." In addition, the shares of Common Stock issuable upon exercise of the Warrants shall bear at the time of issuance a legend in substantially the form set forth above and any legend required by the state securities or "blue sky" laws of any state in which a registered holder thereof is resident, unless such shares have been registered under the Securities Act. 8F. Survival of Representations and Warranties. All representations and warranties contained herein shall survive the execution and delivery of this Agreement, regardless of any investigation made by the Investors or on their behalf. All statements contained in any certificate or other instrument delivered by or on behalf of Holdings or the Company pursuant to this Agreement shall be deemed representations and warranties of Holdings and the Company under this Agreement. 8G. Successors and Assigns. Except as otherwise provided herein, all covenants and agreements in this Agreement contained by or on behalf of the parties hereto shall bind and inure to the benefit of the respective successors, transferees and assigns of the parties hereto whether so expressed or not and for greater certainty, a purchaser of Exchangeable Preferred Stock or Warrants from any holder thereof will be entitled to the benefits of this Agreement and Holdings and the Company shall be deemed to have received express notice in writing of any such assignment by a request for registration of the Exchangeable Preferred Stock or Warrants, as the case may be, in the name of a subsequent purchaser. 8H. Notices. All communications provided for hereunder shall be sent by first class mail, overnight courier or by fax with hard copy by first class mail or overnight courier and, (i) if to the Investors, addressed to the Investors in the manner (except as otherwise provided in paragraph 8A with respect to payments) in which its address appears on the 31 signature page hereof, with a copy to William J. Grant, Jr., Esq., at Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022-4677, telecopy number (212) 821-8111; (ii) if to Holdings, addressed to it care of Mentmore Holdings Corporation at 1430 Broadway, 13th Floor, New York, New York 10018-3308, telecopy number (212) 391-1393, Attention William L. Remley, with a copies to Richard C. Hoffman, P.C., at 1430 Broadway, 13th Floor, New York, New York 10018-3308 and Michael D. Schenker, Esq., at Kelley, McCann & Livingstone, BP America Building, 35th Floor, 200 Public Square, Cleveland, Ohio 44114- 2302, telecopy number (216) 241-3707; (iii) if to the Company, addressed to it at 501 Mosside Boulevard, North Versailles, Pennsylvania 15137, telecopy number (412) 823-4110, Attention John R. Weeks, with copies to Mentmore Holdings Corporation at 1430 Broadway, 13th Floor, New York, New York 10018-3308, telecopy number (212) 391-1393, Attention William L. Remley, Richard C. Hoffman, P.C., at 1430 Broadway, 13th Floor, New York, New York 10018-3308 and Michael D. Schenker, Esq., at Kelley, McCann & Livingstone, BP America Building, 35th Floor, 200 Public Square, Cleveland, Ohio 441142302, telecopy number (216) 241-3707; or to such other address with respect to any party as such party shall notify the other in writing, and (unless otherwise specified herein) shall be deemed received 24 hours after it is sent if sent via facsimile with receipt confirmed) or overnight courier; provided, however, that any such communication to Holdings or the Company may also, at the option of the Investors, be delivered to any corporate officer of Holdings. 8I. Descriptive Headings. The descriptive headings of the several Sections and paragraphs of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 8J. GOVERNING LAW: CONSENT TO JURISDICTION. THIS AGREEMENT IS BEING DELIVERED AND IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OP SUCH STATE WITHOUT GIVING EFFECT TO THE CHOICE OF LAW OR CONFLICTS OF LAW PRINCIPLES THEREOF. THIS AGREEMENT IS EFFECTIVE ONLY WHEN DELIVERED AND ENTERED INTO BY THE INVESTORS IN NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, HOLDINGS HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF HOLDINGS AND THE COMPANY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE 32 MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO HOLDINGS OR THE COMPANY AT THEIR RESPECTIVE ADDRESSES SET FORTH IN PARAGRAPH 8J, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE INVESTORS OR ANY HOLDER OF A SECURITY TO .0SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST HOLDINGS OR THE COMPANY IN ANY OTHER JURISDICTION. 8K. Delay Fees. If the Closing shall not actually occur on any date on which the Closing is scheduled to occur, and Holdings or the Company shall have failed to notify each Investor prior to 10:00 A.M. local time, in the place in which an Investor is located, on the day prior to such scheduled Closing that such Closing has been postponed, Holdings or the Company shall pay to each Investor (as compensation for such Investors loss of fund and administrative costs) an amount equal to interest on the purchase price for the Securities to have been purchased by each such Investor on such scheduled date at such Closing, at the rate per annum equal to the annual dividend rate on the Exchangeable Preferred Stock, for each day from and including such scheduled date of Closing to but not including the earlier of the date on which such Closing actually occurs or the date on which the amount to be paid by each such Investor as said purchase price is available to such Investor for reinvestment, but in any case not less than one day's interest; provided, however, that neither Holdings nor the Company shall owe any Investor any amount under this paragraph 8K if Holdings and the Company have fulfilled all of their obligations under this Agreement and such Investor is not willing or able to fulfill its obligations on the scheduled date of Closing. 8L. Remedies. In case any one or more of the covenants and/or agreements set forth in this Agreement shall have been breached by Holdings, the Company or any holder of Securities, then Holdings, the Company or any holder of Securities (or any of them), as applicable, may proceed to protect and enforce its or their rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Agreement. Notwithstanding the foregoing or anything else to the contrary contained herein, if, and to the extent, any Indebtedness is outstanding under the Senior Credit Agreement, then in the event that any claim by a holder of Securities against Holdings or the Company is reduced to a cash judgment, such Investor agrees to assign its rights to such cash judgment to the lenders from time to time party to the Senior Credit Agreement. The foregoing provision is intended for the express benefit of, and shall be enforceable by, the lenders from time to time party to the Senior Credit Agreement. Holdings, the Company or an Investor acting pursuant to this paragraph 8L, shall be indemnified against all liability, loss or damage, together with all reasonable costs and expenses related thereto (including 33 reasonable legal and accounting fees and expenaes) in accordance with paragraph 8B. 8M. Entire Agreement. This Agreement, the other Related Documents and the other writings referred to herein or delivered pursuant hereto contain the entire agreement among the parties with respect to the subject matter hereof and supersede all prior and contemporaneous arrangements or understandings with respect thereto. 8N. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 8O. Amendments. This Agreement may not be changed orally, but (subject to the provisions of paragraph 8C) only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. 8P. WAIVER OF TRIAL BY JURY. EACH OF HOLDINGS AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT REFERRED TO HEREIN AND AGREES THAT ANY SUCH DISPUTE SHALL, AT THE OPTION OF ANY INVESTOR AS THE CASE MAY BE, BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. 8Q. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 34 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. PRECISE HOLDING CORPORATION By: /s/ William L. Remley ------------------------------ Name: Title: President PRECISE TECHNOLOGY, INC. By:/s/ William L. Remley ------------------------------ Name: Title: Vice Chairman 35 INVESTORS: The foregoing Agreement is hereby accepted as of the date first above written. DELAWARE STATE EMPLOYEES' RETIREMENT FUND c/o Pecks Management Partners Ltd. One Rockefeller Plaza New York, New York 10020 Attention: Robert J. Cresci By: Pecks Management Partners Ltd., Its Investment Adviser By: /s/ Robert J. Cresci ---------------------------- Robert J. Cresci 167.67 shares of Managing Director Common Stock Purchase Price for Common Stock and Warrants: $503,000 385 shares of Cumulative Exchangeable Preferred Stock Purchase Price: $3,850,000 Tax ID Number: 516-00-0279 Nominee: NAP & COMPANY Bank: Mercantile Safe Deposit & Trust Company 2 Hopkins Plaza Baltimore, MD 21201 Attn: Isabelle Corbett ABA Routing Number: 052-000618 Account Number: 214380-8 for State of Delaware account Physical Delivery: Mercantile Safe Deposit & Trust Company 2 Hopkins Plaza Baltimore, MD 21201 Attn: Connie Philpot INVESTORS: The foregoing Agreement is hereby accepted as of the date first above written. DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC. c/o Pecks Management Partners Ltd. One Rockefeller Plaza New York, New York 10020 Attention: Robert J. Cresci By: Pecks Management Partners Ltd., Its Investment Adviser By: /s/ Robert J. Cresci ---------------------------- Robert J. Cresci 33.33 shares of Managing Director Common Stock Purchase Price for Common Stock and Warrants: $100,000 77 shares of Cumulative Exchangeable Preferred Stock Purchase Price: $770,000 Tax ID Number: 042-809861 Nominee: FUELSHIP COMPANY Bank: State Street Bank & Trust Company One Enterprise Drive Solomon Willard Building, 4A North Quincy, MA 02171 ABA Routing Number: 0110-00028 Account Number: JG10 DDA 34758508 for Master Trust/State Street Bank & Trust Company Boston, MA 02101 BNF: Zeneca Holdings Physical Delivery Via Federal Express: State Street Bank & Trust Company 225 Franklin Street Incoming Securities, Concourse Level Boston, MA 02101 Attn: David Kay Account Name: Zeneca Holdings Acct.# JG10 The foregoing Agreement is hereby accepted as of the date first above written. DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC. c/o Pecks Management Partners Ltd. One Rockefeller Plaza New York, New York 10020 Attention: Robert J. Cresci By: Pecks Management Partners Ltd., Its Investment Adviser By: /s/ Robert J. Cresci ---------------------------- Robert J. Cresci 49 shares of Managing Director Common Stock Purchase Price for Common Stock and Warrants: $147,000 113 shares of Cumulative Exchangeable Preferred Stock Purchase Price: $1,130,000 Tax ID Number: 043-171-204 Nominee: NORTHMAN & CO Bank: State Street Bank & Trust Company One Enterprise Drive Solomon Willard Building, 4A North Quincy, MA 02171 ABA Routing Number: 0110-00028 Account Number: I510 DDA 34758649 for Master Trust/State Street Bank Trust Company Boston, MA 02101 BNF: ICI Americas Physical Delivery Via Federal Express: State Street Bank & Trust Company 225 Franklin Street Incoming Securities, Concourse Level Boston, MA 02101 Attn: David Kay Account Name: ICI Americas Acct.# I510 SECURITIES PURCHASE AGREEMENT SCHEDULE 3J MATERIAL CHANGES 1. The transactions contemplated by the Senior Loan Documents may result in a breach of or constitute a default under the Master Equipment Lease dated June 26, 1995 by and between Iron and Glass Bank and the Company, and the License Agreement by and between Parametric Technology Corporation and the Company in connection therewith. In the Company's judgment, this Equipment Lease is not maternal but is included herein for informational purposes only. 2. The transactions contemplated by the Senior Loan Documents may result in a breach of or constitute a default under each of the Master Equipment Leases 620-003789-000 and 620- 000583-000 by and between Siemens Credit Corporation and the Company, for the lease of two ROLM phone systems with phonemail. In the Company's judgment, these Equipment Leases are not material but are included herein for informational purposes only. 3. The transactions contemplated by the Senior Loan Documents may constitute a default under a Security Agreement dated as of March, 1996 by and between Concord Commercial, Division of Marine Midland Business Loans and the Company in connection with the purchase of one Charmilles Roboform 2000 EDM Machining Center. In the Company's judgment, this Agreement is not material but is included herein for informational purposes only. SECURITIES PURCHASE AGREEMENT SCHEDULE 5B FINANCIAL STATEMENTS 1. In December, 1995, based upon a complaint received from Mentholatum, Tredegar Molded Products Company ("Tredegar") became aware of a potential screw back-out problem with respect to the 1/2" stick being produced at its Graham, NC plant. In January, 1996, as Tredegar was still in the process of investigating the nature and extent of the potential problem, it received two complaints from a second customer, Kaufman Containers, a distributor. Kaufman Containers indicated that one of its customers, Accupack, had experienced some instances of the screw backing out of the assembly during filling. During January, 1996, Tredegar identified the source of the problem. Corrective action was immediately taken. The body mold was pulled from production and modified at the end of January. Tredegar sold approximately 7.2 million sticks prior to correcting the mold. An additional 1 million sticks held in inventory have been destroyed. With respect to Kaufman Containers' complaints, it appears that the screw back-out problems arose when the sticks were filled with material of a waxy consistency. Approximately 3,842,000 sticks with the potential back-out problem were shipped to Kaufman Containers. The problems encountered by Kaufman Containers' other customers have not been significant enough to prompt a product return. The majority of this product is sold to Bonnie Bell. The consistency of Bonnie Bell's product is soft. Repeated internal testing and testing of customer filled samples indicated screw back-out to be minimal to non-existent. (Mentholatum was only provided product samples for testing and did not purchase any of the sticks). On February 27, 1996, Tredegar received a complaint from Kato Laboratories citing a screw back-out problem. Kato Laboratories has requested a product return of all 50,000 sticks (order no. 0278255) shipped to it from the Graham plant during the period in question. The Company has provided replacement product to Kato Laboratories that has been accepted by Kato Laboratories. Kato Laboratories has released the Company from any losses resulting from that order (order no. 0278255). 2. Tredegar encountered certain assembly problems with a new Hoppman machine (SO3) at Tredegar's Graham, NC plant. Hoppman personnel were brought in to address the problems. Tredegar attributes the problems to the Hoppman equipment and considers the work conducted by the Hoppman personnel within the parameters of the purchase price of the equipment. Nonetheless, Hoppman has billed Tredegar approximately $70,000 for the work. Tredegar is reviewing the charges and has not yet paid the bill. 3. Any liability arising under the following litigation, all of which are more fully described on Schedule 5D: (a) Robert M. Smith v. Unity Mold Corporation, Cook County Illinois Circuit Court, Case No. 94L08051, (b) June Garcia v. Unity Mold Corporation, Cook County Illinois Circuit Court, Case No. 94L16848, (c) Sandra van Etten v. Ferdinand Soto and Tredegar Molded Products Company, Worcester County, Massachusetts Superior Court, Case No., 95-2022, and (d) United States of America v. Fairchild Industries, Inc., et al., Case No. JFM-88-2933, United States District Court for the District of Maryland. 4. The Company has been identified as a potentially responsible party in two adjacent New York waste sites, the Envirotek II Superfund Site and the Roblin Steel Site. The Envirotek II Site is a U.S. EPA-lead site. As a "de minimis" party, the Company has entered into an Administrative Order on Consent with U.S. EPA and a "PRP Participation and Funding Agreement" with other site PRPs, and has performed its obligations thereunder. The clean- up at the site is reported to be complete. Because of its involvement as a PRP in the Envirotek II Site, the State of New York has identified the Company as a PRP at the adjacent Roblin Steel Site, with respect to any contamination that may have migrated to the Roblin Steel Site from the Envirotek II Site. The Company has joined with other PRPs in a participation agreement and believes that any potential liability at this site will be apportioned to the Company as a "de minimis" party. 5. In 1991, Tredegar sold injection-molding assets and real estate located in Chicago, Illinois to the assignees of Inhalation Plastics, Inc. Tredegar's contract indemnification obligations are limited to claims "arising or accruing" prior to two years after the closing date, except for matters disclosed in an environmental report delivered at closing, for which there is no time limit on Tredegar's indemnification obligations. To the Company's knowledge, no claims have been made pertaining thereto. 6. In May, 1994, Tredegar sold real estate and an injection-molding facility located in LaGrange, Kentucky. Significant site assessment and remediation activities were conducted before closing. Tredegar indemnified the buyer from all costs and liabilities resulting from on-site contamination existing as of closing, with no time or dollar limitations. To the Company's knowledge, no claims have been made pertaining thereto. 7. Any environmental liabilities, product claims and indemnification liabilities retained by Tredegar in the agreement governing the sale of its former beverage closure assets and business to Crown Cork & Seal Company, Inc. To the Company's knowledge, no claims have been made pertaining thereto. EXCLUDED FROM THIS SCHEDULE 5B ARE ANY LIABILITIES WHICH MIGHT BE CONTINGENT LIABILITIES BUT WHICH ARE "RETAINED LIABILITIES" UNDER SECTION 1.33 OF THE PURCHASE AGREEMENT. SECURITIES PURCHASE AGREEMENT SCHEDULE 5C CAPITAL STOCK AND RELATED MATTERS Capital Stock - -------------
Holders of Holdings - ------------------- Sunderland 8,035 shares of common stock Delaware State Employees' 167.67 shares of common stock Retirement Fund Warrants to purchase 385 shares of common stock Declaration of Trust for Defined 33.33 shares of common stock Benefit Plans of Zeneca Holdings, Inc. Warrants to purchase 77 shares of common stock Declaration of Trust for Defined 49 shares of common stock Benefit Plans of ICI American Warrants to purchase 113 shares of common stock Holdings, Inc. John Hancock Mutual Life Warrants to purchase 570 shares of common stock Insurance Company Rice Partners II, L.P. Warrants to purchase 570 shares of common stock Hamilton Holdings Ltd. Corporation 331.46 shares of 9 1/2% preferred stock, no par, $10,000 per share stated value Holders of the Company - ---------------------- Holdings 125 shares of common stock Delaware State Employees' 385 shares of Series A Cumulative Exchangeable Retirement Fund Preferred Stock Declaration of Trust for Defined 77 shares of Series A Cumulative Exchangeable Benefits Plans of Zeneca Holdings Preferred Stock Inc. Declaration of Trust for Defined 113 shares of Series A Cumulative Exchangeable Benefits Plans of ICI American Preferred Stock Holdings Inc.
Tredegar Investments, Inc. 250 shares of Series B Cumulative Redeemable Preferred Stock
Subsidiaries - ------------ 1,000 shares of common stock of Precise Technology of Delaware, Inc. held by the Company 100 shares of common stock of Precise Technology of Illinois, Inc. held by the Company 1,000 shares of common stock of Tredegar Molded Products Company held by the Company 1,000 shares of common stock of Unity Mold Corporation held by Precise Technology of Illinois, Inc. held by the Company 10 shares of common stock of Polestar Plastics Manufacturing Company held by Tredegar Molded Products Company 10 shares of common stock of Massie Tool, Mold & Die, Inc. Related Matters - --------------- 1. The rights, obligations and restrictions pertaining to the Common Stock, Exchangeable Preferred Stock, and the Warrants contained in the Related Documents. 2. The rights, obligations and restrictions pertaining to the Series B Cumulative Redeemable Preferred Stock of the Company. 3. The rights, obligations and restrictions contained in the Senior Credit Agreement and the other documents and agreements to be delivered thereunder, including, but not limited to the Pledge Agreement and the Pledge & Security Agreement. 4. The rights, obligations and restrictions pertaining to the 9 1/2% Preferred Stock of Holdings. SECURITIES PURCHASE AGREEMENT SCHEDULE 5D ACTIONS PENDING 1. Robert M. Smith v. Unity Mold Corporation, Cook County Illinois Circuit Court, Case No. 94L08051, a retaliatory discharge action. 2. June Garcia v. Unity Mold Corporation, Cook County Illinois Circuit Court, Case No. 94L16848, a retaliatory discharge action. 3. Sandra van Etten v. Ferdinand Soto and Tredegar Molded Products Company, Worcester County, Massachusetts Superior Court, Case No. 95-2022, a personal injury action arising out of a motor vehicle accident. 4. United States of America v. Fairchild Industries, Inc. et al., Case No. JFM-88-2933, United States District Court for the District of Maryland, a cost recovery action against the Company under CERCLA; the Company has signed a comprehensive Settlement Agreement and is awaiting its dismissal from the action. 5. The Company has been identified as a potentially responsible party in two adjacent New York waste sites, the Envirotek II Superfund Site and the Roblin Steel Site. The Envirotek II Site is a U.S. EPA-lead site. As a "de minimis" party, the Company has entered into an Administrative Order on Consent with U.S. EPA and a "PRP Participation and Funding Agreement" with other site PRPs, and has performed its obligations thereunder. The clean- up at the site is reported to be complete. Because of its involvement as a PRP in the Envirotek II Site, the State of New York has identified the Company as a PRP at the adjacent Roblin Steel Site, with respect to any contamination that may have migrated to the Roblin Steel Site from the Envirotek II Site. The Company has joined with other PRPs in a participation agreement and believes that any potential liability at this site will be apportioned to the Company as a "de minimis" party. 6. Lawrence Ramey v. Tredegar Molded Products Company and Polestar Plastics Manufacturing Company, Case No. 4:95-CV-1150, United States District Court for the Middle District of Pennsylvania, an action alleging violations of the Fair Labor Standards Act. A Settlement Agreement and Release of Claims dated as of February 7, 1996 has been entered into by the parties. 7. Pending litigation and claims within the definition of "Retained Liabilities" under Section 1.33 of the Purchase Agreement. 8. The reported contamination, releases and environmental issues referenced in the Phase I Initial Site Investigation Report dated January, 1996, and supplemental reports and test data, prepared by O'Brien & Gere Engineers, Inc. with respect to Tredegar Molded Products Company's South Grafton, Massachusetts facility. SECURITIES PURCHASE AGREEMENT SCHEDULE 5E OUTSTANDING DEBT; DEFAULTS See Schedules 3J and 5B. SECURITIES PURCHASE AGREEMENT SCHEDULE 5H CONFLICTING AGREEMENTS See Schedule 3J and Related Matters on Schedule 5C. SECURITIES PURCHASE AGREEMENT SCHEDULE 5S SUBSIDIARIES Precise Technology, Inc., a Delaware corporation Precise Technology of Delaware, Inc., a Delaware corporation (wholly owned by the Company) Precise Technology of Illinois, Inc., a Delaware corporation (wholly owned by the Company) Unity Mold Corporation, an Illinois corporation (wholly owned by Precise Technology of Illinois, Inc.) Tredegar Molded Products Company, a Virginia corporation (wholly owned by the Company) Polestar Plastics Manufacturing Company, a Virginia corporation (wholly owned by Tredegar Molded Products Company) Massie Tool, Mold & Die, Inc., a Florida corporation (wholly owned by Tredegar Molded Products Company) All of the common stock of all of the Subsidiaries, except the Company, is subject to pledges to NationsBank, N.A. under that certain Pledge and Security Agreement dated as of the Closing Date. SECURITIES PURCHASE AGREEMENT SCHEDULE 5L ENVIRONMENTAL MATTERS 1. See Schedule 5B, item 7. 2. See Schedule 5D, items 4, 5 and 8. 3. Preliminary soil sample test results have identified total petroleum hydrocarbon soil contamination of 200 mg/kg at the location of the septic system leach field at the Company's West Lafayette, Indiana facility. 4. Oil-discolored soil at the Company's West Lafayette, Indiana facility, as evidenced by 1986 correspondence to and from the Indiana Department of Environmental Management. 5. In 1991, Tredegar sold injection-molding assets and real estate located in Chicago, Illinois to the assignees of Inhalation Plastics, Inc. Tredegar's contract indemnification obligations are limited to claims "arising or accruing" prior to two years after the closing date, except for matters disclosed in an environmental report delivered at closing, for which there is no time limit on Tredegar's indemnification obligations. 6. In May, 1994, Tredegar sold real estate and an injection-molding facility located in LaGrange, Kentucky. Significant site assessment and remediation activities were conducted before closing. Tredegar indemnified the buyer from all costs and liabilities resulting from on-site contamination existing as of closing, with no time or dollar limitations. 7. Environmental-related claims, liabilities, losses and expenses which are "Retained Liabilities" under Section 1.33(i) of the Purchase Agreement. SECURITIES PURCHASE AGREEMENT SCHEDULE 5X EQUITY OF HOLDINGS Delaware State Employees' Retirement Fund 5.5267% Declaration of Trust for Defined Benefit Plans 1.1033% of Zeneca Holdings, Inc. Declaration of Trust for Defined Benefit Plans 1.6200% of ICI American SECURITIES PURCHASE AGREEMENT SCHEDULE 5W AGREEMENT WITH AFFILIATES 1. After the Closing Date, the Company will be a party to a Management Agreement with Mentmore Holdings Corporation. 2. The Company is party to certain employment arrangements with John R. Weeks and Michael M. Farrell, who may be deemed to be Shareholders. 3. On or before the Closing Date, Sunderland's unrecorded junior mortgage on the Company's North Versailles, Pennsylvania facility, in the approximate principal amount of $300,000, will be satisfied. 4. On the Closing Date, the $3,000,000 deposit under the Purchase Agreement made on behalf of the Company by Trinity Investment Corp. will be returned to Trinity. 5. Certain out of pocket expenses, including travel expenses, advanced or incurred by Mentmore Holdings Corporation in connection with the Acquisition, will be paid on Closing. EX-10.4 20 NOTE PURCHASE AGREEMENT 10.4 NOTE PURCHASE AGREEMENT This Note Purchase Agreement (this "Agreement"), dated as of March 29, 1996, is by and among PRECISE TECHNOLOGY, INC., a Delaware corporation (the "Company"), JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts mutual life insurance company ("John Hancock"), and RICE PARTNERS II, L.P., a Delaware limited partnership ("Rice") (John Hancock and Rice are individually and collectively referred to herein as the "Purchaser"). Capitalized terms used in this Agreement and not otherwise defined herein are defined in Section 11.1. To induce Purchaser to purchase the Senior Subordinated Notes from the Company, and for $10.00 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows. I. DESCRIPTION OF SENIOR SUBORDINATED NOTES AND COMMITMENT 1.1 Description of Senior Subordinated Notes. The Company will authorize the issuance and sale of the Senior Subordinated Notes which shall be dated the Closing Date, shall be in the aggregate original principal amount of $20,000,000 and shall bear interest at a fixed rate of twelve and one-quarter of one percent (12.25%) per annum; provided, however, that upon the occurrence of any Event of Default, and during the continuation thereof, the unpaid principal amount of the Senior Subordinated Notes shall bear interest at a fixed rate of fourteen and one-quarter of one percent (14.25%) per annum. Interest on the Senior Subordinated Notes shall be computed on the basis of the actual number of days elapsed over a three hundred sixty (360) day year. The Senior Subordinated Notes shall be substantially in the forms attached hereto as Exhibits A-1 and A-2. 1.2 Funding. (a) Subject to the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, the Company agrees to issue and sell to each Purchaser, and each Purchaser agrees to purchase from the Company, one or more Senior Subordinated Notes in the aggregate original principal amount set forth beneath the name of such Purchaser on the signature page of this Agreement. Each Senior Subordinated Note will be delivered to each respective Purchaser in fully registered form, and shall be issued in each Purchaser's name or the name of its respective nominee. (b) On the Closing Date the Company shall deliver to each Purchaser one or more Senior Subordinated Notes in the aggregate original principal amount set forth beneath the name of such Purchaser on the signature page of this Agreement, and upon receipt thereof, each Purchaser shall disburse one hundred percent (100%) of such aggregate principal amount in immediately available funds to such Persons as the Company shall designate in writing. 1 1.3 Use of Proceeds. The proceeds from the sale of the Senior Subordinated Notes shall be used solely to (a) finance a portion of the purchase price of the Acquisition, (b) pay fees and expenses incurred by the Company in connection with the Acquisition, (c) refinance existing Indebtedness of the Company (including the Acquired Companies), and (d) pay fees and expenses payable by the Company to the Purchaser and the Senior Lender under this Agreement and the Senior Loan Agreement. II. PAYMENT AND PREPAYMENT OF SENIOR SUBORDINATED OBLIGATIONS 2.1 Principal and Interest Payments. Principal and interest on the Senior Subordinated Notes shall be due and payable as follows: (a) Unless otherwise accelerated pursuant to the terms hereof, the principal amount of the Senior Subordinated Notes shall be due and payable as follows: (i) $6,666,666.66 of the principal amount of the Senior Subordinated Notes shall be due and payable on March 31, 2004, (ii) $6,666,666.66 of the principal amount of the Senior Subordinated Notes shall be due and payable on March 31, 2005, and (iii) the remaining unpaid principal amount of the Senior Subordinated Notes shall be due and payable on the Termination Date. (b) Interest on the Senior Subordinated Notes shall be due and payable (i) quarterly in arrears on the last day of each calendar quarter (or, if any such day is not a Business Day, on the next succeeding Business Day), commencing June 30, 1996, and (ii) on the Termination Date. 2.2 Optional Prepayments. At the Company's option, upon notice given as provided below, the Company may, at any time and from time to time, prepay all or any part of the principal amount of the Senior Subordinated Notes, by payment to the Holders of the principal amount to be prepaid, plus (a) accrued unpaid interest on the principal amount so prepaid, plus (b) any expenses for which each Purchaser may be entitled to receive payment or reimbursement hereunder or, if the Senior Subordinated Notes are being prepaid in full, the aggregate amount of all other Senior Subordinated Obligations, plus (c) a premium equal to the percentage of the principal amount of the Senior Subordinated Notes so prepaid which is applicable in accordance with the following table based on the date on which such prepayment is made (a "Prepayment Fee") Prepayment Date Premium --------------- ------- Closing Date through March 31, 1997 12.25% April 1, 1997 through March 31, 1998 10.89% April 1, 1998 through March 31, 1999 9.53% April 1, 1999 through March 31, 2000 8.17% April 1, 2000 through March 31, 2001 6.81% April 1, 2001 through March 31, 2002 5.44% April 1, 2002 through March 31, 2003 4.08% 2 April 1, 2003 through March 31, 2004 2.72% April 1, 2004 through March 31, 2005 1.36% April 1, 2005 and thereafter 0.00% In the case of each partial prepayment of the Senior Subordinated Notes, the principal amount of such prepayment shall be paid pro-rata to each Purchaser in accordance with the unpaid principal amount of the Senior Subordinated Notes held by them immediately prior to such prepayment. Each partial prepayment under this Section 2.2 shall be in a principal amount of not less than $250,000 or, if greater than $250,000, then in integral multiples of $50,000. Each prepayment under this Section 2.2 shall be applied first to accrued interest on the principal amount prepaid, second to any applicable Prepayment Fee, third to installments of principal in the inverse order of their maturities, and fourth to any expenses for which each Purchaser may be entitled. The amount of any such prepayment may not be reborrowed by the Company. The Company shall give notice of any optional prepayment to Purchaser not less than thirty (30) days nor more than sixty (60) days before the date of prepayment, specifying in each such notice the date upon which prepayment is to be made and the principal amount (together with accrued interest and any applicable Prepayment Fee) to be prepaid on such date. Notice of prepayment having been so given, the applicable prepayment amount shall become due and payable on the specified prepayment date. The Company shall have no right to prepay the Senior Subordinated Notes except as provided in this Section 2.2 or in Section 2.3. 2.3 Mandatory Prepayments. Any prepayment under this Section 2.3 shall be applied first to accrued interest, second to any applicable Prepayment Fee, third to installments of principal in the inverse order of their maturities, and fourth to any expenses for which each Purchaser may be entitled. The amount of any such mandatory prepayment may not be reborrowed by the Company. The Company shall make mandatory prepayments, together with a premium equal to the Prepayment Fee, in each of the following circumstances: (a) In the event of any public or private offering by the Company or Parent of any of the Company's or Parent's debt or equity securities, the Company shall prepay the Senior Subordinated Obligations in an amount equal to the lesser of (i) the net cash proceeds of any such public or private offering (after any mandatory payments and prepayments in permanent reduction of the Senior Debt required under the Senior Loan Agreement are made with respect thereto), or (ii) the aggregate amount of all Senior Subordinated Obligations (including any applicable Prepayment Fee), such prepayment and Prepayment Fee to be made within five (5) Business Days of receipt of such net proceeds. A refinancing or replacement of the Senior Debt which is permitted under Section 7.1(c) hereof shall not obligate the Company to prepay the Senior Subordinated Notes pursuant to this Section 2.3(a). (b) In the event of any sale or other disposition of any property or properties of the Company or any Subsidiary of the Company (other than a sale or disposition which is (i) not deemed to be an Asset Sale, (ii) permitted by Section 7.3, or (iii) governed by Section 2.3(c) below), the Company shall prepay the Senior Subordinated Obligations in an amount equal to the lesser of (i) the aggregate net cash proceeds of such sales or other dispositions (after any mandatory payments and prepayments in permanent reduction of the Senior Debt required under 3 the Senior Loan Agreement are made with respect thereto) or (ii) the aggregate amount of all Senior Subordinated Obligations (including any applicable Prepayment Fee), such prepayment and Prepayment Fee to be made within five (5) Business Days of receipt of such net proceeds. (c) In the event of any sale or other disposition of all or substantially all of the stock or assets of the Company or any Subsidiary of the Company (other than a sale or disposition permitted by Section 7.3) in a single transaction or series of transactions, the Company shall prepay the Senior Subordinated Obligations in an amount equal to the lesser of (i) the aggregate net cash proceeds of such sales or dispositions (after any mandatory payments and prepayments in permanent reduction of the Senior Debt required under the Senior Loan Agreement are made with respect thereto) or (ii) the aggregate amount of all Senior Subordinated Obligations (including any applicable Prepayment Fee), such prepayment and Prepayment Fee to be made within five (5) Business Days of receipt of such net proceeds. 2.4 Additional Pavements. Except as otherwise provided herein or in the Other Agreements, all Senior Subordinated Obligations, other than principal, premium and interest on the Senior Subordinated Notes, shall be due and payable by the Company to the Holders within thirty (30) days of written demand therefor, and shall bear interest from the date due until paid at the rate of interest then applicable under Section 1.1. Payment of reasonable fees and expenses due and payable on the Closing Date to Purchaser and Purchaser's legal counsel shall be paid in full on the Closing Date. 2.5 Liquidated Damages. Any Prepayment Fee payable pursuant to Section 2.2 or Section 2.3 shall be payable as liquidated damages for loss of the opportunity to recover loan origination expenses and profits over the balance of the term of this Agreement and not as a penalty. 2.6 Direct Payment. The Company will pay all sums becoming due hereunder and on the Senior Subordinated Notes to each Purchaser at the address specified for each Purchaser on Annex I hereto, by wire transfer in U.S. Dollars of Federal Reserve Funds or other immediately available funds, to the account specified for such Purchaser on Annex I, or at such other address or in such other form as such Purchaser shall have designated by notice to the Company at least five (5) Business Days prior to the date of any payment, in each case without presentment and without notations being made thereon. All payments by the Company shall be made without set-off or counterclaim. Any wire transfer shall identify such payment as "Precise Technology, Inc. 12.25% Senior Subordinated Note" and shall identify the payment as principal, premium, interest and/or reimbursement of costs and expenses, together with the applicable date or period to which it relates. 2.7 Payments Payable on Business Days. Payments of all amounts due hereunder or under the Senior Subordinated Notes shall be made on a Business Day. Any payment due on a day that is not a Business Day shall be made on the next Business Day, together with all interest (if any) accrued in the interim. 4 2.8 Interest Laws. Notwithstanding any provision to the contrary contained in this Agreement or any Other Agreement, the Company shall not be required to pay, and Purchaser shall not be permitted to contract for, take, reserve, charge or receive, any compensation which constitutes interest under applicable law in excess of the maximum amount of interest permitted by law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in any Other Agreement or otherwise contracted for, taken, reserved, charged or received, then in such event: (a) the provisions of this Section 2.8 shall govern and control; (b) the Company shall not be obligated to pay any Excess Interest; (c) any Excess Interest that Purchaser may have contracted for, taken, reserved, charged or received hereunder shall be, at Purchaser's option, (i) applied as a credit against the outstanding principal balance of the Senior Subordinated Obligations or accrued and unpaid interest (not to exceed the maximum amount permitted by law), (ii) refunded to the payor thereof, or (iii) any combination of the foregoing; (d) the interest provided for shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Agreement and the Other Agreements shall be deemed to have been, and shall be, reformed and modified to reflect such reduction; and (e) the Company shall have no action against Purchaser for any damages arising due to any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Senior Subordinated Obligations is calculated at the Maximum Rate rather than the applicable rate specified under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Senior Subordinated Obligations shall remain at the Maximum Rate until Purchaser shall have received the amount of interest which Purchaser would have received during such period on such Senior Subordinated Obligations had the applicable rate of interest not been limited to the Maximum Rate during such period. All sums paid or agreed to be paid hereunder or under the Other Agreements for the use, forbearance or detention of sums due shall, to the extent permitted by applicable law, be amortized, pro-rated, allocated and spread throughout the full term of the Senior Subordinated Obligations until payment in full so that the rate or amounts of interest on account of the Senior Subordinated Obligations does not exceed the Maximum Rate. The terms of this Section 2.8 shall be deemed incorporated into each Other Agreement and any other document or instrument between the Company and any Purchaser or directed to the Company by any Purchaser, whether or not specific reference to this Section 2.8 is made. 2.9 Certain Rights and Obligations Among Holders. The provisions of this Section 2.9 are solely for the benefit of the Holders, and neither the Company nor any other Person shall have any rights with respect to or be entitled to enforce this Section 2.9. (a) Sharing of Payments. If, at any time or times, a Holder shall not have received a payment on its Senior Subordinated Note(s), then it shall notify the other Holders of such fact, the amount of such nonpayment, the date or period to which it relates and, subject to the terms of the Senior Subordination Agreement, such other Holders which have received such payments shall remit to the unpaid Holder such amount as is necessary to allocate the aggregate amount of such payments pro rata among all Holders. The amount of any such remittance shall be credited to the Senior Subordinated Note(s) of the Holder to whom it is remitted, and shall not be credited to the Senior Subordinated Note(s) of the remitting Holder. 5 (b) Sharing of Prepayments. Subject to the terms and provisions of the Senior Subordination Agreement, if, at any time or times, a Holder shall receive a prepayment on its Senior Subordinated Note(s), it shall notify the other Holders of the amount and date of such prepayment. If all other Holders shall not have received a pro rata prepayment as agreed, the Holder giving such notice shall remit to the other Holders such amount as is necessary to distribute such prepayment pro rata among all Holders. The amount of any such remittance shall be credited to the Senior Subordinated Note(s) of the Holder to whom it is remitted, and shall not be credited to the Senior Subordinated Note(s) of the remitting Holder. III. REPRESENTATIONS AND WARRANTIES OF PURCHASER 3.1 Representations and Warranties of the Purchaser. Each Purchaser severally and not jointly represents and warrants to the Company as follows: (a) Existence. It is a limited partnership or corporation, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. (b) Authority. It has the right and power and authority to enter into, execute, deliver and perform its obligations under this Agreement, and its partners, officers or agents executing and delivering this Agreement are duly authorized to do so. This Agreement has been duly and validly executed and delivered and constitutes the legal, valid and binding obligation of such Purchaser, enforceable in accordance with its terms. (c) Investor Status. It (i) is an "accredited investor," as that term is defined in Regulation D under the Securities Act of 1933, as amended, and (ii) has such knowledge, skill, sophistication and experience in business and financial matters, based on actual participation, that it is capable of evaluating the merits and risks of the purchase of its Senior Subordinated Note(s) from the Company and the suitability thereof for such Purchaser. (d) Investment for own Account. Except as otherwise contemplated by this Agreement, such Purchaser is acquiring its Senior Subordinated Note(s) for investment for its own account and not with a view to any distribution thereof in violation of applicable securities laws. (e) Legend on Notes. Its Senior Subordinated Note(s) will bear the appropriate legends referencing restrictions on transfer and will not be offered, sold or transferred in the absence of registration or exemption under applicable securities laws. 3.2 Representations and Warranties of John Hancock. John Hancock represents and warrants to the Company that, with respect to each source of funds to be used by it to purchase its Senior Subordinated Notes and its Warrants (respectively, the "Source"), at least one of the following statements is accurate as of the Closing Date: 6 (a) The Source is an "insurance company general account," as such term is defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 (issued July 12, 1995) (PTE 95-60), and the purchase is exempt under the provisions of PTE 95-60; (b) The Source is a "governmental plan" as defined in Title I, Section 3(32) of ERISA; (c) The Source is either (i) an insurance company pooled separate account, and the purchase is exempt in accordance with Prohibited Transaction Exemption 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, in which case the purchase is exempt in accordance with PTE 91-38 (issued July 12, 1991); (d) The Source is an "investment fund" managed by a "qualified professional asset manager" or "QPAM" (as defined in Part V of PTE 84-14, issued March 13, 1984) which QPAM has been identified in writing, and the purchase is exempt under PTE 84-14 provided that no other party to the transaction described in this Agreement and no "affiliate" of such other party (as defined in Section V(c) of PTE 84-14) has at this time, and has not exercised at any time during the immediately preceding year, the authority to appoint or terminate said QPAM as manager of the assets of any "plan" identified in writing pursuant to this paragraph (d) or to negotiate the terms of said QPAM's management agreement on behalf of any such identified "plans"; or (e) The Source is one or more "plans" or a separate account or trust fund comprised of one or more "plans," each of which has been identified in writing pursuant to this paragraph (e). As used in this Article III, "plan" or "plans" shall have the meaning set forth in Title I, Section 3(3) of ERISA. IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY To induce each Purchaser to enter into this Agreement, the Company represents and warrants to each Purchaser that the following statements are, and after giving effect to the Acquisition will be, true, correct and complete: 4.1 Corporate Existence and Authority. The Company and each of its Subsidiaries (including the Acquired Companies) (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) has all requisite corporate power and authority to own its assets and carry on its business as now conducted; and (c) is qualified to do business in all jurisdictions in which the nature of its business makes such qualification necessary and where failure to be so qualified would have a Material Adverse Effect. The Company has the corporate power and authority to execute, deliver, and perform its obligations under this Agreement, the Acquisition Documents, the Senior Loan Documents, and all Other Agreements to which it is or in connection with the transactions contemplated hereby, may become, a party. Each of the Company's Subsidiaries has the corporate power and authority 7 to execute, deliver, and perform its obligations under the Other Agreements to which it is or in connection with the transactions contemplated hereby, may become, a party. 4.2 Financial Statements Undisclosed Liabilities. (a) The Company has heretofore furnished to Purchaser (i) its consolidated balance sheets and statements of operations and cash flows as of and for the fiscal years ended December 31, 1993, 1994 and 1995 audited by and accompanied by the unqualified opinion of, in the case of the 1995 statements, Ernst & Young L.L.P. and, in the case of the 1993 and 1994 statements, Grant Thorton, independent public accountants and (ii) the consolidated balance sheets and statements of operations and cash flows of the Acquired Companies as of and for the fiscal years ended December 31, 1994 and 1995, audited by and accompanied by the unqualified opinion of Coopers & Lybrand, independent public accountants (the financial statements referred to in clauses (i) and (ii) above, collectively, the "Financial Statements"). The Financial Statements present fairly in accordance with GAAP, the consolidated financial position and the consolidated results of operations and cash flows of the Company and its Consolidated Subsidiaries or the consolidated financial position and the consolidated results of operations and cash flows of the Acquired Companies, as applicable, as of such dates and for such periods. Except as disclosed on Schedule 4.2(a), the balance sheets and the notes thereto included in the Financial Statements disclose all material liabilities, actual or contingent, of the Company and its Consolidated Subsidiaries or, to the knowledge of the Company, of the Acquired Companies, as applicable, as of the dates thereof. The Financial Statements were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto). The Financial Statements are consistent in all material respects with the information included in the Confidential Information Memorandum. Attached hereto as Schedule 4.2(b) are earnings projections of the Company for the period beginning on January 1, 1996 through December 31, 2001, together with a written statement of the assumptions underlying them. Such earnings projections have been prepared in good faith based on estimates and assumptions believed by the Company to be reasonable as of the date such projections were prepared. (b) The Company has heretofore delivered to Purchaser its unaudited consolidated balance sheet as of the Closing Date, prepared on a pro forma basis after giving effect to the Acquisition. Such pro forma balance sheet has been prepared in good faith by the Company, based on the assumptions used to prepare the pro forma financial information contained in the Confidential Information Memorandum (which assumptions are believed by the Company on the date hereof and on the Closing Date to be reasonable), is based on the best information available to the Company as of the date of delivery thereof, accurately reflects all material adjustments required to be made to give effect to the Acquisition and presents fairly on a pro forma basis the estimated consolidated financial position of the Company and its Consolidated Subsidiaries as of December 31, 1995, assuring that the Acquisition had actually occurred on that date. The Company has no reason to believe that such pro forma balance sheet is misleading in any material respect in light of the circumstances existing at the time of the preparation thereof. 4.3 Default. Except as disclosed on Schedule 4.3, neither the Company nor any of its Subsidiaries is in violation of any material provision under any material loan agreement, 8 indenture, mortgage, security agreement, lease, franchise, permit, license or other agreement or obligation to which it is a party or by which any of its properties is bound, which violation or violations could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. The Company and each of its Subsidiaries is paying its Indebtedness as it becomes due. 4.4 Authorization: Governmental Consents and Approvals. The execution, delivery and performance by each of the Company and its Subsidiaries (including the Acquired Companies) of this Agreement, the Acquisition Documents, the Senior Loan Documents and the Other Agreements to which it is or will be a party (including the exercise of remedies thereunder) and the consummation of the Acquisition (a) have been duly authorized by all requisite corporate and, if required, stockholder action and (b) will not (i) violate in any material respect any provision of law, statute, rule or regulation or any order of any Governmental Authority, (ii) violate any provision of the certificate of incorporation or other constitutive documents or by-laws of the Company and its Subsidiaries (including the Acquired Companies), (iii) violate in any material respect any provision of any indenture, material agreement or other material instrument to which the Company or any of its Subsidiaries (including the Acquired Companies) is a party or by which any of them or any of their property is or may be bound, except as set forth on Schedule 4.4, (iv) except as set forth on Schedule 4.4, be in conflict in any material respect with, result in a breach in any material respect of or constitute (alone or with notice or lapse of time or both) a material default or give rise to material increased, additional, accelerated or guaranteed rights of any Person under any such indenture, material agreement or other material instrument or (v) except for the Liens in favor of the Senior Lender arising out of the Senior Loan Documents, result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Company or any of its Subsidiaries (including the Acquired Companies). No action, consent or approval of, registration or filing with, or any other action by any Governmental Authority is or will be required in connection with the Acquisition or the performance by the Company or any of its Subsidiaries (including the Acquired Companies) of this Agreement, the Acquisition Documents, the Senior Loan Documents and the Other Agreements to which it is or will be a party, except (a) in each case, such as have been made or obtained and are in full force and effect and (b) for transfers of immaterial local permits and other similar ministerial matters that will be properly addressed promptly after the Closing Date. 4.5 Environmental Condition of the Property. To the best of the Company's knowledge, except as disclosed on Schedule 4.5 and except for matters that could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect: (a) The location, construction, occupancy, operation and use of the Property do not violate in any material respect any material applicable law, statute, ordinance, rule, regulation, order or determination of any governmental authority or other body exercising similar functions, or any restrictive covenant or deed restriction (recorded or otherwise) affecting the Property in any material way, including, without limitation, all applicable zoning ordinances, flood disaster, occupational health and safety laws and Environmental Laws and regulations (hereinafter sometimes collectively called "applicable laws"); 9 (b) Without limitation of paragraph (a) above, neither the Company nor the Property is subject to any existing, pending or threatened material investigation or inquiry by any governmental authority or subject to any remedial obligations due to violations of applicable laws; (c) Neither the Company nor any of its Subsidiaries is subject to any material liability or obligation relating to (i) the environmental conditions on, under or about the Property, including, without limitation, the soil and ground water conditions at the Property, or (ii) the use, management, handling, transport, treatment, generation, storage, disposal, release or discharge of any Polluting Substance; (d) There is no Polluting Substance that currently poses any material risk to human safety or health on, under or about the Property; (e) Each of the Company and its Subsidiaries has taken reasonable steps to determine and hereby represents and warrants that no Polluting Substances have been disposed of or otherwise released on, onto, into, or from the Property in an amount which would require remedial action under applicable Environmental Laws; and (f) Each of the Company and its Subsidiaries has been issued all material required federal, state and local licenses, certificates or permits relating to the Property, and each of the Company's and its Subsidiaries' facilities, business, assets, leaseholds and equipment are all in compliance in all material respects with all applicable federal, state and local laws, rules and regulations relating to, air emissions, water discharge, noise emissions, solid or liquid waste disposal, Polluting Substances, or other environmental, health or safety matters. 4.6 Solvency. After giving effect to the Acquisition and the transactions contemplated by the Senior Loan Agreement, this Agreement and the Other Agreements, the Company will be solvent, able to pay its debts as they mature, have capital reasonably sufficient to carry on its business and all businesses in which it is about to engage, and (a) the assets of the Company, at a fair valuation, exceed the total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of the Company; (b) current projections which are based on underlying assumptions which provide a reasonable basis for the projections and which reflect the Company's judgment based on present circumstances, the most likely set of conditions and the Company's most likely course of action for the period projected, demonstrate that the Company will have sufficient cash flow to enable it to pay its debts as they mature; and (c) the Company does not have an unreasonably small capital base with which to engage in its anticipated business. 10 For purposes of paragraph (a) of this Section 4.6, the "fair valuation" of the assets of the Company shall be determined on the basis of the amount which may be realized within a reasonable time, either through collection or sale of such assets at market value, deeming the latter as the amount which could be obtained for the property in question within such period by a capable and diligent businessman from an interested buyer who is willing to purchase under ordinary selling conditions. 4.7 Litigation and Judgments. Except as disclosed on Schedule 4.7, there is no action, suit, proceeding or investigation before any court, governmental authority or arbitrator pending for which service of process or other written notice has been received, or to the knowledge of the Company threatened, against or affecting the Company or any of its Subsidiaries, this Agreement, the Acquisition Documents, the Senior Loan Documents and/or the Other Agreements. Except as disclosed on Schedule 4.7, there are no outstanding judgments against the Company or any of its Subsidiaries. None of the matters listed on Schedule 4.7 could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. 4.8 Rights in Properties; Liens. Each of the Company and its Subsidiaries has good and indefeasible title to all properties and assets reflected on its balance sheets (except for (a) minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes, and (b) the rights of its equipment lessors under its capitalized leases identified as such on such balance sheets), and none of such properties or assets is subject to any Liens, except Permitted Liens. Each of the Company and its Subsidiaries enjoys peaceful and undisturbed possession under all leases necessary for the operation of its other properties, assets, and businesses and all such leases are valid and subsisting and are in full force and effect. There exists no default by the Company or any of its Subsidiaries under any provision of any lease which would permit the lessor thereunder to terminate any such lease or to exercise any rights under such lease which, individually or together with all other such defaults, could have a Material Adverse Effect. Each of the Company and its Subsidiaries has the exclusive right to use all of the Intellectual Property necessary or desirable to its business as presently conducted, and, to the best of the Company's knowledge, neither the Company's nor any of its Subsidiaries' use of the Intellectual Property infringes on the rights of any other Person. To the best of the Company's knowledge, no other Person is infringing the rights of the Company or any of its Subsidiaries in any of the Intellectual Property. 4.9 Enforceability. This Agreement, the Acquisition Documents, the Senior Loan Documents and the Other Agreements to which the Company or any of its Subsidiaries (including the Acquired Companies) is a party, when delivered, shall constitute the legal, valid and binding obligations of such Person enforceable against such Person in accordance with their respective terms, except to the extent that such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors' rights generally, or (b) general principles of equity. 11 4.10 Indebtedness. Neither the Company nor any of its Subsidiaries has any Indebtedness, except Permitted Indebtedness. All Indebtedness owed by the Company and its Subsidiaries to any Affiliate is set forth on Schedule 4.10. 4.11 Tax Returns. Each of the Company and its Subsidiaries (including the Acquired Companies) has filed or caused to be filed all Federal, state and local tax returns required to be filed by it and has paid or caused to be paid all taxes shown to be due and payable on such returns or on any assessments received by it, except taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its financial statements. No election under Section 338 of the Code will be made with respect to the Acquisition. Except for matters that are immaterial, the Company knows of no pending investigation of the Company by any taxing authority or pending but unassessed tax liability of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has made a presently effective waiver of any applicable statute of limitations or request for an extension of time to file a tax return, and neither the Company nor any of its Subsidiaries is a party to any tax-sharing agreement. To the extent (and only to the extent) that the foregoing representations of this Section 4.11 apply to liabilities related to the Acquired Companies, which liabilities constitute "Retained Liabilities" under the Purchase Agreement, such representations are made to the knowledge of the Company and shall not be deemed violated by any matter that would not have a Material Adverse Effect, notwithstanding the express terms of such representations. 4.12 Use of Proceeds; Margin Securities. The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any extension of credit under this Agreement will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying margin stock. Neither the Company, any of its Subsidiaries, nor any Person acting on their behalf has taken any action that might cause the transactions contemplated by this Agreement, the Acquisition Documents, the Senior Loan Documents or any Other Agreements to violate Regulations G, T, U or X or to violate the Securities Exchange Act of 1934, as amended. 4.13 Employee Benefit Plans. (a) After giving effect to the Acquisition, each of the Company and the Commonly Controlled Entities will be in compliance in all material respects with the applicable provisions of ERISA and the regulations and published interpretations thereunder. Neither a Reportable Event nor an "accumulated funding deficiency"(within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred within the five years prior to the Closing Date with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. Except as set forth in Schedule 4.13, no termination of a Single Employer Plan has occurred or is contemplated and no Lien in favor of the PBGC or a Plan has arisen during the five years prior to the Closing Date. No prohibited transaction under ERISA or the Code has occurred with respect to any Multiemployer Plan or Single Employer Plan which could have a Material Adverse Effect. 12 (b) The present value of all accrued benefits under each Single Employer Plan in which the Company or any Commonly Controlled Entity is a participant (based on those assumptions used to fund the Plans) did not, as of the last annual valuation date prior to the most recent date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits, except to the extent that such excess amounts for all such underfunded Plans equal no more than $250,000 in the aggregate at any time outstanding. (c) Neither the Company nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Company nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Company or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the last valuation date prior to the Closing Date. (d) No such Multiemployer Plan is in "reorganization" or "insolvent," within the meaning of such terms as used in ERISA. (e) Neither the Company nor any Commonly Controlled Entity has any liability for post retirement benefits to be provided to its current and former employees. (f) To the extent (and only to the extent) that the foregoing representations in this Section 4.13 apply to liabilities related to the Acquired Companies, which liabilities constitute "Retained Liabilities" under the Purchase Agreement, such representations are made to the knowledge of the Company and shall not be deemed violated by any matter that would not have a Material Adverse Effect, notwithstanding the express terms of such representations. (g) Neither (i) the execution and delivery of this Agreement by the Company, (ii) the offer, issuance, sale and delivery by the Company to John Hancock of its Senior Subordinated Notes and Warrants, (iii) the acquisition of the Senior Subordinated Notes and Warrants by John Hancock, (iv) the application by the Company of the proceeds of the sale of the Senior Subordinated Notes and Warrants nor (v) the consummation of any of the other transactions contemplated by this Agreement will result in a "prohibited transaction" as described in Section 406(a) of ERISA or a tax under Section 4975 of the Code. The representation by the Company in the preceding sentence is made in reliance upon the representations made by John Hancock in Section 3.2 hereof as to the Source to be used by John Hancock to purchase its Senior Subordinate Notes and Warrants. 4.14 Delivery of Acquisition Documents. Purchaser has received complete copies of the Acquisition Documents and all documents executed in connection with the Acquisition (including all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof. None of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written agreement or instrument which has heretofore been delivered to Purchaser. 13 4.15 Disclosure. No representation or warranty made by the Company in this Agreement, the Senior Loan Documents, the Acquisition Documents or any Other Agreement to which the Company is a party contains any untrue statement of material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no fact known to the Company which the Company has determined has a Material Adverse Effect, or which the Company has determined could have a Material Adverse Effect, that has not been disclosed in writing to Purchaser. 4.16 Subsidiaries and Capitalization. Schedule 4.16 sets forth as of the Closing Date a list of all Subsidiaries of the Company (including the Acquired Companies) and the respective jurisdictions of organization thereof. All the issued and outstanding shares of Capital Stock of the Company and its Subsidiaries are duly authorized, validly issued, fully paid and nonassessable. The capitalization of the Company and its Subsidiaries on the Closing Date is set forth on Schedule 4.16. No violation of any preemptive rights of shareholders of the Company has occurred by virtue of the transactions contemplated under this Agreement, the Acquisition Documents, the Senior Loan Documents or any Other Agreement. There are no outstanding contracts, options, warrants, instruments, documents or agreements binding upon the Company or any of its Subsidiaries granting to any Person or group of Persons any right to purchase or acquire shares of the Company's or any of its Subsidiaries' Capital Stock. 4.17 Current Locations. Schedule 4.17 identifies (a) each of the Company's and its Subsidiaries' principal place of business and chief executive office, (b) all the locations where each of the Company and its Subsidiaries maintains any books or records relating to any of its assets, (c) all other locations where the Company and its Subsidiaries has a place of business, and (d) each address where any of the Company's or its Subsidiaries' assets are located. Schedule 4.17 accurately indicates whether each such location is owned or leased, and, if leased, identifies the owner of such location. No Person other than the Company has possession of any material amount of the assets of the Company except as disclosed on Schedule 4.17. 4.18 Investment Company Act. Neither the Company, any of its Subsidiaries, nor any company controlling the Company or any of its Subsidiaries is required to be registered as an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 4.19 Public Utility Holding Company Act. Neither the Company nor any of its Subsidiaries is a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.20 No Burdensome Restrictions. Neither the Company nor any of its Subsidiaries is a party to, or bound by any agreement, condition, contract or arrangement which has, or which the Company reasonably expects in the future will have, a Material Adverse Effect. 4.21 Securities Laws. The Company has complied with or is exempt from the registration and/or qualification requirements of all federal and state securities or blue sky laws applicable to the issuance or sale of the Senior Subordinated Notes. 14 4.22 No Labor Disputes. Neither the Company nor any of its Subsidiaries is involved in any labor dispute. There are no strikes or walkouts or union organization of any of the Company's or any of its Subsidiaries employees threatened or in existence and, except as set forth on Schedule 4.22, no labor contract is scheduled to expire during the term of this Agreement. Each of the Company and its Subsidiaries is in compliance with all laws, rules, regulations, orders and decrees applicable to it and its properties, except for instances of noncompliance which, individually or in the aggregate, will not have a Material Adverse Effect. 4.23 Brokers. Neither the Company nor any of its shareholders has dealt with any broker, finder, commission agent or other Person in connection with the Acquisition or other transactions referenced in or contemplated by this Agreement, nor is the Company or any of its shareholders under any obligation to pay any broker's fee or commission in connection with such transactions, except as set forth on Schedule 4.23. 4.24 Insurance. The amount and types of insurance carried by each of the Company and its Subsidiaries, and the terms and conditions thereof, are substantially similar to the coverage maintained by companies in the same or similar business as the Company and its Subsidiaries, respectively and similarly situated, and include, without limitation, property and casualty insurance, general liability insurance, business interruption insurance and other insurance in the amounts and of the types described in Section 6.12 hereof. 4.25 Conduct of Business. On the Closing Date, the Company and its Subsidiaries are engaged only in businesses of the type described on Schedule 4.25. 4.26 Senior Debt. Simultaneously with the issuance of the Senior Subordinated Notes, the Senior Lender will provide the Company with a revolving loan facility in an amount not to exceed $13,000,000 and a term loan facility in an amount not to exceed $40,000,000, each pursuant to the Senior Loan Agreement. The Company expects that a total of approximately $45,000,000 of the Senior Debt will be advanced by the Senior Lender to the Company on the Closing Date. V. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER Each Purchaser's obligations hereunder shall be subject to (a) the performance by the Company of its obligations hereunder which by the terms hereof are to be performed on or prior to delivery of the Senior Subordinated Notes, and (b) the satisfaction of the following conditions on or before the Closing Date: 5.1 Effectiveness of Senior Loan Documents. The Senior Loan Documents shall have been duly executed and delivered by the parties thereto and shall be on terms and conditions reasonably satisfactory to Purchaser. On the Closing Date, the Senior Loan Documents shall not have been amended or modified, nor any condition thereof waived by the Company in a manner adverse in any material respect to the rights or interests of the Purchaser, without the prior written consent of the Purchaser. 15 5.2 Effectiveness of Senior Subordination Agreement. The Senior Subordination Agreement shall have been duly executed and delivered by the parties thereto, and shall be on terms and conditions which are satisfactory to Purchaser. 5.3 Minimum Availability. The Company shall have available cash and immediately accessible availability under the Senior Debt in an amount equal to not less than $7,000,000 on the Closing Date after giving affect to the payment of (a) prior Indebtedness of the Company and the Acquired Companies, (b) all fees payable to Purchaser under the terms of this Agreement, and (c) all costs and expenses arising as a result of the transactions contemplated by this Agreement, the Acquisition Documents, the Senior Loan Documents and any Other Agreement to which the Company, Parent and/or either of their Subsidiaries is a party, and Purchaser shall have received satisfactory evidence thereof. 5.4 Stockholders Equity. Stockholders equity of the Company shall be not less than $14,250,000 on the Closing Date, and Purchaser shall have received satisfactory evidence thereof. 5.5 Preferred and Common Stock. The (a) Company shall receive, simultaneously with the issuance of the Senior Subordinated Notes, not less than $5,750,000 in cash from Pecks in exchange for the issuance to Pecks of the Pecks Preferred Stock, (b) Company shall issue to Tredegar Investments, simultaneously with the issuance of the Senior Subordinated Notes, the Seller Preferred Stock as partial consideration for the purchase price of the Acquisition, and (c) Parent shall receive, simultaneously with the issuance of the Senior Subordinated Notes, not less than $750,000 in cash from Pecks in exchange for the issuance to Pecks of 250 shares of common stock of Parent and warrants to purchase 575 shares of common stock of Parent all of the foregoing on terms reasonably satisfactory to Purchaser, and Purchaser shall receive satisfactory evidence thereof. 5.6 Limitation on Fees and Expenses. No fees shall have been paid by the Company to Mentmore or any of its Affiliates or any Affiliate of the Company (other than reasonable legal fees payable to Richard C. Hoffman, counsel to Mentmore) relating to the closing of the financing contemplated by this Agreement. The aggregate amount of reimbursable expenses payable by the Company to Mentmore or any of its Affiliates relating to the closing of the financing contemplated by this Agreement shall not exceed $300,000, and the Company shall have provided the Purchaser with a detailed listing of such reimbursable expenses on Schedule 5.6 hereto. 5.7 Acquisition. The Acquisition. Documents shall have been duly executed and delivered by the parties thereto and shall be on terms and conditions satisfactory to Purchaser. On the Closing Date, the Acquisition Documents shall not have been altered, amended or otherwise changed or supplemented or any condition therein waived in a manner adverse in any material respect to the rights or interests of Purchaser, without the prior written consent of Purchaser, including, but not limited to, the amount or type of consideration to be paid in connection with the Acquisition and the contents of all disclosure schedules and exhibits. 16 5.8 Due Diligence. The results of Purchaser's due diligence regarding the Company and the Acquisition shall be satisfactory to Purchaser, and Purchaser shall be satisfied with the assets and books and records and the business and financial condition of the Company, after giving effect to the Acquisition. 5.9 Approval. Each Purchaser's investment committee shall have approved the purchase of its Senior Subordinated Notes on the terms set forth herein and in the Other Agreements. 5.10 No Litigation; Consummation of Transactions. No injunction, preliminary injunction, or temporary restraining order shall be threatened or shall exist which prohibits or may prohibit the transactions contemplated herein or any other related transaction, and no litigation or similar proceeding (including, without limitation, any litigation or other proceeding seeking injunctive or similar relief) shall be threatened or shall exist with respect to the transactions contemplated herein, which, if adversely determined, could in the judgment of Purchaser have a Material Adverse Effect. 5.11 Documents. Purchaser shall have received the following, each in form and substance satisfactory to Purchaser: (a) Senior Subordinated Notes. The Senior Subordinated Notes issued in the name of each Purchaser duly executed by the Company; (b) Warrant and Warrant Documents. The Warrants, duly issued by Parent to each Purchaser in the denominations specified on Annex I hereto, along with the other fully executed Warrant Documents and all other documents and instruments required pursuant thereto; (c) Junior Subordination Agreements. A junior subordination agreement duly executed in favor of Purchaser by each Affiliate to whom the Company owes Indebtedness; (d) Other Agreements. The Other Agreements, duly executed by the parties thereto; (e) Insurance. Certificates of insurance with respect to all insurance policies and endorsements thereto required by Section 6.12, together with a certificate from an insurance broker acceptable to Purchaser, confirming that the amount of such insurance coverage and the terms and conditions thereof are substantially similar to policies maintained by companies similarly situated to the Company and engaged in the same or a similar business; (f) Approvals and Consents. Copies, certified by the Company of all material consents, authorizations, filings, licenses and approvals, if any, required in connection with the consummation of the Acquisition, the execution, delivery and performance by the Company, or the validity and enforceability of, this Agreement, the Senior Loan Documents, the Acquisition Documents or the Other Agreements to which the Company is a party; 17 (g) Opinion of Counsel to the Company. The written legal opinion of Kelley, McCann & Livingstone, general counsel to the Company and Parent, and Winston & Strawn, special New York counsel to the Company and Parent, each of which shall be satisfactory in form and substance to the Purchaser; and written permission from each other legal counsel issuing a legal opinion to the Company, Parent or the Senior Lender in connection with the Acquisition Documents or Senior Loan Documents (other than local legal counsel to the Senior Lender), authorizing the Purchaser to rely on such opinion. (h) General Certificate of the Company's Assistant Secretary. A certificate of the Assistant Secretary of the Company together with true, correct and complete copies of the following: (i) Certificate of Incorporation. The Certificate of Incorporation of the Company, including all amendments thereto, certified by the Secretary of State of the state of its incorporation and dated within thirty (30) days prior to the Closing Date; (ii) Bylaws. The Bylaws of the Company, including all amendments thereto; (iii) Resolutions. The resolutions of the Board of Directors of the Company authorizing the execution, delivery and performance of this Agreement, the Acquisition Documents, the Senior Loan Documents, and the Other Agreements to which the Company is a party and authorizing the issuance of the Pecks Preferred Stock and the Seller Preferred Stock; (iv) Existence and Good Standing Certificates. Certificates of the appropriate government officials of the state of incorporation of the Company as to its existence and good standing, and certificates of the appropriate government officials in each state where the Company does business and where failure to qualify as a foreign corporation would have a Material Adverse Effect, as to its good standing and due qualification to do business in such state, each dated within sixty (60) days prior to the Closing Date; and (v) Incumbency. The names of the officers of the Company authorized to sign this Agreement and the Other Agreements to be executed by the Company, together with a sample of the true signature of each such officer; (i) General Certificate of Parent's Assistant Secretary. A certificate of the Assistant Secretary of Parent together with true and correct copies of the following: (i) Certificate of Incorporation. The Certificate of Incorporation of Parent, including all amendments thereto, certified by the Secretary of State of the state of its incorporation and dated within thirty (30) days prior to the Closing Date; 18 (ii) Bylaws. The Bylaws of Parent, including all amendments thereto; (iii) Resolutions. The resolutions of the Board of Directors of Parent authorizing the execution, delivery and performance of the Other Agreements to which Parent is a party and authorizing the issuance of the Warrants; (iv) Existence and Good Standing Certificates. Certificates of the appropriate government officials of the state of incorporation of Parent as to its existence and good standing, and certificates of the appropriate government officials in each state where Parent does business and where failure to qualify as a foreign corporation would have a Material Adverse Effect, as to its good standing and due qualification to do business in such state, each dated within sixty (60) days prior to the Closing Date; and (v) Incumbency. The names of the officers of Parent authorized to sign the Other Agreements to be executed by Parent, together with a sample of the true signature of each such officer; (j) General Certificate of each Subsidiary's Assistant Secretary. A certificate of the Assistant Secretary of each Subsidiary of the Company together with true and correct copies of the following: (i) Certificate of Incorporation. The Articles/Certificate of Incorporation of such Subsidiary, including all amendments thereto, certified by the Assistant Secretary of such Subsidiary and dated within thirty (30) days prior to the Closing Date; (ii) Bylaws. The Bylaws of such Subsidiary, including all amendments thereto; (iii) Resolutions. The resolutions of the Board of Directors of such Subsidiary authorizing the execution, delivery and performance of the Other Agreements to which such Subsidiary is a party; (iv) Existence and Good Standing Certificates. Certificates of the appropriate government officials of the state of incorporation of such Subsidiary as to its existence and good standing, and certificates of the appropriate government officials in each state where such Subsidiary does business and where failure to qualify as a foreign corporation would have a Material Adverse Effect, as to its good standing and due qualification to do business in such state, each dated within sixty (60) days prior to the Closing Date; and (v) Incumbency. The names of the officers of such Subsidiary authorized to sign the Other Agreements to be executed by such Subsidiary, together with a sample of the true signatures of each such officer; 19 (k) Senior Loan Documents. Copies of the Senior Loan Documents and each document relating thereto, and a certificate of the President or the Controller of the Company certifying that the attached documents are a true, correct and complete set of the Senior Loan Documents, that all conditions precedent to funding of the Senior Debt have been met or waived, and that those transactions are being consummated simultaneously with the sale of the Senior Subordinated Notes; (l) Acquisition Documents. Copies of the Acquisition Documents and each document relating thereto, and a certificate of the President or the Controller of the Company certifying that the attached documents are a true, correct and complete set of the Acquisition Documents, that all conditions precedent to funding to the Acquisition have been met or waived, and that those transactions are being consummated simultaneously with the sale of the Senior Subordinate Notes; (m) Solvency Certificate. A certificate regarding the solvency of the Company, which includes a pro forma balance sheet and cash flow projections and analyses for the Company, executed by the President or the Controller of the Company; (n) Sources and Uses Certificate. A certificate executed by the President or the Controller of the Company, setting forth in reasonable detail the sources and uses of funds in the transactions contemplated herein, in the Senior Loan Documents and in the Other Agreements; (o) Communication with Accountants. Purchaser shall have received a copy of a letter from the Company addressed to its accountants authorizing such accountants to disclose to Purchaser such financial information concerning the Company and its Subsidiaries as the Purchaser may reasonably request to assist Purchaser in determining compliance by the Company with any of the financial covenants contained in Article VII hereof; (p) Inducement Letter. Letter agreements in the form and substance of Exhibit B hereto executed by each of Parent, Pecks and Mentmore in favor of Purchaser. (q) Transaction Certificate. A certificate of the President or the Controller of the Company that, to the best of their knowledge after due investigation, all conditions precedent to the effectiveness of this Agreement have been satisfied or waived; (r) Environmental Reports. Environmental reports of an independent environmental consulting firm satisfactory to the Purchaser with respect to the Property and all improvements, fixtures and equipment located thereon, which reports shall be addressed to the Purchaser and which shall evidence no material violation of Environmental Laws or any actual or potential material liability relating to Polluting Substances which is unacceptable to Purchaser in its sole discretion; 20 (s) Guaranties. A guaranty executed by (i) Parent guarantying the Indebtedness of the Company to the Purchaser, and (ii) each of the Subsidiaries of the Company guarantying the indebtedness of the Company to the Purchaser; and (t) Additional Information, Other Documents and Agreements. Such other information, documents, agreements, commitments and undertakings as Purchaser or Purchaser's counsel shall reasonably request. 5.12 Material Adverse Change. For the period from December 31, 1995 to the Closing Date, and except for the transactions contemplated by this Agreement, the Other Agreements, and the Senior Loan Documents, there shall have been (a) no occurrence or event which, in Purchaser's opinion, has or could have a Material Adverse Effect, and (b) no occurrence or event which would lead the Company or Purchaser to believe that the Company would fail to meet the cash flow projections delivered to Purchaser pursuant to Section 4.2, except as disclosed on Schedule 5.12. 5.13 Fees. All fees then payable pursuant to this Agreement which are due on or prior to the Closing Date (including the fees, expenses and disbursements of the Purchaser's counsel) shall have been paid to Purchaser (or such counsel, as applicable). 5.14 No Event of Default. No Event of Default or Potential Default shall have occurred and be continuing. 5.15 Representations and Warranties. All representations and warranties contained in this Agreement and the Other Agreements shall be true and correct in all material respects on the Closing Date. 5.16 Private Placement Number. The CUSIP Service Bureau of Standard & Poor's Ratings Group shall have assigned private placement numbers to the Senior Subordinated Notes and Warrants issued to John Hancock and evidence thereof shall have been delivered to John Hancock and John Hancock's special counsel. 5.17 Legality. The Senior Subordinated Notes and Warrants shall qualify as a legal investment for the Purchaser under all applicable laws (without resort to any so-called "basket clause" of any such law) and the Purchaser's purchase thereof shall not cause the Purchaser to be subject to any onerous or burdensome legal requirement or penalty. VI. AFFIRMATIVE COVENANTS The Company covenants and agrees that, from the date hereof and until the Senior Subordinated Obligations have been finally and irrevocably paid in full in accordance with the terms hereof and thereof: 21 6.1 Financial Statements. The Company will furnish to Purchaser: (a) As soon as available, and in any event within ninety (90) days after the end of each fiscal year of the Company, beginning with the fiscal year ending December 31, 1996, (i) a copy of the consolidated and consolidating financial statements of the Company for such fiscal year containing a balance sheet, statement of income, statement of stockholders' equity, and statement of cash flow as at the end of such fiscal year and for the fiscal year then ended, in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail and audited and certified by Ernst & Young, L.L.P. or any other firm of independent certified public accountants of national recognized standing acceptable to Purchaser to the effect that such financial statements have been prepared in accordance with GAAP; (ii) a certificate by such independent certified public accountants confirming the calculations set forth in the officers' certificate delivered simultaneously therewith in accordance with Section 6.2(a); and (iii) a comparison of the actual results during such fiscal year to those originally budgeted by the Company prior to the beginning of such fiscal year, along with management's discussion and analysis of variances, as well as, variances between actual results for such fiscal year and actual results for the previous fiscal year. The annual audit report required hereby shall not be qualified or limited. (b) As soon as available, and in any event within thirty (30) days after the end of each calendar month, a copy of an unaudited consolidated and consolidating financial statements of the Company as of the end of such calendar month and for the portion of the fiscal year then ended, containing balance sheets, statements of income, statements of retained earnings and statements of cash flow, in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year, all in reasonable detail, including, without limitation, a comparison of the actual results for such period to those originally budgeted by the Company prior to the beginning of such fiscal period and for the fiscal year to date. (c) Simultaneously with the delivery of financial information pursuant to Section 6.1(b) in respect of any month which is the last month of any fiscal quarter, management's discussion and analysis of variances between the results for the portion of the current fiscal year ended on the last day of such fiscal quarter and the corresponding period of the preceding fiscal year. (d) On or before thirty (30) days prior to the beginning of each fiscal year of the Company, an annual budget or business plan for such fiscal year, including a projected consolidated and consolidating balance sheet, income statement, and cash flow statement for such year, and, promptly during each fiscal year, all revisions thereto approved by the Board of Directors of the Company. 6.2 Certificates; Other Information. The Company will furnish to Purchaser all of the following: (a) Concurrently with the delivery of each of the financial statements referred to in Sections 6.1(a) and 6.1(b), a certificate of an authorized officer of the Company in the form 22 of the officer's certificate attached hereto as Exhibit C (i) stating that no Potential Default or Event of Default has occurred and is continuing or, if such officer has knowledge of a Potential Default or Event of Default, the nature thereof and specifying the steps taken or proposed to remedy such matter, (ii) showing in reasonable detail the calculations showing compliance with Sections 7.9 and 7.10, (iii) stating that the financial statements attached have been prepared in accordance with GAAP and fairly and accurately present (subject to year-end audit adjustments, for the annual certificates) the financial condition and results of operations of the Company at the date and for the period indicated therein, (iv) containing summaries of accounts payable agings, accounts receivable agings, and inventory (provided that such information shall be required only in connection with the delivery of the financial statements referred to in Section 6.1 (b) in respect of any month which is the last month of a fiscal quarter of the Company), and (v) containing a schedule of the outstanding Indebtedness for borrowed money of the Company and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan (provided that such information shall be required only in connection with the delivery of the financial statements referred to in Section 6.1(b) in respect of any month which is the last month of a fiscal quarter of the Company). (b) As soon as available, (i) a copy of each financial statement, report, notice or proxy statement sent by the Company or any of its Subsidiaries to their respective stockholders in their capacity as stockholders, (ii) a copy of each regular, periodic or special report, registration statement, or prospectus filed by the Company or any of its Subsidiaries with any securities exchange or the Securities and Exchange Commission or any successor agency, (iii) any material order issued by any court, governmental authority, or arbitrator in any material proceeding to which the Company or any of its Subsidiaries is a party, (iv) copies of all press releases and other statements made available generally by the Company or any of its Subsidiaries to the public generally concerning material developments in the Company's or such Subsidiary's business, and (v) a copy of all notices and other correspondence sent by the Company to the Senior Lender pertaining to the occurrence of any default or event of default under the Senior Loan Documents. (c) Promptly, such additional information concerning the Company or any of its Subsidiaries as Purchaser may reasonably request. 6.3 Books and Records. The Company shall, and shall cause each of its Subsidiaries to, keep (a) proper books of record and account in which full, true and correct entries will be made of all dealings or transactions of or in relation to its business and affairs; (b) set up on its books accruals with respect to all taxes, assessments, charges, levies and claims; and (c) on a reasonably current basis set up on its books from its earnings allowances against doubtful receivables, advances and investments and all other proper accruals (including, without limitation, by reason of enumeration, accruals for premiums, if any, due on required payments and accruals for depreciation, obsolescence, or amortization of properties), which should be set aside from such earnings in connection with its business. All determinations pursuant to this subsection shall be made in accordance with, or as required by, GAAP consistently applied. 23 6.4 Financial Disclosure. The Company hereby irrevocably authorizes and directs all accountants and auditors employed by it at any time during the term of this Agreement to exhibit and deliver to Purchaser copies of any of the Company's financial statements, trial balances or other accounting records of any sort in the accountant's or auditor's possession, and to disclose to Purchaser any information they may have concerning the Company's or any of its Subsidiaries' financial status and business operations. The Company hereby irrevocably authorizes all federal, state and municipal authorities to furnish to Purchaser copies of reports or examinations relating to the Company or any of its Subsidiaries, whether made by the Company, any of its Subsidiaries or otherwise. 6.5 Disclosure of Material Matters. The Company will, and will cause each of its Subsidiaries to, immediately upon learning thereof, report to Purchaser (a) all matters materially affecting the value, enforceability or collectibility of any material portion of the its assets including, without limitation, changes to significant contracts, schedules of equipment. changes of significant equipment or real property, the reclamation or repossession of, or the return to the Company or any of its Subsidiaries of, a material amount of goods and material claims or disputes asserted by any customer or other obligor, which matters could have a Material Adverse Effect, and (b) any material adverse change in the relationship between the Company and any of its suppliers or customers or its Subsidiaries and any of their respective suppliers or customers which could have a Material Adverse Effect. 6.6 Performance of Obligations. The Company will, and will cause each of its Subsidiaries to, duly and punctually pay and perform its obligations under this Agreement and the Other Agreements to which it is a party. 6.7 Preservation of Existence and Conduct of Business. The Company will, and will cause each of its Subsidiaries to, preserve and maintain (a) its corporate existence and (b) all of its material leases, privileges, franchises, qualifications and rights that are necessary or useful in the ordinary conduct of its business (if the failure to so maintain such leases, privileges, franchises, qualifications and rights would, individually or in the aggregate, have a Material Adverse Effect), and conduct its business as presently conducted in an orderly and efficient manner in accordance with good business practices (if the failure to so conduct its business would have a Material Adverse Effect); provided, however, the Company shall not be obligated to preserve the existence of any Inactive Subsidiary. 6.8 Maintenance of Properties. The Company will, and will cause each of its Subsidiaries to, operate and maintain in good condition and repair (ordinary wear and tear excepted) and replace as necessary, all of its assets and properties which are necessary or useful in accordance with sound business practices in the proper conduct of its business so that the value and operating efficiency of its assets and properties are maintained and preserved (if the failure to so operate, maintain or replace any such assets or properties would have, either individually or in the aggregate, a Material Adverse Effect). The Company will, and will cause each of its Subsidiaries to, at all times maintain the Intellectual Property in full force and effect, and will defend and protect the Intellectual Property against all adverse claims, except to the 24 extent that the failure to so maintain, defend or protect such Intellectual Property would not have a Material Adverse Effect. 6.9 Payment of Taxes and Claims. The Company will, and will cause each of its Subsidiaries to, pay or discharge, at or before maturity or before becoming delinquent (a) all taxes, levies, assessments, vault, water and sewer rents, rates, charges, levies, permits, inspection and license fees and other governmental and quasi-governmental charges and any penalties or interest for nonpayment thereof, heretofore or hereafter imposed or which may become a Lien upon any property owned by the Company or its Subsidiaries or arising with respect to the occupancy, use, possession or leasing thereof (collectively the "Impositions") and (b) all lawful claims for labor, material, and supplies, which, if unpaid, might become a Lien upon any of its property; provided, however, neither the Company nor any of its Subsidiaries will be required to pay or discharge any claim for labor, material, or supplies or any Imposition which is being contested in good faith by appropriate actions or proceedings diligently pursued, and for which adequate reserves in conformity with GAAP with respect thereto have been established. 6.10 Compliance with Laws. The Company shall, and shall cause each of its Subsidiaries to, comply with all acts, rules, regulations and orders of any legislative, administrative or judicial body or official applicable to the operation of the Company's or any Subsidiary's business if noncompliance with such acts, rules, regulations or orders could have a Material Adverse Effect; provided, however, each of the Company and its Subsidiaries may contest or dispute any acts, rules, regulations, orders and directions of those bodies or officials in any reasonable manner, provided that adequate reserves with respect thereto are established in accordance with GAAP. 6.11 Payment of Leasehold Obligations. The Company shall, and shall cause each of its Subsidiaries to, at all times pay, when and as due, its rental obligations under all material leases under which it is a tenant or lessee, and shall otherwise comply, in all material respects, with all other terms of such leases and keep them in full force and effect and, at the request of Purchaser, will provide evidence of its having done so. Each of the Company and its Subsidiaries may, however, contest or dispute its obligations under such material leases, provided that adequate reserves with respect thereto are established in accordance with GAAP. Each of the Company and its Subsidiaries shall also comply in all respects with all provisions of all agreements, indentures, mortgages, deeds of trust or other agreements binding on it or affecting its properties or business (other than the Senior Loan Documents) (after giving effect to applicable grace periods contained therein, if any) where the failure to so comply would have a Material Adverse Effect. 6.12 Insurance. The Company will, and will cause each of its Subsidiaries to, maintain, with financially sound, reputable and solvent companies, insurance policies (a) insuring its assets and business against loss by fire, explosion, theft, business interruption and other risks and casualties as are customarily insured against by companies engaged in the same or a similar business, and (b) insuring it against liability for personal injury and property damages relating to its assets, such policies to be in such amounts and covering such risks as are usually insured against by companies engaged in the same or a similar business and use. All 25 general liability policies shall be endorsed in favor of Purchaser as an additional insured, and shall provide that any amounts payable thereunder to Purchaser is subordinate in right of payment to the Senior Debt. The Company shall, and shall cause each of its Subsidiaries to, (a) deliver copies of all such policies to Purchaser within 30 days after the Closing Date, and from time to time thereafter upon request, (b) pay, or cause to be paid, all premiums for such insurance before such premiums become due, (c) furnish to Purchaser satisfactory proof of the timely making of such payments, and (d) cause such policies to require the insurer to give notice to Purchaser of termination of any such policy at least 30 days before such termination is to be effective. 6.13 Inspection Rights. At any time and from time to time during normal business hours and upon two Business Days prior notice, the Company will, and will cause each of its Subsidiaries to, permit representatives of Purchaser to examine and make copies of the books and records of, and visit and inspect the properties of, the Company and its Subsidiaries, and to discuss the business, operations, and financial condition of the Company and its Subsidiaries with their respective officers and with their respective independent certified public accountants. In accordance with the terms of Section 12.1 hereof, the Company will, and will cause each of its Subsidiaries to, promptly reimburse Purchaser for all expenses incurred by representatives of Purchaser in connection with such inspections. 6.14 Notices. The Company will promptly, but in any event within five (5) Business Days after first becoming aware thereof, notify Purchaser in writing of: (a) the commencement of any action, suit, or proceeding against the Company or any of its Subsidiaries that, in its reasonable judgment, if determined adversely to the Company, would have a Material Adverse Effect; or (b) any other matter that has had or, in the reasonable judgment of the Company, is likely to have, a Material Adverse Effect; or (c) the occurrence of a Potential Default or an Event of Default, which notice shall specify the nature of such event, condition or default and what action the Company has taken or is taking or proposes to take with respect thereto. Any notification required by this Section 6.14 shall be accompanied by a certificate of the President or the Controller of the Company setting forth the details of the specified events and the action which the Company or its Subsidiary proposes to take with respect thereto. 6.15 Additional Notices. Immediately upon receipt by the Company, the Company shall provide Purchaser with copies of all notices (including notices of default), statements and financial information, including notices of default, received from the Senior Lender under the Senior Loan Agreement and any other creditor or lessor with respect to the acceleration of the maturity of any item of Indebtedness for borrowed money which, if not paid, could give rise to an Event of Default under Section 8.1(b) or the repossession of material property from the Company or any of its Subsidiaries. 26 6.16 Senior Loan Document Amendments. The Company shall promptly provide Purchaser with copies of all proposed amendments to the Senior Loan Documents and of all other material loan agreements to which the Company or any of its Subsidiaries is a party. 6.17 Further Assurances. Each of the Company and the Holders shall, and shall cause each of their respective Subsidiaries to, execute and deliver, from time to time, upon the reasonable request of the other party, such supplemental agreements, statements, assignments and transfers, or instructions on documents as may be necessary in order that the full intent of the parties to this Agreement and the Other Agreements may be carried into effect. 6.18 Compliance with ERISA and the Code. The Company will, and will cause each of its Subsidiaries to, comply, and will cause each other member of any Commonly Controlled Entity to comply, with all minimum funding requirements, and all other material requirements, of ERISA and the Code, if applicable, to any Plan it or they sponsor or maintain, so as not to give rise to any liability thereunder. The Company will, and will cause each of its Subsidiaries to, pay and will cause each other member of any Commonly Controlled Entity to pay when due any amount payable by it to the PBGC. Promptly after the filing thereof, the Company shall, and shall cause each of its Subsidiaries to, furnish to Purchaser with regard to each Plan, copies of each annual report required to be filed pursuant to Section 104 of ERISA in connection with each such Plan for each Plan Year. 6.19 Compliance with Regulations G. T. U and X. Neither the Company nor any Person acting on its behalf will, nor will the Company permit any of its Subsidiaries to, take any action which might cause this Agreement, the Senior Subordinated Notes, the Warrant Documents, the Senior Loan Documents or any Other Agreements to violate, and the Company will, and will cause each of its Subsidiaries to, take all actions necessary to cause compliance with, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System and the Securities Exchange Act of 1934, in each case as now in effect or as the same may hereafter be in effect. 6.20 Fiscal Year. The Company will cause its fiscal year to be the twelve month period ending on December 31 of each year. 6.21 Board of Directors. In addition to any rights under this Agreement, the Company will cause Parent to deliver to Purchaser (a) a certified copy of all materials distributed at or prior to all meetings of Parent's board of directors, certified as true and accurate by the Secretary of Parent, promptly following each such meeting and (b) a certified copy of the minutes of each of the meetings of Parent's board of directors, certified as true and accurate by the secretary of Parent, as soon as available but in any event promptly following the end of the next subsequent regular meeting of Parent's board of directors. The Company will cause Parent to (a) permit Rice, at all times during which Rice is a Holder or owns any stock, warrants or other equity interest in Parent, to designate one (1) Person to attend all meetings of Parent's board of directors and shareholders as an observer, (b) permit John Hancock, at all times during which John Hancock is a Holder or owns any stock, warrants or other equity interest in Parent, to designate 27 one (1) Person to attend all meetings of Parent's board of directors and shareholders as an observer. The Company will cause Parent to provide such designees not less than twenty-one (21) calendar days actual notice of all regular meetings and not less than seven (7) calendar days actual notice of all special meetings of Parent's board of directors and shareholders (unless any such special meeting of Parent's board of directors is an emergency meeting, in which case Parent shall provide such designees with the same calendar days actual notice as provided to the members of Parent's board of directors). Such board of directors meetings shall be held in person at least quarterly. Purchaser may change its designees by written notice to Parent. Parent shall reimburse Purchaser for all reasonable expenses incurred in traveling to and from such meetings and attending such meetings by such observers. 6.22 Environmental Costs. (a) The Company hereby indemnifies and holds Purchaser harmless from and against any liability, loss, damage, suit, action or proceeding pertaining to solid or hazardous waste materials or other waste-like or toxic substances, including, but not limited to, claims of any federal, state or municipal government or quasi-governmental agency or any third person, whether arising under any federal, state or municipal law or regulation, or tort, contract or common law that relates to the Company or any of its Subsidiaries. (b) To the extent the laws of the United States or any state in which the Company or any of its Subsidiaries leases or owns property provide that a Lien upon the property of the Company or any of its Subsidiaries may be obtained for the removal of Polluting Substances which have been released, no later than sixty (60) days after notice is given by Purchaser to the Company or any of its Subsidiaries, the Company shall, and shall cause each of its Subsidiaries to, deliver to Purchaser a report issued by a qualified, third party environmental consultant selected by the Company and approved by Purchaser certifying as to the existence of any Polluting Substances located upon or beneath the specified property, leased or owned. To the extent any such Polluting Substance is located therein or thereunder that either (i) subjects the property to Lien or (ii) requires removal to safeguard the health of any Person, the Company shall, and shall cause each of its Subsidiaries to, remove, or cause to be removed, such Lien and such Polluting Substance at the Company's expense. 6.23 Future Guaranties. The Company agrees to cause all Subsidiaries acquired or created by it to execute guaranties in favor of Purchaser in respect of all Senior Subordinated Obligations now or hereafter owing by the Company to the Purchaser. Nothing contained in this Section 6.23 shall be construed as a consent by Purchaser to the formation or acquisition by the Company of any Subsidiaries in contravention of Section 7.3. VII. NEGATIVE COVENANTS The Company covenants and agrees that from the date hereof until the Senior Subordinated Obligations have been finally and irrevocably paid in full in accordance with the terms hereof and thereof: 28 7.1 Indebtedness. The Company will not, and will not cause or permit any of its Subsidiaries to, create, incur, issue, assume, guarantee or otherwise become liable for any Indebtedness except (a) Permitted Indebtedness; and (b) any extension, renewal or refinancing of any Permitted Indebtedness (other than the Senior Debt) on such terms and conditions as are, on the whole, no more onerous than the terms and conditions of such Permitted Indebtedness on the date of such extension, renewal or refinancing; and (c) any replacement or refinancing of the Senior Debt; provided that (i) the interest rate margin on such refinancing shall be no greater than the Applicable Margin provided for in the Senior Loan Agreement as in effect on the date hereof, (ii) the amortization of principal on such refinancing shall be for no shorter period, and for no greater annual amounts, than the amortization provided for in the Senior Loan Agreement as in effect on the date hereof, (iii) the maximum principal amount outstanding under the Senior Debt as so replaced or refinanced does not exceed the maximum principal amount permitted to be outstanding under the Senior Loan Agreement as in effect on the date of such replacement or refinancing, and (iv) the other terms and conditions of such replacement or refinancing, taken as a whole, are not materially more onerous to the Company than the terms of the Senior Loan Agreement as in effect on the date hereof. Any Permitted Indebtedness which is subordinated to the Senior Subordinated Obligations shall continue to be subordinated to the Senior Subordinated Obligations on terms and conditions satisfactory to Purchaser. 7.2 Limitation on Liens. The Company will not, and will not cause or permit any of its Subsidiaries to, incur, create, assume, or permit to exist any Lien upon any of its property, assets, or revenues, including, but not limited to, its shares of Capital Stock of each of its Subsidiaries, whether now owned or hereafter acquired, except Permitted Liens. 7.3 Merger, Acquisition, Dissolution and Sale of Assets. (a) The Company will not, and will not cause or permit any of its Subsidiaries to, (i) merge into or consolidate with any other Person, (ii) permit any other Person to merge into or consolidate with it, (iii) sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets whether now owned or hereafter acquired) or (iv) issue, sell, transfer, lease or otherwise dispose of any Capital Stock of the Company or any Subsidiary to, or accept any capital contribution from, any Person, except that: (A) the Company and any of its Subsidiaries may sell inventory in the ordinary course of business; (B) the Company and any of its Subsidiaries may sell damaged, worn out or obsolete tangible assets in the ordinary course of business and in commercially reasonable manner, so long as the Net Cash Proceeds of any such disposition are applied as required by Section 2.11(e) of the Senior Loan Agreement; (C) the Company or any of its Subsidiaries may dispose of assets consisting of machinery, equipment or facilities which will be replaced or upgraded with machinery, equipment or facilities put to a similar use and owned by it; provided that (i) such replacement or upgraded machinery, equipment or facilities are acquired (or a firm order thereof is placed) within ninety (90) days after such disposition), and (ii) the fair 29 market value of all property disposed of pursuant to this clause (C) does not exceed $1,500,000 in the aggregate during any fiscal year of the Company; (D) If at the time thereof, and immediately after giving effect thereto, no Potential Default or Event of Default shall have occurred and be continuing, (i) any Wholly Owned Subsidiary may merge into the Company in a transaction in which the Company is the surviving corporation and (ii) any Wholly Owned Subsidiary may merge into or consolidate with any other Wholly Owned Subsidiary in a transaction in which (x) the surviving entity is a Wholly Owned Subsidiary and (y) no Person other than the Company or a Wholly Owned Subsidiary receives any consideration; (E) the Company may issue to Pecks the Pecks Preferred Stock; (F) the Company may liquidate Cash Equivalents for its account; (G) the Company may issue to Tredegar Investments the Seller Preferred Stock; (H) the Company or any of its Subsidiaries may sell, lease, transfer, assign or otherwise dispose of assets (other than in connection with any Casualty or Condemnation) to the Company, Tredegar or any other Wholly Owned Subsidiary, so long as (i) the fair market value of all property disposed of by the Company after the Closing Date pursuant to this clause (H) does not exceed $5,000,000 in the aggregate, and (ii) the fair market value of all property disposed of by Wholly Owned Subsidiaries to other Wholly Owned Subsidiaries after the Closing Date pursuant to this clause (H) does not exceed $5,000,000 in the aggregate; (I) the foregoing shall not be deemed violated by any Casualty or Condemnation affecting assets of the Company or any Subsidiary, so long as the Net Cash Proceeds thereof are applied as required by Section 2.11(e) of the Senior Loan Agreement and the Company and its Subsidiaries are in compliance with all applicable provisions of Section 5.13 of the Senior Loan Agreement; (J) the Company or any of its Subsidiaries may sell, lease, transfer, assign or otherwise dispose of assets (other than in connection with any Casualty or Condemnation) of the Company of any of its Subsidiaries to any Person (other than the Company or any of its Subsidiaries) to the extent that the aggregate Net Cash Proceeds from such sale, lease, transfer, assignment or other disposition do not exceed $500,000, so long as (i) the fair market value of all property disposed of pursuant to this clause (J) does not exceed $1,000,000 in the aggregate during any fiscal year of the Company, (ii) such disposition is made for cash at fair market value and (iii) the Net Cash Proceeds of such disposition are applied as required by Section 2.11(e) of the Senior Loan Agreement as in effect on the Closing Date (unless no Senior Loan Agreement is then in effect, in which case, such Net Cash Proceeds shall be applied as a mandatory prepayment of the Senior Subordinated Notes in accordance with Sections 2.3(b) and/or (c)); 30 (K) the Company or any of its Subsidiaries may sell equipment to a customer of the Company or any of its Subsidiaries approved by the Purchaser pursuant to terms that are (i) ancillary to an agreement to supply such customer with products of the Company or any of its Subsidiaries which is entered into after the Closing Date on an arm-length basis and (ii) commercially reasonable in the context of such supply agreement, so long as (x) the equipment sold is used in the production of such products for such customer and (y) the fair market value of all property disposed of pursuant to this clause (K) after the Closing Date does not exceed $1,500,000 in the aggregate; and (L) the Company may accept contributions to its capital from Parent made in cash (including Qualifying Capital Contributions), so long as (i) Parent shall receive no consideration therefor (other than additional shares of Common Stock) and (ii) 100% of the Net Cash Proceeds thereof are applied as required by Section 2.11(e) of the Senior Loan Agreement as in effect on the Closing Date (unless no Senior Loan Agreement is then in effect, in which case, such Net Cash Proceeds shall be applied as a mandatory prepayment of the Senior Subordinated Notes). (b) The Company will not, and will not cause or permit any of its Subsidiaries to, purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other Person, except that the Company and any of its Subsidiaries may purchase inventory in the ordinary course of business. (c) The Company will not form, acquire or permit the existence of any Subsidiary or Subsidiaries of the Company other than the Subsidiaries listed on Schedule 4.16. 7.4 Dividends Distributions and Other Restricted Payments. The Company will not, and will not cause or permit any of its Subsidiaries to, (a) declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise and including any tax sharing payments), whether in cash, property, securities or a combination thereof, with respect to any Capital Stock of the Company or any of its Subsidiaries, (b) directly or indirectly redeem, purchase, retire or otherwise acquire for value, any Capital Stock of the Company or any of its Subsidiaries (including the Pecks Preferred Stock and the Seller Preferred Stock), whether such acquisition is made at the option of the Company or such Subsidiary or at the option of the holder of such Capital Stock and whether or not such acquisition is required under the terms and conditions applicable to such Capital Stock or set aside any amount for any such purpose, (c) release, cancel, compromise or forgive in whole or in part the Indebtedness evidenced by the Intercompany Notes or (d) directly or indirectly redeem, purchase, prepay, retire, defease or otherwise acquire for value any Indebtedness which is subordinate in right of payment or of equal payment priority to the Senior Subordinated Notes, whether such acquisition is made at the option of the Company or such Subsidiary or at the option of the holder of such Indebtedness and whether or not such acquisition is required under the terms and conditions applicable to such Indebtedness, or set aside any amount for any such purpose, except for repayments of principal of any such Indebtedness (other than Indebtedness which is subordinate in right of payment to 31 the Senior Subordinated Notes) in accordance with the scheduled amortization thereof; provided, however, that: (i) any of the Company's Subsidiaries may declare and pay dividends or make other distributions to the Company; (ii) the Company may make Permitted Tax Distributions; (iii) the Company may fund purchases by Parent or Sunderland of the common stock of Parent or Sunderland held by an employee of the Company upon the termination of such individual's employment with the Company; provided that (A) the Company shall give prior written notice thereof to the Purchaser, (B) the aggregate amount of all such repurchases made after the Closing Date shall not exceed $3,000,000, (C) the aggregate amount of all such repurchases made during any fiscal year of the Company shall not exceed $1,000,000 and (D) no such repurchase shall be made if any Potential Default or Event of Default shall have occurred and be continuing (or would occur after giving effect thereto); (iv) the Company may redeem and retire the Seller Preferred Stock for consideration consisting solely of the release and satisfaction of Tredegar Investment's obligations to make indemnification payments in a total amount not exceeding the aggregate liquidation preference (including accrued dividends) of the shares of Seller Preferred Stock so redeemed and retired; (v) so long as no Potential Default or Event of Default shall have occurred and be continuing or would occur as a result thereof, the Company may declare and pay accrued regular dividends on the Pecks Preferred Stock and the Seller Preferred Stock in accordance with the terms thereof as in effect on the Closing Date; provided that such dividends shall not exceed, in the case of the Pecks Preferred Stock, 11.25% per annum of the liquidation preference thereof and, in the case of the Seller Preferred Stock, 7.00% per annum of the liquidation preference thereof; (vi) so long as no Potential Default or Event of Default shall have occurred and be continuing or would occur as a result thereof, the Company may make distributions to Parent to permit Parent to pay regular dividends on the Hamilton Preferred Stock in accordance with the terms thereof as in effect on the Closing Date: provided that (A) such dividends shall not exceed 9 1/2% per annum of the liquidation preference thereof and (B) any such funding by the Company shall be immediately applied by Parent to the payment of such accrued regular dividends; (vii) so long as no Potential Default or Event of Default shall have occurred and be continuing or would occur as the result thereof, the Company may make distributions to Parent to permit Parent to (A) purchase the Warrants upon exercise of the Put Option (as defined in the Warrant documents) by the holders of the Warrants and (B) pay the principal balance of, or any scheduled interest payments due on, any promissory notes issued by Parent to the holders of the Warrants in accordance with the terms of the Shareholders Agreement; and 32 (viii) the Company may redeem and retire the Pecks Preferred Stock in connection with the exchange of such stock for unsecured Indebtedness of the Company, but only if such Indebtedness would constitute Permitted Indebtedness under clause (g) of the definition of Permitted Indebtedness. 7.5 Loans and Investments. Except for Permitted Investments, the Company will not, and will not cause or permit any of its Subsidiaries to, make any advance, loan, extension of credit, or capital contribution to or investment in, or purchase any stock, bonds, notes, debentures, or other securities of any Person. 7.6 Transactions with Affiliates and Shareholders. The Company will not, and will not cause or permit any of its Subsidiaries to, sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise enter into or maintain any other transactions with, any of its Affiliates or Shareholders, except that so long as no Event of Default or Potential Default shall have occurred and be continuing, the Company or any of its Subsidiaries may enter into any of the foregoing transactions in the ordinary course of business at prices and on terms and conditions that are (a) set forth in writing and delivered to Purchaser and (b) as favorable to the Company or such Subsidiary as would be obtainable at the time in a comparable transaction on an arm's-length basis from an unrelated third party. The provisions of this Section 7.6 shall not prohibit (i) any payment expressly permitted under Section 7.4 or 7.5, (ii) any transaction entered into and maintained among the Company and any Wholly Owned Subsidiaries or among Wholly Owned Subsidiaries, (iii) commencing with the fiscal quarter of the Company ended June 30, 1997, the payment of fees of up to $75,000 per fiscal quarter pursuant to the Management Agreement, provided that (A) the Leverage Ratio as of the last day of such fiscal quarter is less than 3.50:1.00 and the Interest Coverage Ratio as of the last day of such fiscal quarter is greater than 3.00:1.00 and (B) no Event of Default or Potential Default shall have occurred and be continuing or would occur as a result thereof, (iv) the payment of reasonable out-of-pocket expenses by the Company to Mentmore pursuant to the Management Agreement, (v) the payment of compensation to employees in the ordinary course of business and (vi) the execution and delivery by the Company, Parent and Sunderland of a tax sharing agreement consistent with Section 7.4 and the definition of Permitted Tax Distributions. The Company will not, and will not cause or permit any of the Subsidiaries to, enter into any management, employment, consulting or similar agreement or arrangement with, or otherwise pay any consideration to, the Permitted Holders, any members of their families or any Affiliates of the Permitted Holders or such other Persons, except for payments pursuant to the Management Agreement permitted under clauses (iii) and above. 7.7 Nature of Business. The Company will not, and will not cause or permit any of its Subsidiaries to, engage in any business other than the businesses conducted by it on the Closing Date (after giving effect to the Acquisition), or any business reasonably related thereto. 7.8 Modification of Senior Loan Agreement. The Company will not, without the prior written consent of Purchaser, agree or consent to any modification, amendment or waiver of 33 any of the terms or provisions of the Senior Loan Agreement that is prohibited under Section 5.02 of the Senior Subordination Agreement. 7.9 Capital Expenditures. (a) The Company will not permit Capital Expenditures for any period set forth below to be more than the sum of (i) the amount set forth below opposite such period (without giving effect to any carry over from any prior period), (ii) commencing with 1997, the amount of Excess Cash Flow for the immediately preceding calendar year not required to be paid to the Senior Lender pursuant to Section 2.11(f) of the Senior Loan Agreement, if any, and (iii) commencing with 1997, the excess, if any, of the amount set forth below opposite the immediately preceding period (without giving effect to any carry over from any prior period) over the actual amount of Capital Expenditures for such immediately preceding period: Period Amount ------ ------ Nine calendar months ended December 31, 1996 $4,500,000 Calendar year ended December 31, 1997 $8,025,000 Calendar year ended December 31, 1998 $6,725,000 Each calendar year thereafter $3,800,000 (b) The Company will not permit Cash Capital Expenditures for any period set forth below to be more than the sum of (i) the amount set forth below opposite such period (without giving effect to any carry over from any prior period), (ii) commencing with 1997, the amount of Excess Cash Flow for the immediately preceding calendar year not required to be paid to the Senior Lender pursuant to Section 2.11 (f) of the Senior Loan Agreement, if any, and (iii) commencing with 1997, the excess, if any, of the amount set forth below opposite the immediately preceding period (without giving effect to any carry over from any prior period) over the actual amount of Cash Capital Expenditures for such immediately preceding period: Period Amount ------ ------ Nine calendar months ended December 31, 1996 $1,800,000 Calendar year ended December 31, 1997 $2,300,000 Calendar year ended December 31, 1998 $1,900,000 Each calendar year thereafter $2,300,000 7.10 Financial Covenants. (a) Interest Coverage. The Company will not permit the ratio, for the one-fiscal-quarter period ending June 30, 1996, the two-fiscal-quarter period ending September 30, 1996, the three-fiscal-quarter period ending December 31, 1996 or any subsequent four-fiscal-quarter period (any such period, a "measurement period") ending on a date falling in any period set forth below (the "applicable period"), of (i) EBITDA for such measurement period to (ii) Cash Interest Expense for such measurement period to be less than the ratio set forth below for such applicable period: From and including To and Including Ratio ------------------ ---------------- ----- April 1, 1996 June 30, 1996 1.10 to 1.00 34 April 1, 1996 September 30, 1996 1.25 to 1.00 April 1, 1996 December 31, 1996 1.80 to 1.00 January 1, 1997 March 31, 1997 2.00 to 1.00 April 1, 1997 June 30, 1997 2.20 to 1.00 July 1, 1997 December 31, 1997 2.50 to 1.00 January 1, 1998 June 30, 1998 2.75 to 1.00 July 1, 1998 December 31, 1998 3.00 to 1.00 January 1, 1999 March 31, 2006 3.00 to 1.00 (b) Fixed Charge Coverage. The Company will not permit the ratio, for any four-fiscal-quarter period (any such period, a "measurement period") ending on a date falling in any period set forth below (the "applicable period"), of (i) (A) EBITDA for such measurement period, less (B) Cash Capital Expenditures for such measurement period, less (C) Cash Preferred Dividends for such measurement period to (ii) (A) Cash Interest Expense for such measurement period, plus (B) Scheduled Principal Payments for such measurement period to be less than the ratio set forth below for such applicable period: From and including To and Including Ratio ------------------ ---------------- ----- January 1, 1997 March 31, 1997 1.00 to 1.00 April 1, 1997 September 30, 1997 1.00 to 1.00 October 1, 1997 December 31, 1997 1.10 to 1.00 January 1, 1998 June 30, 1998 1.20 to 1.00 July 1, 1998 March 31, 2006 1.25 to 1.00 (c) Leverage Ratio. The Company will not permit the ratio, for any four-fiscal quarter period (any such period, a "measurement period") ending on a date falling in any period set forth below (an "applicable period"), of (i) Total Funded Debt as of the end of such measurement period (after giving effect to any Qualifying Capital Contribution made after such fiscal quarter) to (ii) EBITDA for such measurement period to be greater than the ratio set forth below for such applicable period: From and including To and Including Ratio ------------------ ---------------- ----- January 1, 1997 September 30, 1997 5.00 to 1.00 October 1, 1997 December 31, 1997 4.00 to 1.00 January 1, 1998 December 31, 1998 3.75 to 1.00 January 1, 1999 March 31, 2006 3.50 to 1.00 (d) Minimum Net Worth. The Company will not permit its Net Worth as of the last day of any fiscal quarter of the Company (after giving effect to any Qualifying Capital Contribution made after such fiscal quarter) to be less than the "Minimum Compliance Level". The Minimum Compliance Level shall be $1,500,000 on the Closing Date, and shall be increased as of the last day of each fiscal quarter of the Company ending after the Closing Date, commencing with the fiscal quarter ending on June 30, 1996, by an amount equal to 50% of Net Income (if positive) for such fiscal quarter and 100% of the Net Cash Proceeds of any Equity 35 Issuance (other than a Qualifying Capital Contribution) by the Company during such fiscal quarter. The foregoing increases in the Minimum Compliance Level shall be fully cumulative and no reduction in the Minimum Compliance Level shall be made to reflect negative Net Income for any period. For purposes of this Section 7.10(d) only, Net Income shall be determined without regard to clauses (d) and of the proviso in the definition thereof. (e) Total Funded Debt. The Company will not permit Total Funded Debt at any time on or prior to March 31, 1997 to exceed $75,000,000. (f) Rental Expense. The Company will not permit Rental Expense for any fiscal year of the Company to be greater than $3,250,000. VIII. EVENTS OF DEFAULT AND REMEDIES THEREFOR 8.1 Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default": (a) The (i) Company shall fail to pay any scheduled interest payment when due under the Senior Subordinated Notes, and such failure is not cured within five (5) Business Days after the occurrence thereof (additional interest shall accrue at the rate set forth in Section 1.l on any such unpaid interest until fully paid), (ii) Company or any of its Subsidiaries shall fail to pay when due (whether upon acceleration or otherwise) any principal or Prepayment Fee payable under or with respect to the Senior Subordinated Notes, this Agreement or any of the Other Agreements, or (iii) the Company or any of its Subsidiaries shall fail to pay when due any other sums payable pursuant to Section 2.4 (after giving effect to the notice and grace period set forth therein); (b) The Company shall fail to pay when due (following the expiration of applicable notice and cure periods, if any), whether upon acceleration or otherwise, any Indebtedness, individually or in the aggregate, having an unpaid principal amount in excess of $750,000; (c) (i) The Company shall fail to perform or observe any agreement, covenant, term or condition contained in (A) Sections 6.7(a), 6.13 or 6.14 or in Article VII of this Agreement or (B) the second and fourth sentences of Section 6.21; or (ii) The Company shall fail to perform or observe any agreement, covenant, term or condition contained in Sections 6.1 or 6.2 of this Agreement, and such default is not remedied or waived within ten (10) days after the occurrence thereof; or (iii) The Company shall fail to perform or observe any agreement, covenant, term or condition contained in this Agreement (excluding the specific Sections and Article referred to in Sections 8.1(c)(i) and (ii) above), and such default is not remedied or waived within forty-five (45) days after the date any such default becomes known to a Responsible Officer; 36 (d) The Company and/or any of its Subsidiaries shall fail to comply with any Other Agreement to which it is a party, and such default is not remedied or waived within forty-five (45) days after the date any such default becomes known to a Responsible Officer; (e) Any representation or warranty whatsoever made or provided by the Company and/or its Subsidiaries to the Purchaser in connection with this Agreement or any Other Agreement was incorrect or misleading in any material respect, when made; (f) The Company or any of its Subsidiaries (other than an Inactive Subsidiary) shall become subject to an Event of Bankruptcy; (g) Any judgment or order for payment of money shall be rendered against the Company or any of its Subsidiaries (or any combination thereof) which exceeds $750,000 and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order, or (ii) there shall be a period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (h) This Agreement or any Other Agreement to which the Company or any of its Subsidiaries is a party or any material portion thereof applicable to the Company or any of its Subsidiaries shall be declared by any Governmental Authority to be invalid or unenforceable in whole or in part or shall for any reason not be, or shall be asserted by the Company and/or any of its Subsidiaries not to be, in full force and effect and enforceable in accordance with its terms; (i) The Parent Guaranty or any Guaranty Agreement shall for any reason not be, or shall be asserted by Parent or any Subsidiary not to be, in full force and effect and enforceable in accordance with its terms (other than, with respect to the Parent Guaranty, the failure of the Parent Guaranty to be enforceable as the result of an Event of Bankruptcy involving only Parent); (j) Any Material Contract shall be declared by any Governmental Authority to be invalid or unenforceable in whole or in part or shall for any reason not be, or shall be asserted by the Company or any of its Subsidiaries not to be, in full force and effect and enforceable in accordance with its terms and such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; (k) The occurrence or existence of any event of default under the Senior Loan Documents together with an act of acceleration of the Senior Debt; or (l) The occurrence of a Change in Control. 8.2 Remedies of Holders upon Occurrence of Event of Default. When any Event of Default described in Section 8.1 above, other than any Event of Default described in clause (f) thereof, has occurred and is continuing, any Purchaser may, in addition to any other right, power 37 or remedy permitted by law, declare the entire amount of the Senior Subordinated Obligations owing to it, including, without limitation, the entire principal, premium (if any) and all interest accrued then outstanding under its Senior Subordinated Obligations, to be, and the same shall thereupon become, forthwith due and payable, together with an amount equal to the Prepayment Fee, without any presentment, demand, protest, notice of default, notice of intention to accelerate, notice of acceleration or other notice of any kind, all of which are hereby expressly waived, and in such event the Company shall (subject to the terms of the Senior Subordination Agreement) forthwith pay to such Purchaser an amount equal to one hundred percent (100%) of the amount thereof. When any Event of Default described in clause (f) of Section 8.1 above shall occur, all of the Senior Subordinated Obligations, including, without limitation, the entire principal, premium (if any) and all accrued interest then outstanding under the Senior Subordinated Notes, shall thereupon be forthwith due and payable, without any presentment, demand, protest, notice of default, notice of intention to accelerate, notice of acceleration or other notice of any kind (including any notice by Purchaser), all of which are hereby expressly waived by the Company, and the Company will (subject to the terms of the Senior Subordination Agreement) forthwith pay to Purchaser an amount equal to 100% of the amount thereof. 8.3 Annulment of Acceleration. The provisions of the foregoing Section 8.2 are subject to the condition that, if any Purchaser has declared all or any part of its Senior Subordinated Obligations immediately due and payable (or if any Purchaser's Senior Subordinated Obligations have otherwise become immediately due and payable) by reason of the occurrence of any Event of Default, such Purchaser may, by written instrument delivered to the Company (an "Annulment Notice"), rescind and annul such declaration and the consequences thereof as to its Senior Subordinated Obligations, provided that (a) at the time such Annulment Notice is delivered no judgment or decree has been entered for the payment of any monies due pursuant to such Senior Subordinated Obligations in connection therewith, and (b) all arrears of interest and all other sums payable on such Senior Subordinated Obligations in connection therewith (except any principal, interest or premium which has become due and payable solely by reason of such declaration under Section 8.2 hereof) shall have been duly paid or deferred by the Holder of the Senior Subordinated Obligations agreeing to such rescission and annulment; and provided further, that no such rescission and annulment shall extend to or affect any other Purchaser or any subsequent Event of Default or impair any right consequent thereto, and shall not be deemed a waiver of the Event of Default giving rise to the acceleration unless specifically waived in writing by the Purchaser agreeing to such rescission or annulment. 8.4 Payment of Senior Subordinated Obligations. Subject to the terms of the Senior Subordination Agreement, Purchaser shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Senior Subordinated Notes and payment of all other Senior Subordinated Obligations on the date when due and, upon the occurrence and continuance of an Event of Default, to institute suit against the Company for the enforcement of any such payment. Such rights shall not be impaired without Purchaser's prior written consent. 8.5 Remedies. Subject to the terms of the Senior Subordination Agreement, if any Event of Default shall occur and be continuing, may exercise any right or remedy it has at law, in equity or under this Agreement or any Other Agreement. No right or remedy conferred upon or 38 reserved to Purchaser under this Agreement or any Other Agreement is intended to be exclusive of any other right or remedy, and every right and remedy shall be cumulative and in addition to every other right or remedy given hereunder or now or hereafter existing under any applicable law. Every right and remedy given by this Agreement or by applicable law to Purchaser may be exercised from time to time and as often as may be deemed expedient by Purchaser. 8.6 Conduct No Waiver. No course of dealing on the part of any Purchaser, nor any delay or failure on the part of any Purchaser to exercise any of its rights, shall operate as a waiver of such right or otherwise prejudice any Purchaser's rights, powers and remedies. If the Company fails to pay when due, the principal of, the premium (if any) or the interest on, the Senior Subordinated Notes, or fails to comply with any other provision of this Agreement, the Company shall pay to Purchaser, to the extent permitted by law, on demand, such further amounts as shall be sufficient to cover the cost and expenses, including, but not limited to, reasonable attorney's fees incurred by Purchaser in collecting any sums due on the Senior Subordinated Notes or in otherwise enforcing any of Purchaser's rights. IX. SUBORDINATION RIGHTS Notwithstanding any provision in this Agreement to the contrary, the Indebtedness evidenced by the Senior Subordinated Notes shall be subordinate in right of payment to all regularly scheduled payments of principal and interest with respect to Senior Debt, and Purchaser's rights and remedies hereunder shall be subordinate to the rights and remedies of the Senior Lender, all in accordance with the terms of the Senior Subordination Agreement. Nothing contained in this Article IX or elsewhere in this Agreement, in the Senior Subordinated Notes or the Senior Subordination Agreement is intended to or shall impair, as between the Company and Purchaser, the obligations of the Company, which are absolute and unconditional, to pay to Purchaser the principal of, the premium (if any) and interest on the Senior Subordinated Notes and all other Senior Subordinated Obligations as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of Purchaser and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent Purchaser from exercising all remedies otherwise permitted by applicable law upon an Event of Default under this Agreement. X. FORM OF SENIOR SUBORDINATED NOTES. REGISTRATION, TRANSFER AND REPLACEMENT 10.1 Form of Senior Subordinated Notes. The Senior Subordinated Notes initially delivered under this Agreement will be fully registered notes in the forms attached hereto as Exhibits A-1 and A-2. The Senior Subordinated Notes are issuable only in fully registered form in such denominations as are requested by each Purchaser. 10.2 Senior Subordinated Note Register. The Company shall cause to be kept at its principal business office a register for the registration and transfer of the Senior Subordinated Notes. The names and addresses of the Holders of the Senior Subordinated Notes, the transfer 39 thereof and the name and address of the transferees of such Senior Subordinated Notes shall be recorded in such register. 10.3 Issuance of New Senior Subordinated Notes upon Exchange or Transfer. Upon surrender for exchange or registration of transfer of a Senior Subordinated Note at the office of the Company designated for notices in accordance with Section 12.3 hereof, the Company shall execute and deliver, at its expense, one or more new Senior Subordinated Notes of any authorized denomination requested by the Holder of the surrendered Senior Subordinated Note, each dated the date to which interest has been paid on the Senior Subordinated Note so surrendered (or, if no interest has been paid, the date of such surrendered Senior Subordinated Note), but in the same aggregate unpaid principal amount as such surrendered Senior Subordinated Note, and registered in the name of such Person or Persons as shall be designated in writing by such Holder. Every Senior Subordinated Note surrendered for registration of transfer shall be duly endorsed, or be accompanied by a written instrument of transfer duly executed, by the Holder of such Senior Subordinated Note or by his attorney duly authorized in writing. 10.4 Replacement of Senior Subordinated Notes. Upon receipt of evidence satisfactory to the Company of the loss, theft, mutilation or destruction of any Senior Subordinated Note and, in the case of any such loss, theft or destruction, upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Company or, in the event of such mutilation upon surrender and cancellation of such Senior Subordinated Note, the Company, without charge to the Holder thereof, will make and deliver a new Senior Subordinated Note of like tenor and the same series in lieu of such lost, stolen, destroyed or mutilated Senior Subordinated Note. If any such lost, stolen or destroyed Senior Subordinated Note is owned by any Purchaser or any other Holder whose credit is satisfactory to the Company, then the affidavit of an authorized officer of such owner setting forth the fact of loss, theft or destruction and of its ownership of such Senior Subordinated Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof, and no further indemnity shall be required as a condition to the execution and delivery of a new Senior Subordinated Note. XI. INTERPRETATION OF AGREEMENT 11.1 Certain Terms Defined. When used in this Agreement, the terms set forth below are defined as follows: "Acquired Companies" means Tredegar, and its direct and indirect subsidiaries. "Acquisition" means the transactions pursuant to which the Company acquired all of the outstanding Capital Stock of Tredegar, all pursuant to the transactions evidenced by the Acquisition Documents. "Acquisition Documents" means the Purchase Agreement and the agreements, documents and instruments executed in connection therewith or contemplated thereby, and all amendments thereto. 40 "Additional Approved Director" shall mean (a) with respect to the Board of Directors of Parent, a Person nominated by the Permitted Holders to serve as a director of Parent, so long as the Permitted Holders retain the right to remove such Person from his or her directorship with or without cause at any time and to replace such Person with a successor nominated by the Permitted Holders and (b) with respect to the Board of Directors of the Company, a Person nominated by Parent to serve as a director of the Company, so long as Parent retains the right to remove such Person from his or her directorship with or without cause at any time and to replace such Person with a successor nominated by Parent. "Affiliate" means any Person directly or indirectly controlling, controlled by, or under common control with, the Person in question. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract, or otherwise. "Agreement" means this Note Purchase Agreement, including all schedules and exhibits hereto, as the same may be modified, supplemented, extended and/or amended from time to time. "Annulment Notice" is defined in Section 8.3. "Applicable Margin" means whichever is applicable, the Applicable ABR Margin or the Applicable Eurodollar Margin, both as defined in the Senior Loan Agreement. "Asset Sale" shall mean any sale, lease, transfer, assignment, loss, damage or destruction (in the case of loss, damage or destruction, to the extent covered by insurance) or other disposition of assets (including trademarks and other intangibles), business units, individual business assets or property of the Company or any of its Subsidiaries, including the sale, transfer or disposition of any Capital Stock or real property; provided, however, that none of the following shall be deemed to be an Asset Sale: (a) the sale of inventory in the ordinary course of business; or (b) the sale, lease, transfer, assignment or other disposition of assets (other than in connection with any Casualty or Condemnation) of the Company or any of its Subsidiaries (i) to the Company or any Wholly Owned Subsidiary, (ii) to any other Person to the extent that the aggregate Net Cash Proceeds from such sale, lease, transfer, assignment or other disposition do not exceed $50,000, so long as the fair market value of all property disposed of pursuant to this clause (ii) does not exceed $250,000 in the aggregate in any fiscal year, (iii) in connection with the liquidation for the account of the Company of Cash Equivalents, (iv) if the assets disposed of consist of machinery or equipment of the Company or any of its Subsidiaries which will be replaced or upgraded with machinery and equipment put to a similar use and owned by it, provided that such replacement or upgraded machinery and equipment is acquired (or a firm order therefor is placed) within 90 days after such disposition or (v) to the extent that such assets consist of damaged, worn out or obsolete tangible assets, so long as the fair market value of all property disposed of pursuant to this clause (v) does not exceed $250,000 in the aggregate in any 41 fiscal year; provided that the foregoing definition shall not be deemed to imply that any such Asset Sale is permitted under this Agreement. "Business Day" means any day (other than a day which is a Saturday, Sunday or legal holiday in the State of North Carolina, New York or Pennsylvania) on which banks are open for business in Charlotte, North Carolina, New York City and Pittsburgh, Pennsylvania. "Capital Expenditures" means, for any period, the sum of (a) all expenditures (whether paid in cash or other consideration or accrued as a liability) which would, in accordance with GAAP, be included on a consolidated statement of cash flows of the Company and its Consolidated Subsidiaries for such period as additions to property, plant and equipment, Capital Lease Obligations or similar items and (b) to the extent not covered by clause (a) hereof, all expenditures (whether paid in cash or other consideration or accrued as a liability) of the Company and its Consolidated Subsidiaries for such period to acquire by purchase or otherwise the business, property or fixed assets of, or stock or other evidences of beneficial ownership of, any other Person (other than the portion of such expenditures allocable in accordance with GAAP to net current assets); provided that the foregoing shall exclude all such expenditures to the extent made with Insurance Proceeds or Condemnation Proceeds pursuant to Section 5.13 of the Senior Loan Agreement. "Capital Lease Obligations" of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Capital Stock" of any Person means any and all shares, partnership and other interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) the equity of such Person. "Cash Capital Expenditures" shall mean, for any period, all Capital Expenditures paid in cash during such period. "Cash Equivalents" shall mean: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within 180 days from the date of acquisition thereof; (b) investments in commercial paper maturing within 180 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poor's Corporation or from Moody's Investors Service, Inc., respectively; 42 (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof and overnight repurchase agreements issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any Senior Lender or any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; (d) money market funds substantially all of whose assets are comprised of securities of the types described in (a) through (c) above; (e) cash deposits in any Deposit Account covered by a Lockbox Agreement or in any cash collateral account with the Senior Lender required by, and maintained in accordance with, the Senior Loan Documents; and (f) other investment instruments approved in writing by the Senior Lender and offered by financial institutions which have a combined capital and surplus and undivided profits of not less than $500,000,000. "Cash Interest Expense" shall mean, for any period, the gross amount of interest expense of the Company and its Consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, during such period, including (a) the portion of any payments or accruals with respect to Capital Lease Obligations that are allocable to interest expense in accordance with GAAP, (b) all amounts paid (net of any amounts received) pursuant to Interest Rate Protection Agreements during such period and (c) all fees, charges, discounts and other costs paid in respect of Indebtedness during such period, but, in each case, excluding non-cash interest expense. "Cash Preferred Dividends" means, for any period, the aggregate amount of dividends paid in cash during such period as permitted by clause (v) of Section 7.4 of this Agreement. "Cash Tax Expense" shall mean, for any period, the amount of expense for Federal, state, local and other income taxes of the Company and its Consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP (assuming the Company was deemed to be the common parent of an affiliated group (within the meaning of Section 1504 of the Code) of which only the Company and the Subsidiaries were members), for such period, but excluding deferred tax expense. "Casualty" means any casualty or other damage or defect. "Change in Control" means the occurrence of any of the following: (a) the failure by Parent to own 100% of the outstanding Common Stock; 43 (b) the failure at any time after the Closing Date of a majority of the seats (including vacant seats) of the board of directors of the Company to be occupied by William L. Remley, Richard Kramer and, if Parent so elects (but only if such Person's service as a director of the Company is in addition to service as a director of the Company by both William L. Remley and Richard Kramer, and not in substitution of such service by either of them), one Additional Approved Director (provided, however, that in the event of the death, total disability or total incapacitation of either William L. Remley or Richard Kramer, no "Change in Control" under this clause (b) shall result if a majority of the seats of the board of directors shall be occupied by (i) William L. Remley or Richard Kramer (whichever of them is not deceased, disabled or incapacitated, the "Surviving Director"), (ii) one Person nominated by the Surviving Director with the approval of the Senior Lender and the Purchaser; provided that any such approval by the Purchaser shall not be unreasonably withheld (the "Surviving Director's Nominee") and (iii) if Parent so elects (but only if such Person's service as a director is in addition to service by both the Surviving Director and the Surviving Director's Nominee), one Additional Approved Director; (c) any Person or Persons (other than the Permitted Holders) (i) shall own (beneficially or of record), in the aggregate, more than 25% of the outstanding Voting Stock of Parent or (ii) shall, whether through the ownership of securities, by contract or otherwise, directly or indirectly Control Parent; or (d) the failure at any time after the Closing Date of a majority of the seats (including vacant seats) of the board of directors of Parent to be occupied by William L. Remley, Richard Kramer and, if the Permitted Holders so elect (but only if such Person's service as a director of Parent is in addition to service as a director of Parent by both William L. Remley and Richard Kramer, and not in substitution of such service by either of them), one Additional Approved Director (provided, however, that in the event of the death, total disability or total incapacitation of either William L. Remley or Richard Kramer, no "Change in Control" under this clause (d) shall result if a majority of the seats of the board of directors shall be occupied by (i) William L. Remley or Richard Kramer (whichever of them is not deceased, disabled or incapacitated, the "Surviving Director"), (ii) one Person nominated by the Surviving Director with the approval of the Senior Lender and the Purchaser; provided that any such approval by the Purchaser shall not be unreasonably withheld (the "Surviving Director's Nominee") and (iii) if the Permitted Holders so elect (but only if such Person's service as a director is in addition to service by both the Surviving Director and the Surviving Director's Nominee), one Additional Approved Director. "Closing Date" means the date on which all of the conditions stated in Article V of this Agreement have been met to Purchaser's satisfaction and the purchase price for the Senior Subordinated Notes has been paid, but in any event not later than March 29, 1996. "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time, and the regulations promulgated thereunder. 44 "Common Stock" shall mean the Common Stock, no par value, of the Company, any other Capital Stock of the Company into which such Common Stock shall be reclassified or otherwise changed and any other Capital Stock of the Company which is not Preferred Stock. "Commonly Controlled Entity" shall mean an entity, whether or not incorporated, which is under common control with the Company within the meaning of Section 4001 of ERISA or is part of a group which includes the Company and which is treated as a single employer under Section 414 of the Code. "Company" means Precise Technology, Inc., a Delaware corporation. "Condemnation" means the institution of any action or proceeding for the taking of any Mortgaged Property (as defined in the Senior Loan Agreement), or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain by reason of any public improvement or condemnation proceeding, or, in any other manner. "Condemnation Proceeds" means the proceeds of any Condemnation or transfer in lieu thereof. "Confidential Information Memorandum" means the Confidential Information Memorandum of the Company dated February, 1996. "Consolidated Subsidiaries" means for any Person, all subsidiaries of such Person that should be consolidated with such Person for financial reporting purposes in accordance with GAAP. "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and "Controlling" and "Controlled" shall have meanings correlative thereto. "Current Assets" shall mean, as of any date, all assets which would, in accordance with GAAP, be included on a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of such date as current assets. "Current Liabilities" shall mean, as of any date, all liabilities which would, in accordance with GAAP, be included on a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of such date as current liabilities. "Deposit Account" means any demand, time, savings, passbook, collection, operating, investment or other like type of account relating in any way to the assets or business of the Company or any of its Subsidiaries. "Disqualified Stock" of any Person shall mean (a) in the case of the Company, the Permitted Preferred Stock and the Seller Preferred Stock, (b) any Capital Stock of such Person 45 which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable), upon the happening of any event or otherwise (i) matures or is mandatorily redeemable or subject to any mandatory repurchase requirement, pursuant to a sinking fund obligation or otherwise, (ii) is convertible into or exchangeable or exercisable for Indebtedness or Disqualified Stock or (iii) is redeemable or subject to any mandatory repurchase requirement at the option of the holder thereof, in whole or in part, in each case on or prior to the Termination Date and (c) if such Person is a Subsidiary, any Preferred Stock of such Person. "EBITDA" shall mean, for any period, (a) Net Income for such period, p1us, (b) the following to the extent deducted in computing such Net Income: (i) interest expense, (ii) tax expense, (iii) depreciation and amortization of tangible and intangible assets, and (iv) other non-cash charges or non-cash losses, in each case for the Company and its Consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, minus (c) the following to the extent added in computing such Net Income: (i) interest income and (ii) any non-cash income or non-cash gains, in each case for the Company and its Consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Environmental Laws" means all federal, state, or local laws, ordinances, rules, regulations and orders of courts or administrative agencies or authorities relating to pollution or protection of the environment (including, without limitation, ambient air, surface water, ground water, land surface, and subsurface strata), and other laws relating to (a) Polluting Substances or (b) the manufacture, processing, distribution, use, treatment, handling, storage, disposal, or transportation of Polluting Substances. "Equity Issuance" shall mean the issuance of any Capital Stock (other than the Permitted Preferred Stock and Seller Preferred Stock) or receipt of any capital contribution by the Company or any of its Subsidiaries, provided that the foregoing definition shall not be deemed to imply that any such Equity Issuance is permitted under this Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended and in effect from time to time, and the regulations promulgated thereunder. "Event of Bankruptcy" with respect to any Person, means any of (a) the filing by such Person of a voluntary petition in bankruptcy under any provision of any bankruptcy law or a petition to take advantage of any insolvency act, (b) the admission in writing by the Company of its inability to pay its debts generally as they become due, (c) the appointment of a receiver or receivers for all or a material part of such Person's assets with the consent of such Person, (d) the filing of any bankruptcy, arrangement or reorganization petition by or, with the consent of such Person, against such Person under any provision of any bankruptcy law, (e) a receiver, liquidator or trustee of such Person or a substantial part of its assets shall be appointed pursuant to the Federal Bankruptcy Code by the order of a court of competent jurisdiction which shall not be dismissed or stayed within sixty (60) days, or (f) an involuntary petition to reorganize or liquidate a Person pursuant to the Federal Bankruptcy Code shall be filed against such Person and shall not be dismissed or stayed within 60 days. 46 "Event of Default" is defined in Section 8.1. "Excess Cash Flow" shall mean, for any period, the excess of (a) the sum, without duplication, of (i) EBITDA for such period, (ii) extraordinary cash income, if any, business interruption insurance proceeds, if any, and cash gains attributable to sales of assets out of the ordinary course of business, if any, during such period to the extent that any such extraordinary cash income, such insurance proceeds or such cash gain (A) is not included in EBITDA for such period and (B) is not required to be utilized in connection with a payment made (or to be made) by the Company pursuant to Section 2.11(e) of the Senior Loan Agreement, (iii) the amount, if any, by which Working Capital decreased during such period over (b) the sum, without duplication, of (i) Cash Tax Expense for such period, (ii) Cash Interest Expense paid during such period, (iii) Cash Capital Expenditures made during such period, (iv) Scheduled Principal Payments made during such period, (v) optional and mandatory prepayments of the principal of the Senior Debt during such period, but only to the extent that such prepayments by their terms cannot be reborrowed or redrawn, and (vi) the amount, if any, by which Working Capital increased during such period. "Excess Interest" is defined in Section 2.8. "Financial Officer" of any corporation shall mean the chief financial officer, principal accounting officer or similar officer of such corporation. "Financial Statements" is defined in Section 4.2. "GAAP" means generally accepted accounting principles, applied on a consistent basis. "Governmental Authority" means any federal, state, local or foreign governmental department, commission, board, bureau, authority, agency, court, instrumentality or judicial or regulatory body or entity. "Guaranty Agreement" means, with respect to each of the Company's Subsidiaries, the Guaranty Agreement dated as of the Closing Date executed by each such Subsidiary in favor of the Purchaser. "Hamilton Preferred Stock" shall mean the 331.46 shares of 9 1/2% Preferred Stock, stated value $10,000 per share, of Parent issued by Parent to Hamilton Holdings Ltd. Corporation, a Texas corporation, on the Closing Date. "Holders" when used in reference to the Senior Subordinated Notes and/or the Senior Subordinated Obligations, means the Person or Persons who, at the time of determination, is the lawful owner of all or a portion of the Senior Subordinated Notes or an obligee of all or a portion of the Senior Subordinated Obligations. "Impositions" is defined in Section 6.9. 47 "Inactive Subsidiary" means any Subsidiary of the Company that has less than $10,000 in assets (whether computed by book value, market value or any other method) and that is not engaged in any activities relating to the Company's business. "Indebtedness" of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind made with or to such Person, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, including certificates issued in connection with an asset securitization, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services, (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations of such Person in respect of Interest Rate Protection Agreements, (j) all obligations of such Person, contingent or otherwise, as an account party in respect of letters of credit and bankers' acceptances and (k) all obligations of such Person to contribute money or other property to any other Person. The Indebtedness of any Person shall include, without duplication, the Indebtedness of any partnership in which such Person is a general partner and of any trust or other entity formed or utilized in connection with a securitization of assets of such Person. Notwithstanding the foregoing, the term "Indebtedness" shall exclude (x) all trade accounts payable by any Person arising in the ordinary course of business and (y) the Pecks Preferred Stock. "Insurance Proceeds" means collectively all insurance proceeds (other than business interruption proceeds), damages, awards, claims and rights of action with respect to any Casualty. "Intellectual Property" means all patents, patent rights, patent applications, licenses, inventions, trade secrets, know-how, proprietary techniques (including processes and substances), trademarks, service marks, trade names and copyrights. "Intercompany Notes" shall mean the promissory notes issued as contemplated by the definition of Permitted Investments, in the form attached hereto as Exhibit D. "Interest Coverage Ratio" as of any date shall mean the ratio of (a) EBITDA for the Reference Period with respect to such date to (b) Cash Interest Expense for such Reference Period. "Interest Rate Protection Agreement" shall mean any interest rate swap, collar, cap, foreign currency exchange agreement or other arrangement requiring payments contingent upon interest or exchange rates. 48 "Letter of Credit" shall mean any Standby Letter of Credit or Trade Letter of Credit issued pursuant to the Senior Loan Agreement. "Leverage Ratio" as of any date shall mean the ratio of (a) Total Funded Debt as of the end of the Reference Period with respect to such date to (b) EBITDA for such Reference Period. "Lien" means any lien, mortgage, security interest, tax lien, pledge, encumbrance, financing statement, or conditional sale or title retention agreement, or any other interest in property designed to secure the repayment of Indebtedness or any other obligation, whether arising by agreement, operation of law, or otherwise. "Lockbox Agreement" shall mean a lockbox agreement among the Company, NationsBank, N.A., as agent for Senior Lender, and a financial institution in which the Company maintains a deposit account, in substantially the form attached to the Senior Loan Agreement as Exhibit F, as amended from time to time. "Management Agreement" shall mean tile Management Agreement dated as of March 15, 1996, to be effective as of April 1, 1996, between the Company and Mentmore. "Material Adverse Effect" means (a) a material adverse effect upon the business, operations, properties, assets or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole or (b) the material impairment of the ability of any party to perform its obligations under this Agreement or any of the Other Agreements to which it is a party or of Purchaser to enforce or collect any of the Senior Subordinated Obligations. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing events would result in a Material Adverse Effect. "Material Contracts" means each agreement, contract, lease, license, commitment or other instrument to which the Company or any of its Subsidiaries is a party or by which they or any of their respective properties or assets are or may be bound as of the Closing Date, after giving effect to the application of proceeds thereof on the Closing Date, the loss of which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. "Maximum Rate" is defined in Section 2.8. "Mentmore" means Mentmore Holdings Corporation, a Delaware corporation. "Minimum Compliance Level" shall have the meaning assigned to such term in Section 7.10(d). 49 "Multiemployer Plan" shall mean a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" shall mean: (a) with respect to any Asset Sale, (i) the gross amount of cash proceeds (including in each fiscal year of the Company the amount of condemnation awards and insurance settlements, except business interruption insurance proceeds, in such fiscal year in excess of Set Aside Amounts (it being understood that Set Aside Amounts shall not be included in the term "Net Cash Proceeds" and may be retained by the Company or a Subsidiary, as applicable, for the purposes described in Section 5.13 of the Senior Loan Agreement unless and until any such amount shall cease to be a Set Aside Amount as a result of any failure to meet any of the criteria set forth in such Section 5.13 of the Senior Loan Agreement)) actually paid to or actually received by the Company or any of its Subsidiaries in respect of such Asset Sale (including cash proceeds subsequently received in respect of such Asset Sale in respect of non-cash consideration initially received or otherwise), less (ii) the sum of (A) the amount, if any, of all taxes (other than income taxes) and the Company's good-faith best estimate of all income taxes (to the extent that such amount shall have been set aside for the purpose of paying such taxes when due), and customary fees, brokerage fees, commissions, costs and other expenses (other than those payable to the Company, any of its Subsidiaries or any Affiliate of the Company) that are incurred in connection with such Asset Sale and are payable by the seller or the transferor of the assets or property to which such Asset Sale relates (or, in the case of income taxes in respect of the period during which the Company is consolidated with Parent and Sunderland for the purposes of the payment of such income taxes, payable by Sunderland, provided that the Company is permitted to fund the payment of such income taxes under Section 7.4 at such time), but only to the extent not already deducted in arriving at the amount referred to in clause (a) above, (B) appropriate amounts that must be set aside as a reserve in accordance with GAAP against any liabilities associated with such Asset Sale and (C) if applicable, the amount of Indebtedness secured by a Permitted Lien that has been repaid or refinanced as required in accordance with its terms with the proceeds of such Asset Sale; and (b) with respect to any Equity Issuance, the gross amount of cash proceeds paid to or received by the Company or any Subsidiary in respect of such Equity Issuance, net of underwriting discounts and commissions or placement fees, investment banking fees, legal fees, consulting fees, accounting fees and other customary fees and expenses directly incurred by the Company or any of its Subsidiaries in connection therewith. "Net Income" shall mean, for any period, net income (or loss) of the Company and its Consolidated Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such calculation of net income (or loss) (a) the income of any Person in which any other Person (other than the Company or any of its Subsidiaries) has any interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Wholly Owned Subsidiary by such Person during such period, (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with the Company or any of its Subsidiaries or the date such Person's assets are acquired by the Company or any of its Subsidiaries, (c) the income of any of its Subsidiaries to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of that income is 50 not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary, (d) any after-tax gains or losses attributable to sales of assets out of the ordinary course of business and (e) (to the extent not included in clauses (a) through (d) above) any non-cash extraordinary gains or non-cash extraordinary losses. "Net Worth" shall mean, as of any date, the total of all amounts which would in accordance with GAAP be included on a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of such date as (a) the par or stated value of all outstanding Capital Stock of the Company, (b) paid in capital or capital surplus relating to such Capital Stock and (c) any retained earnings or earned surplus less (i) any accumulated deficit and (ii) any amounts attributable to Disqualified Stock. "Other Agreements" means (a) the Senior Subordinated Notes and all other agreements, instruments and documents (including, without limitation, notes, guarantees, powers of attorney, consents, assignments, contracts, notices, subordination agreements and all other written matter), and all renewals, modifications and extensions thereof, whether heretofore, now or hereafter executed by or on behalf of the Company and/or any of its Subsidiaries and delivered to and for the benefit of Purchaser or any Person participating with Purchaser in the Senior Subordinated Notes with respect to this Agreement or any of the transactions contemplated by this Agreement and (b) the Parent Guaranty. "Parent" means Precise Holding Corporation, a Delaware corporation. "Parent Guaranty" means the Guaranty Agreement dated as of the Closing Date executed by Parent in favor of the Purchaser. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor thereto. "Pecks" means, collectively, Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc. and Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. "Pecks Preferred Stock" shall mean the Series A Cumulative Exchangeable Preferred Stock of the Company in the aggregate liquidation preference of $5,750,000 issued to Pecks pursuant to that certain Securities Purchase Agreement dated the date hereof by and among Parent, the Company and Pecks. "Permitted Holder" shall mean (a) William L. Remley and his relatives, (b) Richard Kramer and his relatives (such Persons referred to in clauses (a) and (b) being referred to for purposes of this definition as the "relatives"), (c) any trust, other estate, corporation or other entity through which any relatives have a beneficial interest, directly or indirectly, through one or more intermediaries, in the Capital Stock of Parent, so long as no Persons other than relatives have any beneficial interest in any such trust, other estate, corporation or other entity and (d) any 51 other Affiliate of William L. Remley and/or Richard Kramer, so long as such other Affiliate is reasonably acceptable to the Purchaser. "Permitted Indebtedness" means (a) Indebtedness existing on the Closing Date, to the extent set forth on Schedule 11.1 (a) (but not any extension, renewal or refinancing thereof); (b) Indebtedness in favor of the Purchaser under this Agreement and/or the Other Agreements and created pursuant thereto; (c) Interest Rate Protection Agreements entered into by the Company as part of its interest rate management program; (d) the Senior Debt and the Senior Guarantee Obligations; (e) Capital Lease Obligations in an aggregate amount of up to $12?000,000 outstanding at any time; (f) Indebtedness (excluding Capital Lease Obligations) issued to finance the payment of all or part of the purchase price of any assets acquired after the Closing Date; provided, however, that such Indebtedness is issued and any Liens securing such Indebtedness are created at the time of, or within 90 days after, the acquisition of such assets and such Indebtedness is not secured by a Lien on any other assets; and provided further, that the aggregate principal amount of all such Indebtedness outstanding at any time shall not exceed $2,000,000; (g) unsecured Indebtedness in favor of Pecks arising from the exchange by Pecks of the Pecks Preferred Stock (pursuant to and in accordance with the terms of the Certificate of Designation for the Company's Series A Cumulative Exchangeable Preferred Stock, as in effect on the Closing Date), but only if (i) no Potential Default or Event of Default has occurred and is continuing or would occur as a result of any such exchange, and (ii) the ratio of the Company's Indebtedness to EBITDA is not greater than 2.5 to 1.0 both before and after giving effect to any such exchange; and (h) other unsecured Indebtedness incurred in the ordinary course of business in an aggregate principal amount of up to $2,000,000 outstanding at any time. "Permitted Investments" means the following: (a) investments existing on the Closing Date, to the extent set forth on Schedule 11.11(b), by the Company in its Subsidiaries; (b) loans and advances made after the Closing Date by the Company or any of its Subsidiaries to Wholly Owned Subsidiaries or by any of the Wholly Owned Subsidiaries to 52 the Company; provided that, (I) any such loan or advance is evidenced by an Intercompany Note and (II) any such loan or advance to or by any Wholly Owned Subsidiary shall be permitted only so long as such Person remains a Wholly Owned Subsidiary; (c) Cash Equivalents; (d) trade accounts receivable (and related notes and instruments) arising in the ordinary course of business; and (e) advances to employees for moving and travel expenses in the ordinary course of business. "Permitted Liens" means: (a) Liens existing on the Closing Date, to the extent set forth on Schedule 11.1(c), provided that such Liens secure only those obligations which they secure on the Closing Date; (b) Liens arising under the Senior Loan Documents; (c) Liens for taxes, assessments, governmental charges and levies not yet due or which are being contested in compliance with Section 6.9; (d) carriers', warehousemen's, mechanic's, materialmen's, repairmen's or other like Liens arising in the ordinary course of business and securing obligations that are not due or which are being contested in compliance with Section 6.9; (e) Liens incurred and deposits made in the ordinary course of business in compliance with workmen's compensation, unemployment insurance and other social security laws or regulations; (f) Liens or deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (g) zoning restrictions, easements, restrictive covenants, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Company or any of the Subsidiaries; (h) Liens constituting the interest of any lessor of property subject to Capital Lease Obligations permitted hereunder; provided that such Liens do not extend to any other property; 53 (i) Liens securing purchase money Indebtedness permitted hereunder; provided that such Liens do not extend to any assets other than the assets purchased with the proceeds of such Indebtedness; and (j) other Liens (not included in clauses (a) through (i) above) securing obligations in the ordinary course of business in an aggregate principal amount of up to $500,000 outstanding at any time. "Permitted Tax Distributions" shall mean distributions to Parent up to the amount that the Company would have been required to pay for federal, state, local or other taxes on income if it were deemed to be the common parent of an affiliated group (within the meaning of Section 1504 of the Code) of which only the Company and its Subsidiaries were members (and assuming for such purposes that such group had the benefit of any losses of the Company and the Subsidiaries previously used by Parent, Sunderland or any of their other Affiliates); provided that (A) such distributions may be made only in respect of the period during which the Company is consolidated with Parent and Sunderland for purposes of the payment of such taxes and, (B) no such distribution shall be made earlier than 10 days before the date on which the payment by such affiliated group of such federal, state, local or other taxes on income, including any estimated payment, would be due. "Person" means any individual, sole proprietorship, corporation, business trust, unincorporated organization, association, company, partnership, joint venture, governmental authority (whether a national, federal, state, county, municipality or otherwise, and shall include without limitation any instrumentality, division, agency, body or department thereof), or other entity. "Plan" means at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Company or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Polluting Substances" means all pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes and shall include, without limitation, any flammable explosives, radioactive materials, oil, hazardous materials, hazardous or solid wastes, hazardous or toxic substances or related materials defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act of 1976, the Hazardous and Solid Waste Amendments of 1984, and the Hazardous Materials Transportation Act, as any of the same are hereafter amended, and in the regulations adopted and publications promulgated thereto; provided, in the event any of the foregoing Environmental Laws is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and, provided, further, to the extent that the applicable laws of any state establish a meaning for "hazardous substance," "hazardous 54 waste," "hazardous material," "solid waste," or "toxic substance" which is broader than that specified in any of the foregoing Environmental Laws, such broader meaning shall apply. "Potential Default" means the occurrence of any condition or event which, with the passage of time or giving of notice or both, would constitute an Event of Default. "Preferred Stock", as applied to the Capital Stock of any corporation, shall mean Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "Prepayment Fee" is defined in Section 2.2. "Principal Amount" is defined in Section 1.2(b). "Property" means all real property owned or leased by the Company or any of its Subsidiaries. "Purchase Agreement" means the Stock Purchase Agreement dated as of March 11, 1996, among the Company and Tredegar Investments. "Purchaser" means individually and collectively Rice and John Hancock, together with all of their respective transferees, successors and assigns of all or any portion of the Senior Subordinated Notes or the Senior Subordinated Obligations and any nominees on whose behalf any of the foregoing purchase or otherwise acquire any of such Indebtedness of the Company, and shall include, but not be limited to, each and every "Holder" as defined herein. With respect to any right or action to be taken by Purchaser under this Agreement (other than under Sections 8.2 or 8.3) the term Purchaser means Holders representing a majority in interest of the Senior Subordinated Obligations. "Qualifying Capital Contribution" made after any fiscal quarter of the Company shall mean a contribution to capital of the Company made by Parent in cash; provided that (a) Parent shall receive no consideration therefor (other than additional shares of Common Stock), (b) such capital contribution shall be made prior to delivery to the Purchaser of the financial statements delivered pursuant to Section 6.1 for such fiscal quarter, (c) 100% of the Net Cash Proceeds thereof shall be applied by the Company in accordance with Section 7.3(L) of this Agreement and (d) the amount of such Qualifying Capital Contribution for purposes of this Agreement shall be the amount of Net Cash Proceeds thereof applied in accordance with Section 7.3(L) of this Agreement. "Reference Period" with respect to any date shall mean the period of four consecutive fiscal quarters of the Company immediately preceding such date or, if such date is the last day of a fiscal quarter, ending on such date. 55 "Rental Expense" shall mean for any period, the aggregate amount of fixed and contingent rental obligations payable by the Company and its Consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, for such period under leases of real and/or personal property (net of income from sub-leases thereof), excluding, however, Capital Lease Obligations. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the PBGC has waived either the 30-day notice period or the penalty for failure to give notice. "Responsible Officer" means, with respect to the Company, its president, its chief executive officer, its chief operating officer, any financial officer, any vice president or its general counsel. "Revolving Loans" shall mean the revolving loans made by the Senior Lender to the Company pursuant to the Senior Loan Agreement. "Scheduled Principal Payments" shall mean, for any period, without duplication, (i) the aggregate principal amount of Term Loans (as defined in the Senior Loan Agreement) paid during such period pursuant to Sections 2.11(a) and/or (b) of the Senior Loan Agreement and (ii) the aggregate principal amount of all scheduled principal payments on Indebtedness (other than the Senior Debt) of the Company and its Consolidated Subsidiaries made during such period, determined on a consolidated basis in accordance with GAAP, including any discount or premium relating to such Indebtedness, whether expensed or capitalized. "Seller Preferred Stock" shall mean the preferred equity financing provided by Tredegar Investments as contemplated by Section 5.5 of this Agreement to finance $2,500,000 of the purchase price of the Acquisition; provided that (i) such financing shall consist of Preferred Stock of the Company, (ii) such Preferred Stock shall provide for terms and conditions reasonably satisfactory to the Purchaser and (iii) the aggregate liquidation preference of such Seller Preferred Stock shall not exceed $2,500,000. "Senior Debt" shall have the meaning ascribed to it in the Senior Subordination Agreement. "Senior Guarantee Obligations" shall have the meaning ascribed to it in the Senior Subordination Agreement. "Senior Lender" means NationsBank, N.A., a national banking association, and any other financial institution a party to the Senior Loan Agreement, and their respective successors and assigns, and any Person who replaces or refinances the Senior Debt under the terms set forth in Section 7.1(c). "Senior Loan Agreement" means the Credit Agreement, dated as of March 28, 1996, by and among Parent, the Company, NationsBank, N.A., as Agent and Issuing Bank, and 56 each of the other financial institutions a party thereto, as the same may be modified, amended, waived, supplemented or otherwise changed from time to time, all documents and instruments delivered pursuant thereto in connection with the loans and advances made thereunder, and all agreements, documents and instruments executed by the Company and any Person who replaces or refinances the Senior Debt under the terms set forth in Section 7.1(c). "Senior Loan Documents" means the Senior Loan Agreement and the agreements, documents and instruments executed in connection therewith or contemplated thereby, and all amendments, modifications, waivers, renewals, extensions, substitutions, increases or replacements thereof. "Senior Subordinated Notes" means the term promissory notes issued by the Company to Purchaser pursuant to this Agreement, together with all renewals, modifications, extensions, substitutions and replacements thereof. "Senior Subordinated Obligations" means and includes any and all Indebtedness and/or liabilities of the Company and/or its Subsidiaries to Purchaser of every kind, nature and description, direct or indirect, secured or unsecured, joint, several, joint and several, absolute or contingent, due or to become due, now existing or hereafter arising, under this Agreement or any Other Agreement to which the Company or any of its Subsidiaries is a party (regardless of how such Indebtedness or liabilities arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument) and all obligations of the Company and/or its Subsidiaries to Purchaser to perform acts or refrain from taking any action under any of the aforementioned documents, together with all renewals, modifications, extensions, increases, substitutions or replacements of any of such Indebtedness. "Senior Subordination Agreement" means that certain Senior Subordination Agreement, dated as of March 28, 1996, by and between Purchaser and NationsBank, N.A., as Agent for the Senior Lender, and acknowledged by Parent and the Company, pursuant to which the relative priorities of the Senior Lender and Purchaser with respect to the repayment of Senior Debt and the Senior Subordinated Obligations are established, and all amendments and modifications thereto. "Set Aside Amounts" shall mean, in respect of any Condemnation Proceeds or Insurance Proceeds actually received by the Company or any of its Subsidiaries, the portion thereof, if any, not required to be used to prepay either the Senior Debt pursuant to Section 5.13 of the Senior Loan Agreement, including Section 5.13(e) of the Senior Loan Agreement, or the Senior Subordinated Obligations. "Shareholder" shall mean, as of any date, any Person or "group" (within the meaning of Rule 13d-5 under the Exchange Act) (a) which beneficially owns as of such date Capital Stock of the Company (or of any Person Controlling the Company) representing 5% or more of the aggregate ordinary voting power of all the outstanding Capital Stock of the Company (or of such Person Controlling the Company) and (b) of which the Company has knowledge. 57 "Shareholder Agreement" means the Shareholder Agreement dated as of the Closing Date executed by Parent, the Purchaser, Pecks and the other Persons a signatory thereto, as the same may be amended, modified or restated from time to time. "Single Employer Plan" shall mean any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Source" is defined in Section 3.2. "Standby Letter of Credit" means an irrevocable standby letter of credit for the account of the Company and for the benefit of any holder of obligations of the Company or any of its Subsidiaries incurred in the ordinary course of business. "Subsidiary" means any Person of which or in which the Company and/or Parent and their other Subsidiaries own directly or indirectly 50% or more of (a) the combined voting power of all classes having general voting power under ordinary circumstances to elect a majority of the board of directors or equivalent body of such Persons, if it is a corporation, (b) the capital interest or profits interest of such Person, if it is a partnership, joint venture or similar entity, or (c) the beneficial interest of such Person if it is a trust, association or other unincorporated organization. "Sunderland" shall mean Sunderland Industrial Holdings Corporation, a Delaware corporation, and its successors. "Termination Date" means the earliest to occur of (a) March 28, 2006, (b) the date on which the Senior Subordinated Notes are accelerated pursuant to Article VIII, and (c) the date on which the Senior Subordinated Obligations are paid in full. "Total Funded Debt" shall mean, as of any date, without duplication, (a) the aggregate amount of Indebtedness (other than Indebtedness with respect to interest rate protection agreements) of the Company and its Consolidated Subsidiaries as of such date which has a final maturity more than one year after such date or which is extendible or renewable at the option of the Company or any of its Consolidated Subsidiaries to a time more than one year after such date (whether or not renewed or extended), including any current installment thereof due within one year after such date, determined on a consolidated basis in accordance with GAAP, (b) the aggregate undrawn amount on all outstanding letters of credit (including Letters of Credit) as to which the Company or any of its Consolidated Subsidiaries is the account party and (c) the aggregate principal amount of outstanding loans constituting Senior Debt as of such date. "Trade Letter of Credit" means a trade or commercial letter of credit issued for the account of the Company and for the benefit of any holder of obligations of the Company or any of its Subsidiaries incurred in the ordinary course of business. "Transfer" is defined in Section 12.5 hereof. 58 "Transferee" means any Person to whom a Transfer is made. "Tredegar" means Tredegar Molded Products Company, a Virginia corporation. "Tredegar Investments" means Tredegar Investments, Inc., a Virginia corporation. "Voting Stock" shall mean, with respect to any Person, (a) shares of such Person's voting Capital Stock that have ordinary voting power (other than shares or interests having such power only by reason of the occurrence of a contingency) to vote in the election of directors of such Person and (b) all warrants, options and other rights to purchase, or exchange securities for or convert securities into, such shares. "Warrants" mean the warrants to purchase up to seventeen and fifteen one-hundredths percent (17.15%) of Parent's common stock (on a fully diluted basis), as the same may be amended from time to time. "Warrant Documents" means, collectively, (a) the Warrants, (b) the Warrant Purchase Agreement dated as of the Closing Date executed by and among Parent, the Purchaser and Pecks, with respect to the issuance to Purchaser and Pecks of the Warrants, and (c) the Shareholders Agreement. "Wholly Owned Subsidiary" shall mean, at any time, any Subsidiary all the Capital Stock of which is at such time directly or indirectly owned by the Company. "Working Capital" shall mean, as of any date of determination, an amount equal to (a) Current Assets as of such date, but excluding cash and Cash Equivalents described under clauses (a) through (f) of the definition thereof, minus (b) Current Liabilities as of such date, but excluding the current portion of payments on long-term Indebtedness and payments with respect to Revolving Loans. Working Capital as of any date may be a positive or negative number. Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative, and all such increases and decreases for any period shall be determined in a manner consistent with that used in preparing the Company's consolidated statements of cash flows for the same period in accordance with GAAP. Terms which are defined in other Sections of this Agreement shall have the meanings specified therein. All other terms contained in this Agreement shall have, when the context so indicates, the meanings provided for by the Uniform Commercial Code as adopted and in force in the State of New York, as from time to time in effect. 11.2 Accounting Terms and Definitions. Unless otherwise defined or specified herein all accounting terms used in this Agreement shall be construed in accordance with GAAP, applied on a basis consistent in all material respects with the financial statements delivered by Company to Purchaser on or before the Closing Date. All accounting determinations for purposes of determining compliance with the financial covenants contained in Section 6.20 shall be made in accordance with GAAP as in effect on the Closing Date and applied on a basis 59 consistent in all material respects with the audited financial statements delivered to Purchaser by Company on or before the Closing Date. The financial statements required to be delivered hereunder from and after the Closing Date, and all financial records, shall be maintained in accordance with GAAP as in effect at the time of deliverance of such financial statements. If GAAP shall change from the basis used in preparing the audited financial statements delivered to Purchaser by Company on or before the Closing Date, the certificates required to be delivered pursuant to Section 6.2 demonstrating compliance with the covenants contained herein shall include, at the election of Company or upon the request of Purchaser, calculations setting forth the adjustments necessary to demonstrate how Company is in compliance with the financial covenants based upon GAAP as in effect on the Closing Date. 11.3 Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person. XII. MISCELLANEOUS 12.1 Expenses. The Company agrees to pay (a) all out-of-pocket expenses of Purchaser (including reasonable fees, expenses and disbursements of Purchaser's counsel and the allocated costs of staff counsel) in connection with the preparation, negotiation, enforcement, operation and administration of this Agreement, the Senior Subordinated Notes, the Other Agreements, or any documents executed in connection therewith, or any waiver, modification or amendment of any provision hereof or thereof; and (b) if an Event of Default occurs, all court costs and costs of collection, including, without limitation, reasonable fees, expenses and disbursements of counsel employed in connection with any and all collection efforts. The attorneys' fees arising from such services, including those of any appellate proceedings, and all expenses, costs, charges and other fees incurred by such counsel or Purchaser in any way or respect arising in connection with or relating to any of the events or actions described in this Article XII shall be payable by the Company to Purchaser, on demand, and shall be additional Senior Subordinated Obligations. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: recording costs, appraisal costs, paralegal fees, costs and expenses; accountants' fees, costs and expenses; court costs and expenses; photocopying and duplicating expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges, telegram charges; facsimile charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal services. The Company agrees to indemnify Purchaser from and hold it harmless against any documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery by the Company or any other Person of this Agreement, the Other Agreements, and any documents executed in connection therewith. 12.2 Indemnification. IN ADDITION TO AND NOT IN LIMITATION OF THE OTHER INDEMNITIES PROVIDED FOR HEREIN OR IN ANY OTHER AGREEMENTS, THE COMPANY HEREBY INDEMNIFIES AND AGREES TO HOLD HARMLESS PURCHASER AND ANY OTHER HOLDERS, AND EVERY AFFILIATE OF ANY OF THE FOREGOING, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND 60 AGENTS, FROM ANY CLAIMS, ACTIONS, DAMAGES, COSTS, ATTORNEYS' FEES AND EXPENSES (INCLUDING ANY OF THE SAME ARISING OUT OF THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE PERSON TO BE INDEMNIFIED) TO WHICH ANY OF THEM MAY BECOME SUBJECT, INSOFAR AS SUCH LOSSES, LIABILITIES, CLAIMS, ACTIONS, DAMAGES, COSTS AND EXPENSES ARISE FROM OR RELATE TO THIS AGREEMENT OR THE OTHER AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR FROM ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING, OR FROM ANY VIOLATION OR CLAIM OF VIOLATION OF ANY APPLICABLE ENVIRONMENTAL LAWS WITH RESPECT TO ANY REAL OR PERSONAL PROPERTY, OR FROM ANY GOVERNMENTAL OR JUDICIAL CLAIM, ORDER OR JUDGMENT WITH RESPECT TO ANY REAL OR PERSONAL PROPERTY OF THE COMPANY, OR FROM ANY BREACH OF THE WARRANTIES, REPRESENTATIONS OR COVENANTS CONTAINED IN THIS AGREEMENT OR THE OTHER AGREEMENTS. THE FOREGOING INDEMNIFICATION INCLUDES ANY SUCH CLAIMS, ACTIONS, DAMAGES, COSTS, AND EXPENSES INCURRED BY REASON OF THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE PERSON TO BE INDEMNIFIED, BUT EXCLUDES ANY OF THE SAME INCURRED BY REASON OF SUCH PERSON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. 12.3 Notices. Except as otherwise expressly provided herein, all communications provided for hereunder shall be in writing and delivered or mailed by the United States mails, certified mail, return receipt requested, (a) if to Purchaser, addressed to Purchaser at the address specified on Annex I hereto or to such other address as Purchaser may in writing designate, (b) if to any other Holder, addressed to such Holder at such address as such Holder may in writing designate, and (c) if to the Company, addressed to the Company at the address set forth next to its name on the signature pages hereto or to such other address as the Company may in writing designate. Notices shall be deemed to have been validly served, given or delivered (and "the date of such notice" or words of similar effect shall mean the date) five (5) days after deposit in the United States mails, certified mail, return receipt requested, with proper postage prepaid, or upon actual receipt thereof (whether by noncertified mail, telecopy, telegram, facsimile, express delivery or otherwise), whichever is earlier. 12.4 Reproduction of Documents. This Agreement and all documents relating hereto, including, without limitation (a) consents, waivers and modifications which may hereafter be executed, (b) documents received by Purchaser at the closing of the purchase of the Senior Subordinated Note, and (c) financial statements, certificates and other information previously or hereafter furnished to Purchaser, may be reproduced by Purchaser by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and Purchaser may destroy any original document so reproduced. The Company agrees and stipulates that any such reproduction which is legible shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible 61 in evidence; provided that nothing herein contained shall preclude the Company from objecting to the admission of any reproduction on the basis that such reproduction is not accurate, has been altered, is otherwise incomplete or is otherwise inadmissible. 12.5 Assignment, Sale of Interest. The Company may not sell, assign or transfer this Agreement, or the Other Agreements or any portion thereof, including, without limitation, the Company's rights, title, interests, remedies, powers and/or duties hereunder or thereunder. The Company hereby consents to Purchaser's participation, sale, assignment, transfer or other disposition (collectively, a "Transfer"), at any time or times hereafter, of this Agreement, or the Other Agreements to which the Company is a party, or of any portion hereof or thereof, including, without limitation, Purchaser's rights, title, interests, remedies, powers and/or duties hereunder or thereunder. In connection with any Transfer, the Company agrees to cooperate fully with Purchaser and any potential Transferee. Such cooperation shall include, but is not limited to, cooperating with any audits or other due diligence investigation undertaken by any potential Transferee. 12.6 Successors and Assigns. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. 12.7 Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 12.8 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart or reproduction thereof permitted by Section 12.4. 12.9 Reliance on and Survival Provisions. All covenants, representations and warranties made by the Company herein and in any certificates delivered pursuant hereto, whether or not in connection with a closing, (a) shall be deemed to be material and to have been relied upon by Purchaser, notwithstanding any investigation heretofore or hereafter made by Purchaser or on Purchaser's behalf, and (b) shall survive the delivery of this Agreement and the Senior Subordinated Notes until all obligations of the Company under this Agreement shall have been satisfied. 12.10 Integration and Severability. This Agreement embodies the entire agreement and understanding between Purchaser and the Company, and supersedes all prior agreements and understandings relating to the subject matter hereof. In case any one or more of the provisions contained in this Agreement or in any Senior Subordinated Notes, or any application thereof, shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein, and any other application thereof, shall not in any way be affected or impaired thereby. 12.11 Law Governing. THIS AGREEMENT HAS BEEN SUBSTANTIALLY NEGOTIATED AND IS BEING EXECUTED, DELIVERED, AND ACCEPTED, AND IS 62 INTENDED TO BE PERFORMED, IN PART IN THE STATE OF NEW YORK. ALL OBLIGATIONS, RIGHTS AND REMEDIES HEREUNDER, SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE SENIOR SUBORDINATED NOTES SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE SPECIFIED THEREIN. PURCHASER RETAINS ALL RIGHTS UNDER THE LAWS OF THE UNITED STATES OF AMERICA, INCLUDING THOSE RELATING TO THE CHARGING OF INTEREST. 12.12 Waivers; Modification. NO PROVISION OF THIS AGREEMENT MAY BE WAIVED, CHANGED, AMENDED OR MODIFIED, OR THE DISCHARGE THEREOF ACKNOWLEDGED, ORALLY, BUT ONLY BY AN AGREEMENT IN WRITING SIGNED BY THE COMPANY AND THE HOLDERS OF SIXTY-SIX AND TWO-THIRDS PERCENT (66 2/3%) OF THE OUTSTANDING PRINCIPAL AMOUNT OF THE SENIOR SUBORDINATED NOTES. 12.13 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY AND PURCHASER HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SENIOR SUBORDINATED NOTES OR ANY DOCUMENTS ENTERED INTO IN CONNECTION THEREWITH OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF PURCHASER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF. 12.14 Other Business. It is understood and accepted that Purchaser and their Affiliates have interests in other business ventures that may be in conflict with the activities of the Company and that nothing in this Agreement will limit the current or future activities of Purchaser and that nothing in this Agreement will limit the current or future business activities of Purchaser whether or not such activities are competitive with those of the Company. 12.15 Confidentiality. Each Holder agrees to keep confidential any information delivered by the Company to such Holder under this Agreement that the Company clearly indicates in writing to be confidential information; provided, however, that nothing in this Section 12.15 will prevent such Holder from disclosing such information, upon giving notice to the Company where practicable (a) to any Affiliate of such Holder or any actual or potential purchaser, participant, assignee, or transferee of such Holder's rights or obligations hereunder that agrees to be bound by the terms of this Section 12.15, (b) upon order of any court or administrative agency, (c) upon the request or demand of any regulatory agency or authority having jurisdiction over such Holder, (d) that is in the public domain, (e) that has been obtained from any Person that is not a party to this Agreement or an Affiliate of any such party without breach by such Person of a confidentiality obligation known to such Holder, (f) in connection with the exercise of any remedy under this Agreement, (g) to the certified public accountants for such Holder, or (h) to any governmental, quasi-governmental or industry regulator having 63 authority over such Holder. The Company agrees that such Holder will be presumed to have met its obligations under this Section 12.15 to the extent that it exercises the same degree of care with respect to information provided by the Company as it exercises with respect to its own information of similar character. [REMAINDER OF PAGE INTENTIONALLY BLANK] 64 IN WITNESS WHEREOF, the Company and Purchaser have caused this Agreement to be executed and delivered by their respective officers hereunto duly authorized. COMPANY: PRECISE TECHNOLOGY, INC. By: /s/ John R. Weeks ---------------------------------- John R. Weeks President Company's Address for Notices: 501 Mosside Boulevard North Versailles, Pennsylvania 15137 Attn: Mr. John R. Weeks Facsimile: (412) 829-4121 with copies to: Precise Holding Corporation c/o Mentmore Holdings Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 Attn: Mr. William L. Remley Facsimile: (212) 391-1393 Richard C. Hoffman, P.C. 1430 Broadway, 13th Floor New York, New York 10018-3308 Facsimile: (212) 391-1393 Kelley, McCann & Livingstone 200 Public Square, 35th Floor BP America Building Cleveland, Ohio 44114-2302 Attn: Michael D. Schenker Facsimile: (216) 241-3707 RICE: RICE PARTNERS II, L.P., By: Rice Capital Group IV, L.P., its general partner By: RMC Fund Management, L.P., its general partner By: Rice Mezzanine Corporation, its general partner By: /s/ James P. Wilson -------------------------- James P. Wilson Managing Director Amount of Senior Subordinated Note: $10,000,000 JOHN HANCOCK: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ Sandeep Alva ---------------------------------- Sandeep Alva Senior Investment Officer Amount of Senior Subordinated Notes: $10,000,000 Annex I to Note Purchase Agreement Information Concerning Purchaser Rice: Rice Partners II, L.P. Principal Amount of Senior Subordinated Note: $ 10,000,000 Denomination of Warrants: Shares representing 5.7% of the common stock of Parent on a fully diluted basis Address for notices Rice Partners II, L.P. to Rice: c/o Rice Capital Group IV, L.P. 5847 San Felipe, Suite 4350 Houston, Texas 77057 Attn: James P. Wilson Facsimile: (713) 783-9750 and with a copy to: Hughes & Luce, L.L.P. 1717 Main Street, Suite 2800 Dallas, Texas 75201 Attn: Larry A. Makel, Esq. Facsimile: (214) 939-6100 John Hancock: John Hancock Mutual Life Insurance Company Principal Amount of Senior Subordinated Notes: $10,000,000 Denomination of Warrants: Shares representing 5.7% of the common stock of Parent on a fully diluted basis Address for all notices with respect to payments due John Hancock: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, Massachusetts 02117 67 Attn: Securities Accounting Division T-10 Facsimile: (617) ___________________ Address for all other notices or communications to John Hancock: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, Massachusetts 02117 Attn: Bond and Corporate Finance Dept. T-57 Facsimile: (617) __________________ Payments to Rice to be made by wire transfer to: Southwest Bank of Texas, N.A. Houston, Texas ABA Routing #113011258 Accounting #9048545 For the Account of: Rice Partners II, L.P. Money Market Account #9020012 re: Precise Technology, Inc. 12.25% Senior Subordinated Note Payments to John Hancock to be made by wire transfer to: The First National Bank of Boston ABA No. 011000390 Boston, Massachusetts 02110 For the Account of: John Hancock Mutual Life Insurance Company Private Placement Collection Account Account Number: 541-55417 On Order of: Precise Technology, Inc. 12.25% Senior Subordinated Notes PPN No.74018# AA 9 68 EX-10.5 21 WARRANT PURCHASE AGREEMENT 10.5 WARRANT PURCHASE AGREEMENT WARRANT PURCHASE AGREEMENT (the "Agreement") made as of March 29, 1996, by and among PRECISE HOLDING CORPORATION, a Delaware corporation (the "Company"), RICE PARTNERS II, L.P., a Delaware limited partnership ("Rice"), JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts mutual life insurance company ("John Hancock"), DELAWARE STATE EMPLOYEES' RETIREMENT FUND, a Delaware corporation ("Delaware"), DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC., a Delaware corporation ("Zeneca"), and DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC., a Delaware corporation ("ICI") (Delaware, Zeneca, and ICI are collectively referred to herein as "Pecks"). W I T N E S S E T H: WHEREAS, the Company owns beneficially and of record all of the issued and outstanding common stock of Precise Technology, Inc., a Delaware corporation ("Precise"); WHEREAS, Precise, Rice and John Hancock have entered into a Note Purchase Agreement (the "Note Agreement") dated of even date with this Agreement; WHEREAS, the Company, Precise and Pecks have entered into a Securities Purchase Agreement (the "Pecks Securities Purchase Agreement") dated of even date with this Agreement; WHEREAS, the Company, the Shareholder and Rice, John Hancock and Pecks (individually and collectively, the "Purchaser") have entered into a Shareholder Agreement (the "Shareholder Agreement") dated of even date with this Agreement; WHEREAS, the Company is issuing the Warrants to Rice and John Hancock to induce them to (i) enter into the Note Agreement and (ii) lend Precise $20,000,000 in the aggregate in exchange for the sale by Precise of Senior Subordinated Notes (as defined in the Note Agreement); WHEREAS, the Company is issuing the Warrants to Pecks in consideration of and pursuant to the terms of the Pecks Securities Purchase Agreement; and WHEREAS, Rice and John Hancock are willing to enter into and consummate the transactions contemplated by the Note Agreement, and Pecks is willing to enter into and consummate the transactions contemplated by the Pecks Securities Purchase Agreement, only if, among other things, (i) the Company enters into, and performs under, this Agreement, and (ii) the Company and the Shareholder enter into, and perform under, the Shareholder Agreement. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of 1 which are hereby acknowledged, the Purchaser and the Company, intending to be legally bound, agree as follows: Article I Definitions As used in this Agreement, the following terms have the following respective meanings: Actual Consideration. The aggregate consideration received by the Company in respect of an Actual Issuance of Common Stock. Actual Issuance of Common Stock or Actual Issuance. An issuance by the Company of any shares of Common Stock other than pursuant to the Exercise of a Right or a Convertible. Act. The Securities Act of 1933 located at 15 U.S.C. 77a et seq. Adjustment Public Offering. Each primary public offering of shares of any class of Capital Stock pursuant to a registration statement filed with the Commission. Affiliate. With respect to any Person, a Person that, directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term "control" as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract, or otherwise. Aggregate Consideration. The Actual Consideration received by the Company in respect of an Actual Issuance of Common Stock or the Deemed Consideration received and/or deemed received by the Company in respect of a Deemed Issuance of Common Stock. Agreement. This term is defined in the preamble. Appraised Value. The value determined in accordance with the following procedures. For a period of 30 days after the date of a Valuation Event (the "Negotiation Period"), each party to this Agreement agrees to negotiate in good faith with each other party to reach agreement upon the Appraised Value of the securities or property at issue, as of the date of the Valuation Event, which will be the fair market value of such securities or property, without premium for control or discount for minority interests, illiquidity, or restrictions on transfer. In the event that the parties are unable to agree upon the Appraised Value of such securities or other property by the end of the Negotiation Period, then the Appraised Value of such securities or property will be determined for purposes of this Agreement by a recognized appraisal or investment banking firm mutually agreeable to the Holders and the Company (the "Appraiser"). If the Holders and the Company cannot agree on an Appraiser within fifteen (15) days after the end of the 2 Negotiation Period, the Company, on the one hand, and the Holders, on the other hand, shall each select an Appraiser within twenty-one (21) days after the end of the Negotiation Period and those two Appraisers shall select within twenty-five (25) days after the end of the Negotiation Period an independent Appraiser to determine the fair market value of such securities or property, without premium for control or discount for minority interests. Such independent Appraiser shall be directed to determine fair market value of such securities or property as soon as practicable, but in no event later than thirty (30) days from the date of its selection. The determination by an Appraiser of the fair market value will be conclusive and binding on all parties to this Agreement. Appraised Value of each share of Common Stock at a time when (i) the Company is not a reporting company under the Exchange Act and (ii) the Common Stock is not traded in the organized securities markets, will, in all cases, be calculated by determining the Appraised Value of the entire Company taken as a whole (after deducting any liquidation distributions payable with respect to the Hamilton Preferred Stock) and dividing that value by the sum of (x) the number of shares of Common Stock then outstanding plus (y) the number of shares of Common Stock Equivalents, without premium for control or discount for minority interests, illiquidity, or restrictions on transfer. The costs of the Appraiser will be borne by the Company. In no event will the Appraised Value of the Common Stock or Other Securities be less than the per share consideration received or receivable with respect to the Common Stock or securities or property of the same class as the Other Securities, as the case may be, in connection with a pending transaction involving a sale, merger, recapitalization, reorganization, consolidation, or share exchange, dissolution of the Company, sale or transfer of all or a majority of its assets or revenue or income generating capacity, or similar transaction. The prevailing market prices for any security or property will not be dispositive of the Appraised Value thereof. Appraiser. This term is defined in the definition of Appraised Value. Average Market Value. The average of the Closing Prices for the security in question for the thirty (30) trading days immediately preceding the date of determination. Board Dividend Adjustment Event. The failure of Precise to declare or pay when due any two (2) quarterly dividend payments on the Pecks Preferred Stock (whether consecutive or not), but only so long as such dividend payments remain unpaid. Board Non-Payment Adjustment Event. The (a) occurrence and continuance of an "Event of Default", as defined under any instrument evidencing any Indebtedness of Precise having an outstanding principal amount in excess of $2,500,000 or (b) occurrence and continuance of a failure by Precise to maintain, at any time, Consolidated Net Worth (as defined in Precise's Certificate of Designation for its Series A Cumulative Exchangeable Preferred Stock, as in effect on the date hereof) in an amount equal to the sum of (i) $700,000 plus (ii) ten percent (10%) of Precise's Consolidated Net Income (as defined in Precise's Certificate of Designation for its Series A Cumulative Exchangeable Preferred Stock, as in effect on the date hereof), if positive, for each fiscal year of Precise commencing with the fiscal year ending December 31, 1997. 3 Book Value. With respect to shares of Common Stock, an amount equal to the quotient determined by dividing (a) the sum of (x) the total consolidated assets of the Company shown on the consolidated balance sheet of the Company as of the last day of the month preceding the date of the Valuation Event in question minus (y) the (i) total consolidated liabilities of the Company as shown on the consolidated balance sheet of the Company as of the last day of the month preceding the date of the Valuation Event and (ii) any liquidation distributions payable with respect to the Hamilton Preferred Stock by (b) the aggregate number of shares of Common Stock and Common Stock Equivalents as of the date of the Valuation Event. For the purposes of this Agreement, the Book Value of the shares of Common Stock will be determined by the independent certified public accountants then retained by the Company as described in Section 4.06. Business Day. Each day of the week except Saturdays, Sundays, and days on which banking institutions are authorized by law to close in the States of New York, North Carolina or Pennsylvania. Buyer. This term is defined in Section 6.02(a)(ii) of the Shareholder Agreement. Call Option. This term is defined in Section 5.01 of the Shareholder Agreement. Call Option Closing. This term is defined in Section 5.04 of the Shareholder Agreement. Call Option Period. This term is defined in Section 5.01 of the Shareholder Agreement. Capital Stock. As to any Person, its common stock and any other capital stock of such Person authorized from time to time, and any other shares, options, interests, participations, or other equivalents (however designated) of or in such Person, whether voting or nonvoting, including, without limitation, common stock, options, warrants, preferred stock, phantom stock, stock appreciation rights, convertible notes or debentures, stock purchase rights, and all agreements, instruments, documents, and securities convertible, exercisable, or exchangeable, in whole or in part, into any one or more of the foregoing. Closing Date. March 29, 1996. Closing Price. (a) If the primary market for the security in question is a national securities exchange registered under the Exchange Act, the National Association of Securities Dealers Automated Quotation System -- National Market System, or other market or quotation system in which last sale transactions are reported on a contemporaneous basis, the last reported sales price, regular way, of such security for such day, or, if there has not been a sale on such trading day, the highest closing or last bid quotation therefor on such 4 trading day (excluding, in any case, any price that is not the result of bona fide arm's length trading); or (b) If the primary market for such security is not an exchange or quotation system in which last sale transactions are contemporaneously reported, the highest closing or last bona fide bid or asked quotation by disinterested Persons in the over-the-counter market on such trading day as reported by the National Association of Securities Dealers through its Automated Quotation System or its successor or such other generally accepted source of publicly reported bid quotations as the Holders designate from time to time. Common Stock. The common stock, no par value, of the Company. Common Stock Equivalent. Any option, warrant, right, or similar security exercisable into, exchangeable for, or convertible to Common Stock. Commission. The Securities and Exchange Commission and any successor federal agency having similar powers. Company. Precise Holding Corporation and any successor or assign. Consideration Per Share. With respect to any Issuance, shall mean an amount equal to (x) the Actual Consideration with respect to any Actual Issuance of Common Stock divided by the number of shares of Common Stock issued, or (y) the Deemed Consideration with respect to any Deemed Issuance of Common Stock divided by the Shares Deemed Issued as a result of such Deemed Issuance. Convertible. Any stock (other than Non-Voting Stock), note or other security or instrument convertible into or exchangeable for Common Stock, a Right or another Convertible without the payment of any consideration, whether or not the right of conversion or exchange is presently exercisable and whether or not the right of conversion or exchange expires or terminates on any specific date in the future. Current Market Price. (Per share of Common Stock at any date) the average of the daily market prices over a period of twenty (20) consecutive business days before such date. The market price for each such business day shall be the last sale price on such day on the principal securities exchange on which the Common Stock is then listed or admitted to trading, or, if no sale takes place on such day on any such exchange, the average of the closing bid and asked prices on such day as officially quoted on any such exchange, or if the Common Stock is not then listed or admitted on any stock exchange, the market price for each such business day shall be the last sale price on such day, or, if no sale takes place on such day, the average of the closing bid and asked prices on such day in the over-the-counter market, in either case as reported through NASDAQ, or, if such prices are not at the time so reported, as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Company. If and so long as there shall be no 5 exchange or over-the-counter market for the Common Stock during the 20-day period prior to the date on which Current Market Price is to be determined, the Current Market Price shall be deemed to be the Fair Market Value of the Common Stock; provided, however, that in case the Company makes an underwritten public offering of shares of Common Stock, for purposes of the adjustment, if any, pursuant to Section 2.08 hereof, the Current Market Price with respect to such shares shall be deemed to be the price to the public shown in the final prospectus used in connection with such public offering. Current Warrant Price. (Per share of Common Stock at any date) the price at which one share of Common Stock may be purchased hereunder at any time; initially $.01; provided, however, that the Current Warrant Price shall not at any time exceed an amount equal to the result of dividing (i) $100 by (ii) the original aggregate number of Shares Purchasable upon an exercise of all of the Warrants (1715) adjusted in a manner reflecting all adjustments to Shares Purchasable pursuant to Section 2.08 hereof from the Closing Date through and including such time (which would be the aggregate number of Shares Purchasable at such time upon the exercise of all of the Warrants originally issued if no Warrants had been exercised or repurchased by the Company at or prior to such time). Deemed Consideration. The aggregate consideration received and deemed to be received by the Company in respect of a Deemed Issuance of Common Stock, determined by adding (x) the aggregate amount, if any, received or receivable by the Company as consideration in respect of the Issuance of Rights or Convertibles constituting such Deemed Issuance of Common Stock and (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the Full Exercise of all Rights or Convertibles necessary in order to obtain the Shares Deemed Issued in such Deemed Issuance of Common Stock. Deemed Issuance of Common Stock or Deemed Issuance. An issuance by the Company of a Right or a Convertible. Exchange Act. The Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. Exercise. The (x) purchase of or subscription for Common Stock, a Convertible and/or another Right pursuant to the terms of a Right or (y) the conversion or exchange of a Convertible for Common Stock, a Right and/or another Convertible pursuant to the terms of a Convertible. Exercise Price. The price per share specified in Section 2.03 as adjusted from time to time pursuant to the provisions of this Agreement. 6 Fair Market Value. (a) As to securities regularly traded in the organized securities markets, the Average Market Value; and (b) As to all securities (including, without limitation, the Issuable Warrant Shares) not regularly traded in the securities markets and other property, the fair market value of such securities or property as determined in good faith by the board of directors of the Company at the time it authorizes the transaction (a "Valuation Event") requiring a determination of Fair Market Value under this Agreement; provided, however, that, at the election of the Holders, the Fair Market Value of such securities and other property will be the Appraised Value. Full Exercise. The Exercise of each Right or Convertible received in a Deemed Issuance of Common Stock and the Exercise of any Rights or Convertibles purchased or received upon such Exercise so that the maximum number of shares of Common Stock which may ultimately be obtained as a result of such Deemed Issuance of Common Stock are issued. Fully Diluted Basis. As of any date, with respect to calculations involving the Common Stock of the Company (or an individual class or series thereof), making the assumption that all securities of the Company then outstanding which are convertible into such Common Stock (or shares of such class or series, as the case may be) were converted on such date and that all outstanding options, warrants and similar rights to acquire shares of Common Stock of the Company (or shares of such class or series) were exercised on such date. Hamilton. Hamilton Holdings Ltd. Corporation, a Texas corporation. Hamilton Preferred Stock. The three hundred thirty-one and forty-six one hundredths (331.46) shares of 9.5% Preferred Stock, $10,000 per share stated value, of the Company beneficially owned by Hamilton on the Closing Date. Holders. The Purchaser, and all Persons holding Registrable Securities, except that neither the Company nor any Shareholder (other than Pecks with respect to its Registrable Securities) nor any Affiliate of the Company or any Shareholder will at any time be a Holder. Unless otherwise provided in this Agreement, in each instance that the Holders are required to request or consent to an action, the Holders will be deemed to have requested or consented to such action if (a) so long as all of the Initial Holders are Holders, the Holders of seventy percent (70%) or more of the Registrable Securities so request or consent and (b) so long as two (2) or more (but less than all) of the Initial Holders are Holders, the Holders of sixty-six and two-thirds percent (66 2/3%) or more of the Registrable Securities so request or consent. ln the event that only one (1) or none of the Initial Holders is a Holder, in each instance that the Holders are required to request or consent to an action, the Holders will be deemed to have requested or consented to such 7 action if the Holders of a majority-in-interest of the Registrable Securities so request or consent. Inactive Subsidiary. Any Subsidiary that has less than $10,000 in assets and that is not engaged in any activities relating to the business of the Company or Precise. Included in such Deemed Issuance of Common Stock or Included in such Deemed Issuance. With respect to any Right or Convertible, shall mean that the Exercise of such Right or Convertible is required to be taken account of in determining the Shares Deemed Issued in a Deemed Issuance of Common Stock (for example, in the case of a Deemed Issuance which consists of the issuance of a Convertible which may be exchanged for a Right which may, in turn, be exercised for Common Stock, the issuance of the Convertible is a Deemed Issuance of Common Stock and the Exercise of the Convertible and the Right are Included in such Deemed Issuance). Indebtedness. This term is defined in Section 11.1 of the Note Agreement. Indemnified Party. This term is defined in Section 6.01 hereof and in Section 11.01 of the Shareholder Agreement. Initial Holders. Rice, John Hancock, Pecks and any Affiliate of Rice, John Hancock or Pecks to which any of the Warrants or any part of or interest in the Warrants is assigned. Initial Public Offering. The first firm commitment underwritten public offering of Common Stock to not less than 200 members of the general public (none of which shall be an Affiliate of another) under the Securities Act completed by the Company and resulting in proceeds (before underwriting discounts and commissions) to the Company of at least $25,000,000. Intellectual Property. This term is defined in Section 3.01(g). Issuable Warrant Shares. Shares of Common Stock or Other Securities issuable on exercise of the Warrants. Issuance of Common Stock or Issuance. An Actual Issuance of Common Stock or a Deemed Issuance of Common Stock. Issued Warrant Shares. Shares of Common Stock or Other Securities issued on exercise of the Warrants. Material Adverse Effect. (a) A material adverse effect upon the business, operations, properties, assets or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole or (b) the material impairment of the ability of any party to perform its obligations under this Agreement or the Shareholder Agreement or (c) the impairment of the validity of this Agreement or the Shareholder Agreement. In 8 determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing events would result in a Material Adverse Effect. Negotiation Period. This term is defined in the definition of Appraised Value. New Securities. Any Capital Stock other than (a) the Warrant Shares, (b) Permitted Stock and (c) Capital Stock issued in an Adjustment Public Offering. Note Agreement. This term is defined in the preamble and includes the Note Purchase Agreement of even date with this Agreement by and among Precise, Rice and John Hancock and all documents evidencing Indebtedness thereunder or otherwise related to the Note Agreement as the same may be amended from time to time, and any refinancing, refunding, or replacements of the Indebtedness under the Note Agreement. Notice of Acceptance. This term is defined in Section 2.07.2(c) hereof. Notice of Intent. This term is defined in Section 2.07.2(a) hereof. Notice of Sale. This term is defined in Section 6.02(a) of the Shareholder Agreement. Offer Notice. This term is defined in Section 2.07.2(b) hereof. Offer Price. This term is defined in Section 2.07.2(b) hereof. Offered Securities. This term is defined in Section 2.07.2(a) hereof. Other Convertible Conversion Rate. This term is defined in Section 2.08.2(b)(ii) hereof. Other Securities. Any stock (other than Common Stock) and any other securities of the Company or any other person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of Warrants in lieu of or in addition to Warrant Shares, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock (or Other Securities) pursuant to Section 2.08 or otherwise. Pecks Preferred Stock. This term is defined in Section 11.1 of the Note Agreement. Pecks Common Stock. The two hundred fifty (250) shares of Common Stock issued to Pecks on the Closing Date pursuant to the terms of the Pecks Securities Purchase Agreement. Pecks Securities Purchase Agreement. This term is defined in the preamble. 9 Permitted Stock. This term means (a) Common Stock or options or warrants to acquire Common Stock, constituting, in the aggregate, five percent (5%) or less of the outstanding Common Stock, issued or reserved for issuance to present and future key management of Precise pursuant to a management incentive program and (b) the Hamilton Preferred Stock. In no event will the number of shares of Permitted Stock (with respect to clause (a) above) issued or reserved for issuance, in the aggregate, exceed the lesser of the number of shares constituting five percent (5%) of the outstanding Common Stock on (a) the date of this Agreement or (b) the date issued. Person. This term will be interpreted broadly to include any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, company, institution, entity, party, or government (whether national, federal, state, county, city, municipal, or otherwise, including, without limitation, any instrumentality, division, agency, body, or department of any of the foregoing). Public Sale. Any sale of Capital Stock pursuant to an offering pursuant to the Act. Pull Along Sale. This term is defined in Section 6.04 of the Shareholder Agreement. Pull Along Sale Date. This term is defined in Section 6.04 of the Shareholder Agreement. Pull Along Sale Notice. This term is defined in Section 6.04 of the Shareholder Agreement. Purchaser. This term is defined in the preamble. Put Option. This term is defined in Section 4.01 of the Shareholder Agreement. Put Option Closing. This term is defined in Section 4.05 of the Shareholder Agreement. Put Option Period. This term is defined in Section 4.01 of the Shareholder Agreement. Put Price. This term is defined in Section 4.02 of the Shareholder Agreement. Put Shares. The Warrant Shares plus any other shares of Capital Stock owned from time to time by a Holder (other than the Pecks Common Stock). "Register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. Registrable Securities. (a) the Issuable Warrant Shares, (b) the Issued Warrant Shares and (c) the Pecks Common Stock that have not been previously sold to the public. 10 Related Party. A Subsidiary of a Selling Shareholder or one or more Related Parties; any Affiliate of the Shareholders a party to this Agreement on the Closing Date; and any member of the immediate family of any such Person. Right. Any right to purchase or subscribe for, or any option, warrant or other security or instrument (other than a Convertible) conferring on the holder thereof a right to purchase or subscribe for, Common Stock, another Right or a Convertible, in one transaction or in a series of transactions, whether or not such right is presently exercisable and whether or not such right expires or terminates on any specific date in the future. Securities Act. The Securities Act of 1933, as amended, and the rules and regulations thereunder. Senior Lender. This term is defined in Section 11.1 of the Note Agreement. Senior Loan Documents. This term is defined in Section 11.1 of the Note Agreement. Senior Subordinated Obligations. This term is defined in Section 11.1 of the Note Agreement. Senior Subordination Agreement. This term is defined in Section 11.1 of the Note Agreement. Shareholder. This term is defined in the preamble of the Shareholder Agreement. Shareholder Agreement. This term is defined in the preamble and includes the Shareholder Agreement dated as of the Closing Date between the Company, the Purchaser and the Shareholder in substantially the form attached to this Agreement as Annex A and incorporated in this Agreement by reference. Shares Deemed Issued. With respect to a Deemed Issuance of Common Stock, the maximum aggregate number of shares of Common Stock issuable upon the Full Exercise of the Rights or Convertibles the issuance of which constitutes such Deemed Issuance of Common Stock. Shares of Common Stock Deemed Outstanding and Shares Deemed Outstanding. At any time, the sum of (x) the number of shares of Common Stock actually issued and outstanding at such time and (y) the aggregate number of Shares Deemed Issued in all Deemed Issuances of Common Stock effected between the Closing Date and such time. Shares Purchasable. This term is defined in Section 2.08. Subsidiary. Each Person of which or in which the Company or its other Subsidiaries own directly or indirectly fifty-one percent (51%) or more of (i) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a 11 majority of the board of directors or equivalent body of such Person, if it is a corporation or similar person; (ii) the capital interest or profits interest of such Person, if it is a partnership, joint venture, or similar entity; or (iii) the beneficial interest of such Person, if it is a trust, association, or other unincorporated organization. Third Party. This term is defined in Section 2.07.2(a) hereof. Transfer. This term is defined in Section 2.07.2(a) hereof. Transfer Closing Date. This term is defined in Section 2.07.2(c) hereof. Valuation Event. This term is defined in the definition of Fair Market Value. Voting Stock. With respect to a corporation, the stock of such corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect members of the board of directors (or other governing body) of such corporation. Warrant Agreement. This term is defined in the preamble to the Shareholder Agreement and includes this Agreement and all documents related to this Agreement as this Agreement may be amended from time to time. Warrants. The Warrants referred to in Section 2.01, dated as of the Closing Date, issued to Initial Holders, and all Warrants issued upon the transfer or division of, or in substitution for, such Warrants. Warrant Shares. The Issued Warrant Shares and the Issuable Warrant Shares. Article II The Warrants 2.01 The Warrants. On the Closing Date, Rice and John Hancock severally agree to purchase from the Company at the purchase price set forth beneath their respective names on the signature page of this Agreement, and the Company agrees to issue to Rice and John Hancock, one or more Warrants in substantially the form attached to this Agreement as Annex B and incorporated in this Agreement by reference to purchase the aggregate number of shares of Common Stock set forth beneath their respective names on the signature page of this Agreement, all in accordance with the terms and conditions of this Agreement. On the Closing Date, Pecks agrees to purchase from the Company at the purchase price set forth in the Pecks Securities Purchase Agreement, and the Company agrees to issue to Pecks, one or more Warrants in substantially the form attached to this Agreement as Annex B and incorporated in this Agreement by reference to purchase the aggregate number of shares of Common Stock set forth beneath its name on the signature page of this Agreement, all in accordance with the terms and conditions of this Agreement and the Pecks Securities Purchase Agreement. 12 2.02 Legend. The Company will deliver to each Purchaser on the Closing Date one or more certificates representing the Warrant purchased by such Purchaser in such denominations as such Purchaser requests. Such certificates will be issued in each of the Purchasers' respective names or in the name or names of their respective designee or designees, as the case may be. It is understood and agreed that the certificates evidencing the Warrants will bear the following legend: "THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (A) REGISTRATION UNDER OR EXEMPTION FROM THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS, AND (B) UNDER CERTAIN CIRCUMSTANCES, IF REQUESTED BY PRECISE HOLDING CORPORATION (THE "COMPANY"), AN OPINION OF COUNSEL, WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER DOES NOT VIOLATE THE ACT OR ANY APPLICABLE STATE SECURITIES LAWS." "THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO THE TERMS AND PROVISIONS (INCLUDING TRANSFER RESTRICTIONS) OF A WARRANT PURCHASE AGREEMENT, DATED AS OF MARCH 29, 1996, BY AND AMONG THE COMPANY AND RICE PARTNERS II L.P., JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, DELAWARE STATE EMPLOYEES' RETIREMENT FUND, DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC. AND DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC. (COLLECTIVELY, THE "PURCHASER") AND A SHAREHOLDER AGREEMENT, DATED AS OF MARCH 29, 1996, BY AND AMONG THE COMPANY, THE PURCHASER AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES THERETO (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." 2.03 Exercise Price. The Exercise Price per share will be $.01 for each share of Common Stock covered by the Warrants; provided, however, that in no event will the aggregate Exercise Price for all of the shares of Common Stock covered by all Warrants exceed $100.00, whether as a result of any change in the par value of the Common Stock or Other Securities, as a result of any change in the number of shares purchasable as provided in this Article II, or otherwise; provided, further, that such limitation of the aggregate Exercise Price will have no 13 effect whatsoever upon the amount or number of Warrant Shares for which the Warrants may be exercised. 2.04 Exercise. (a) Each of the Warrants may be exercised at any time or from time to time on or after the Closing Date until the tenth (10th) anniversary of the date of this Agreement, on any day that is a Business Day, for all or any part of the number of Issuable Warrant Shares purchasable upon its exercise. In order to exercise any Warrant, in whole or in part, the Holder will deliver to the Company at the address designated by the Company pursuant to Section 6.06, (i) a written notice of such Holder's election to exercise its Warrant, which notice will specify the number of Issuable Warrant Shares to be purchased pursuant to such exercise, (ii) payment of the Exercise Price, in an amount equal to the aggregate purchase price for all Issuable Warrant Shares to be purchased pursuant to such exercise, and (iii) the Warrant. Such notice will be substantially in the form of the Subscription Form appearing at the end of the Warrants. Upon receipt of such notice, the Company will, as promptly as practicable, and in any event within three (3) Business Days, execute, or cause to be executed, and deliver to such Holder a certificate or certificates representing the aggregate number of full shares of Common Stock and Other Securities issuable upon such exercise, as provided in this Agreement. The stock certificate or certificates so delivered will be in such denominations as may be specified in such notice and will be registered in the name of such Holder, or such other name as designated in such notice. A Warrant will be deemed to have been exercised, such certificate or certificates will be deemed to have been issued, and such Holder or any other Person so designated or named in such notice will be deemed to have become a holder of record of such shares for all purposes, as of the date that such notice, together with payment of the Exercise Price and the Warrant, is received by the Company. If the Warrant has been exercised in part, the Company will, at the time of delivery of such certificate of certificates, deliver to such Holder a new Warrant evidencing the rights of such Holder to purchase a number of Issuable Warrant Shares with respect to which the Warrant has not been exercised, which new Warrant will, in all other respects, be identical with the Warrants, or, at the request of such Holder, appropriate notation may be made on the Warrant and the Warrant returned to such Holder. (b) Payment of the Exercise Price will be made, at the option of the Holder, by (i) company or individual check or certified or official bank check, (ii) cancellation of any debt owed by the Company to the Holder or (iii) cancellation of Warrants, valued at Fair Market Value. If the Holder surrenders a combination of cash or cancellation of any debt owed by the Company to the Holder of Warrants, the Holder will specify the respective number of shares of Common Stock to be purchased with each form of consideration, and the foregoing provisions will be applied to each form of consideration with the same effect as if the Warrant were being separately exercised with respect to each form of consideration; provided, however, that a Holder may designate that any cash to be remitted to a Holder in payment of debt be applied, together with other monies, to the exercise of the portion of the Warrant being exercised for cash. 14 2.05 Taxes. The issuance of any Common Stock or Other Securities upon the exercise of the Warrant will be made without charge to any Holder for any tax, other than income taxes assessed on such Holder, in respect of such issuance. 2.06 Warrant Register. The Company will, at all times while any of the Warrants remain outstanding and exercisable, keep and maintain at its principal office a register in which the registration, transfer, and exchange of the Warrants will be provided for. The Company will not at any time, except upon the dissolution, liquidation, or winding up of the Company, close such register so as to result in preventing or delaying the exercise or transfer of any Warrant. 2.07 Transfer and Exchange. 2.07.1 General. Subject to Section 2.07.2 hereof, the Warrants and all options and rights under the Warrants are transferable, as to all or any part of the number of Issuable Warrant Shares purchasable upon exercise, by the Holders of the Warrants, in person or by duly authorized attorney, on the books of the Company upon surrender of the Warrants at the principal offices of the Company, together with (i) the form of transfer authorization attached to the Warrants duly executed and (ii) if requested by the Company, an opinion of counsel of Hughes & Luce, L.L.P., Willkie Farr & Gallagher or other counsel reasonably acceptable to the Company, to the effect that such transfer does not violate the registration requirements of the Securities Act (provided that (i) the cost of any such opinion shall be borne by the Company, (ii) any such opinion shall be deliverable on or within thirty (30) days of any such transfer, and (iii) no such opinion shall be required if such transfer is being made pursuant to Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation adopted by the Commission); provided, however, such transfers will be made only (x) to commercial banking or financial institutions or (y) to other Persons that the transferor in good faith believes to be an "accredited investor" as such term is defined in Regulation D under the Act. Absent any such transfer and subject to the Shareholder Agreement, the Company may deem and treat the registered Holders of the Warrants at any time as the absolute owners of the Warrants for all purposes and will not be affected by any notice to the contrary. If any Warrant is transferred in part, the Company will, at the time of surrender of such Warrant, issue to the transferee a Warrant covering the number of Issuable Warrant Shares transferred and to the transferor a Warrant covering the number of Issuable Warrant Shares not transferred. 2.07.2 Certain Rights of the Company Prior to Transfer. (a) If any Holder of the Warrants desires to sell, convey or transfer ("Transfer") its Warrant, the related Warrant Shares and/or any portion thereof, to any Person other than an Affiliate of such Holder (a "Third Party") prior to the consummation of an Initial Public Offering, such Holder shall give written notice (a "Notice of Intent") to the Company (i) stating, that such Holder desires to make such Transfer, and (ii) setting forth the Warrants or the related Warrant Shares (or 15 portions thereof) proposed to be transferred, and, if applicable, (a) with respect to Rice or John Hancock, the principal amount of Senior Subordinated Notes (which, for purposes of this Section 2.07.2, shall be an amount equal to or greater than $5,000,000) proposed to be transferred by Rice or John Hancock, as the case may be, and (B) with respect to Pecks, the number of shares of Pecks Preferred Stock (which, for purposes of this Section 2.07.2, shall be a number of shares having an aggregate stated value of $1,000,000 or more) proposed to be transferred by Pecks (any such Warrants, Warrant Shares, Senior Subordinated Notes or Pecks Preferred Stock proposed to be so transferred are hereinafter referred to as, the "Offered Securities"). (b) The Company or its designee may elect to treat the Notice of Intent as an irrevocable offer to sell to the Company the Offered Securities proposed to be sold to the Third Party and, within fifteen (15) days of receipt of the Notice of Intent, the Company may deliver or cause to be delivered a written notice (the "Offer Notice") to the Holder of the Offered Securities, stating (i) that the Company or its designee elects to purchase all of the Offered Securities and the cash price that the Company proposes to pay for such Offered Securities (the "Offer Price"), and (ii) that such election is irrevocable. (c) The Holder of the Offered Securities may elect to treat the Offer Notice as an irrevocable offer to sell to the Company the Offered Securities proposed to be sold on the same terms and conditions as stated in the Offer Notice. Such offer will remain open for a period of fifteen (15) days from delivery to the Holder of the Offer Notice. Within such fifteen (15) day period, the Holder may elect to accept such offer in whole or in part by delivering to the Company written notice of its irrevocable election to accept such offer (the "Notice of Acceptance"). If the Holder irrevocably accepts such offer, (i) the Company shall deliver to the Holder, within thirty (30) days of receipt of the Notice of Acceptance, a written notice identifying the source of financing for such purchase by the Company, and (ii) the closing of the purchase and sale shall occur on or before the forty-fifth (45th) Business Day following delivery of the Notice of Acceptance on such date as mutually agreed by the Company or its designee and the Holder of the Offered Securities (the "Transfer Closing Date"). The closing shall be held at 10:00 a.m., local time, on the Transfer Closing Date at the principal office of the Company, or at such other time or place as the parties to such transaction mutually agree. At such closing, the Company will deliver to the Holder the cash purchase price of such Offered Securities, against delivery by the Holder of the Offered Securities being so purchased, such Offered Securities being free and clear of all liens, claims, and encumbrances, other than this Agreement and the Shareholder Agreement, endorsed in good form for transfer to the Company or its designees. (d) If the Holder does not deliver a Notice of Acceptance to the Company within the fifteen (15) day period specified in Section 2.07.2(c) above, 16 the Company's offer to such Holder will be deemed to have been rejected, and the Holder will be free to sell or transfer such Offered Securities to a Third Party within one hundred twenty (120) days of the expiration of such fifteen (15) day period. (e) If the Company or its designee fails to deliver an Offer Notice within the fifteen (15) day period specified in Section 2.07.2(b) above, then the Holder of the Offered Securities may, within a period of one hundred twenty (120) days following the expiration of such fifteen (15) day period, Transfer (or enter into a written agreement to Transfer as soon as practicable, provided that such Transfer is consummated not later than one hundred twenty (120) days following the expiration of the fifteen (15) day period specified in Section 2.07.2(b) all Offered Securities to one or more Third Parties, on terms acceptable to such Holder. (f) If the Holder of the Offered Securities shall not have Transferred or entered into a written agreement to Transfer the Offered Securities to any Third Party prior to the expiration of the one hundred twenty (120) day period specified in Section 2.07.2(d) or (e) above, as applicable, the right of first offer under this Section 2.07.2 shall again apply in connection with any subsequent Transfer by the Holder of its Warrant or the related Warrant Shares (or any portion thereof). (g) If any Holder of the Offered Securities delivers a Notice of Acceptance to the Company within the time period specified in Section 2.07.2(c) above and the Company fails to purchase the Offered Securities within the time period specified in Section 2.07.2(c) the right of first offer under this Section 2.07.2 shall not apply to any subsequent transfer by such Holder of its Warrants or related Warrant Shares (or any portion thereof). (h) The Company shall keep confidential the terms of any proposed Transfer contained in any Notice of Intent or Offer Notice, except as otherwise required by law or as necessary to finance the purchase of the Offered Securities subject to such proposed Transfer. (i) All rights of the Company pursuant to this Section 2.07.2 shall survive the exercise of the Warrants, and shall expire upon the consummation of an Initial Public Offering. 2.08 Adjustments to Number of Shares Purchasable. The number of Warrant Shares purchasable upon exercise of the Warrants (the "Shares Purchasable") shall be subject to adjustment from time to time as hereinafter provided in this Section 2.08. Upon each adjustment of the Shares Purchasable, the Holders of the Warrants shall be entitled to purchase the adjusted Shares Purchasable hereunder at the Current Warrant Price. 17 The provisions of this Section 2.08 shall govern the adjustment from time to time of the Shares Purchasable hereunder. 2.08.1 Basic Adjustment Formula. In case the Company shall at any time or from time to time after the date of this Agreement effect any Issuance of Common Stock for a Consideration Per Share less than the Fair Market Value in effect immediately prior to such Issuance, then and in each such case the Shares Purchasable hereunder shall be increased, effective concurrently with such Issuance, to the number of Shares Purchasable after the Issuance (calculated to the nearest one hundred thousandth of one share (.00001) and rounded to the nearest ten thousandth of one share (.0001)), determined by multiplying the Shares Purchasable immediately prior to such Issuance by a fraction of which: (a) the numerator shall be the Shares of Common Stock Deemed Outstanding immediately after and giving effect to such Issuance; and (b) the denominator shall be the sum of (i) the Shares of Common Stock Deemed Outstanding immediately prior to such Issuance and (ii) the number of shares of Common Stock which the Aggregate Consideration for such Issuance would purchase at such Current Market Price. 2.08.2 Special Applications of Basic Formula. Notwithstanding the provisions of Section 2.08.1 hereof, the following provisions shall govern the application of the adjustment formula set forth in said Section 2.08.1 in the circumstances described below: (a) Deemed Issuances of Common Stock. Whenever an adjustment is made in the Shares Purchasable hereunder pursuant to Section 2.08.1 hereof based upon a Deemed Issuance of Common Stock, except as provided in paragraphs (b) and (c) of this Section 2.08.1, no further adjustment of the Shares Purchasable hereunder shall be made upon the subsequent actual issuance of shares of Common Stock which were Shares Deemed Issued in such Deemed Issuance, nor shall the Exercise of any Right or Convertible Included in such Deemed Issuance constitute an Issuance. (b) Change in Exercise Price or Conversion Rate. If, subsequent to any Deemed Issuance of Common Stock, there is a change (other than a change required by anti-dilution provisions of any Right or Convertible intended to serve the same general purpose as the provisions of Section 2.08) in (i) the purchase or exercise price provided for in any Right Included in such Deemed Issuance (an "Other Right Exercise Price") or (ii) the conversion price or exchange ratio (an "Other Convertible Conversion Rate") of any Convertible Included in such Deemed Issuance, such that the changed Other Right Exercise Price or Other Convertible Conversion Rate, as the case may be, had it been in effect at the time of such Deemed Issuance, would have resulted in an increase in the Shares Deemed Issued in such Deemed Issuance and/or a decrease in the Deemed 18 Consideration with respect to such Deemed Issuance, then (A) such Shares Deemed Issued and/or Deemed Consideration shall be recalculated and the Shares Purchasable hereunder then in effect shall forthwith be readjusted to such Shares Purchasable as would have been in effect at such time had all of such Rights or Convertibles which remain outstanding at the time of such change (or which may be issued upon the Exercise of any Right or Convertible Included in such Deemed Issuance and which then remain outstanding) provided for such changed Other Right Exercise Price or Other Convertible Conversion Rate, as the case may be, at the time of such Deemed Issuance and (B) each other adjustment, if any, made to the Shares Purchasable hereunder subsequent to such Deemed Issuance based on subsequent Issuances shall be recalculated, utilizing for such purpose the Shares Deemed Issued, Deemed Consideration and the Shares Purchasable as recalculated or as readjusted pursuant to clause (A) of this paragraph (b). (c) Expiration of Right on Conversion Privilege. With respect to any Deemed Issuance of Common Stock, effective at the close of business on the first Business Day on which no share of Common Stock may thereafter be issued upon an Exercise of a Right or Convertible Included in such Deemed Issuance (whether by reason of (x) the Full Exercise of all Rights and/or Convertibles Included in such Deemed Issuance or (y) the expiration or termination of any right to Exercise any Rights and/or Convertibles Included in such Deemed Issuance which have not theretofore been Exercised and/or (z) the purchase by the Company and cancellation or retirement of some or all Rights and/or Convertibles Included in such Deemed Issuance which have not theretofore been exercised), the Shares Purchasable then in effect shall be adjusted by (i) recalculating pursuant to Section 2.08.1 hereof the adjustment of the Shares Purchasable as in effect immediately prior to such Deemed Issuance, basing such recalculation on (A) each issuance of shares of Common Stock upon an Exercise of a Right or Convertible Included in such Deemed Issuance, rather than the Shares Deemed Issued on which the original calculation was based and (B) Actual Consideration in an amount equal to the sum of (I) the consideration actually paid to the Company for the Rights and/or Convertibles Included in such Deemed Issuance and (II) the consideration actually paid to the Company upon the Exercise of all Rights and/or Convertibles Included in such Deemed Issuance which were exercised, less (III) the consideration paid by the Company upon any purchase by the Company of Rights and/or Convertibles Included in such Deemed Issuance, rather than the Deemed Consideration on which the original calculation was based and (ii) recalculating each other adjustment, if any, made to the Shares Purchasable subsequent to such Deemed Issuance based on subsequent Issuances, utilizing the Shares Purchasable as adjusted pursuant to clause (i) of this paragraph (c) and including in Shares Deemed Outstanding for such purpose only the shares of Common Stock actually issued upon the Exercise of Rights and/or Convertibles Included in such Deemed Issuance in place of the Shares Deemed Issued in respect of such Deemed Issuance as utilized in the original calculations of those adjustments. 19 (d) Stock Dividends. In case at any time the Company shall declare a dividend or make any other distribution upon any class or series of its stock payable in shares of Common Stock, Rights or Convertibles, (i) any issuance of shares of Common Stock shall be treated as an Actual Issuance of Common Stock, (ii) any issuance of Rights or Convertibles shall be treated as a Deemed Issuance of Common Stock and (iii) any shares of Common Stock, Rights or Convertibles, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration (that is, the Actual Consideration or Deemed Consideration in respect of such Actual Issuance or Deemed Issuance, as the case may be, shall be zero). (e) Purchase of New Securities Pursuant to Article II of the Shareholder Agreement. Notwithstanding any other provision of this Section 2.08, neither the granting of any preemptive rights pursuant to Article II of the Shareholder Agreement hereof nor the issuance of New Securities upon the exercise thereof shall be treated as an Issuance of Common Stock for the purposes of this Section 2.08 or give rise to any adjustment of the Shares Purchasable pursuant to Section 2.08.1 hereof. No shares of Common Stock which would have been, but for the foregoing provisions of this Section 208.2(e) deemed issued as a result of such grant or actually issued as a result of such exercise shall be included in Shares Deemed Outstanding for any calculation of an adjustment in the Shares Purchasable pursuant to Section 2.08.1 hereof or for any other purpose of this Section 2.08. 2.08.3 Principals in Applying Basic Formula. The following provisions shall be applicable for the purpose of calculations utilizing the adjustment formula set forth in Section 2.08.1 hereof and otherwise, as appropriate, for the purposes of this Section 2.08: (a) Consideration for Shares, Rights and Convertibles. In case at any time any shares of Common Stock, Rights or Convertibles shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor in the form of such cash, without deduction of any expenses incurred or any underwriting commissions, discounts or concessions paid or allowed by the Company in connection therewith. In case at any time any shares of Common Stock, Rights or Convertibles shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration at the time of such issuance as determined reasonably and in good faith by the board of directors of the Company, without deduction of any expenses incurred or any underwriting commissions, discounts or concessions paid or allowed by the Company in connection therewith. In case at any time any shares of Common Stock, Rights or Convertibles shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation (other than a transaction to which Section 2.08.4(c) hereof shall be applicable), the 20 amount of consideration received therefor shall be deemed to be the fair value as determined reasonably and in good faith by the board of directors of the Company of such portion of the assets and business of the non-surviving entity as the board of directors of the Company may determine to be attributable to such shares of Common Stock, Rights or Convertibles, as the case may be. In case at any time any Rights or Convertibles shall be issued in connection with the issue and sale of other securities of the Company, together comprising one integral transaction in which no allocation of consideration is made between such Rights or Convertibles and such other securities by the parties thereto, such Rights or Convertibles shall be deemed to have been issued for an amount of consideration equal to the fair value thereof as determined reasonably and in good faith by the board of directors of the Company. Notwithstanding any other provisions of this Section 2.08.3(a), in case any shares of Common Stock, Rights or Convertibles shall be issued or sold to an Affiliate of the Company for consideration other than cash and fifty percent (50%) or more of the shares of Common Stock to be issued or sold (including for this purpose any shares of Common Stock issuable upon exercise of any Rights to be issued or sold and/or any shares of Common Stock issuable upon conversion of any Convertibles to be issued or sold) are to be issued or sold to an Affiliate of the Company, then the Holders shall have the right to demand, upon written notice to the Company given within ten (10) days after receipt of the determination of fair value pursuant to this Section 2.08.3(a) by the board of directors of the Company, and in lieu thereof, a determination of fair value of such consideration to be made by appraisal, by Appraisers as described in the definition of Fair Market Value. (b) Record Date. In case the Company shall take a record of the holders of Common Stock or the holders of Voting Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in shares of Common Stock, Rights or Convertibles, or (ii) to subscribe for or purchase shares of Common Stock, Rights or Convertibles, then such record date shall be deemed to be the date of the Issuance or Deemed Issuance of the shares of Common Stock issued or deemed issued as a result of the declaration of such dividend or the making of such other distribution or the granting of such right of subscription or purchase, as the case may be. (c) Treasury Shares. The number of Shares Deemed Outstanding at any given time shall not include shares of Common Stock owned or held by or for the account of the Company or any Subsidiary. The disposition of any such shares shall be considered an Actual Issuance of Common Stock for the purpose of determining any adjustment of the Shares Purchasable required pursuant to Section 2.08.1 hereof, unless such shares are issued upon the Exercise of any Right or Convertible the grant or sale of which constituted a Deemed Issuance of Common Stock which resulted in an adjustment of the Shares Purchasable pursuant to Section 2.08.1 hereof. 21 2.08.4 Adjustments Not Governed by the Basic Formula. Notwithstanding any other provision of this Section 2.08, under the circumstances set forth in this Section 2.08.4, no adjustment in the Shares Purchasable shall be made pursuant to Section 2.08.1 hereof (except as expressly otherwise provided in this Section 2.08.4) and any adjustment or other provision to protect the right of the Holders to exercise Warrants for shares of Common Stock shall be made only in the manner provided below: (a) Extraordinary Dividends and Distributions. In case the Company at any time or from time to time shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of other or additional stock or other securities or property or options by way of dividend or similar corporate rearrangement) on the Common Stock, other than (i) a dividend payable in shares of Common Stock, Rights or Convertibles or (ii) a dividend declared on or after the Closing Date which is permitted by this Agreement, then, and in each such case, subject to the last sentence of Section 2.08.2 hereof, the Shares Purchasable in effect immediately prior to the close of business on the record date fixed for the determination of holders of any class of securities entitled to receive such dividend or distribution shall be increased, effective as of the close of business on such record date, to an adjusted Shares Purchasable determined by multiplying such Shares Purchasable by a fraction, (x) the numerator of which shall be the Current Market Price in effect on such record date or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading, and (y) the denominator of which shall be such Current Market Price, less the aggregate amount of such dividend or distribution (as determined in good faith by the board of directors of the Company) applicable to one share of Common Stock. (b) Subdivision or Combination of Stock. In case the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares, the Shares Purchasable in effect immediately prior to such subdivision shall be proportionately increased, and conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Shares Purchasable in effect immediately prior to such combination shall be proportionately reduced. (c) Adjustments for Consolidation. Merger. Sale of Assets. Reorganization etc. In case the Company (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) shall permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, (iii) shall transfer all or substantially all of its properties or assets to any other Person, or (iv) shall effect a capital reorganization or reclassification of the Common Stock other than a capital 22 reorganization or reclassification resulting in the issue of additional shares of Common Stock for which adjustment in the Shares Purchasable is provided in this Section 2.08, then, and in each such case, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this Agreement, the Holders, upon the exercise hereof at any time after the consummation of such consolidation, merger, transfer, reorganization or reclassification, shall be entitled to purchase (at the price described in Section 2.03 in effect at the time of such consummation), in lieu of the Common Stock for which the Warrants could have been exercised immediately prior to such consummation, the stock and other securities, cash and property which such Holder would have been entitled to receive upon such consummation if such Holder had exercised its Warrant for such Common Stock immediately prior thereto, subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for in this Section 2.08. Nothing contained in this Section 2.08.4(c) or otherwise herein shall be deemed to authorize the Company to enter into any transaction not otherwise permitted by this Agreement or the Shareholder Agreement. (d) Certain Other Events. If any event occurs as to which the other provisions of this Section 2.08 are not strictly applicable or if strictly applicable would not fairly protect the rights of the Holders in accordance with the essential intent and principles of such provisions, then the board of directors of the Company shall appoint its regular independent auditors or another firm of independent public accountants acceptable to the Holders, which shall give their opinion upon the adjustment, if any, on a basis consistent with such essential intent and principles, necessary to preserve, without dilution, the rights of the Holders. Upon receipt of such opinion, the board of directors of the Company shall forthwith make the adjustments described therein; provided, however, that no such adjustment shall have the effect of reducing the Shares Purchasable as otherwise determined pursuant to this Section 2.08 except as contemplated in Section 2.08.2(b) or (c) or Section 2.08.4(b) hereof. 2.08.5 Notice of Adjustment. Upon the occurrence of any event requiring an adjustment of the Shares Purchasable or effecting a material change in the rights of the holder hereof, then and in each such case the Company shall promptly prepare a schedule setting forth the adjusted Shares Purchasable hereunder and the Current Warrant Price, or specifying the Other Securities or property and the amount thereof receivable as a result of such change in rights, and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Company shall promptly mail a copy of such schedule to the registered holder of this Warrant. 2.08.6 Prohibition of Certain Articles. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be 23 observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 2.08 and in the taking of all such action as may reasonably be requested by the Holders in order to protect the rights of the Holders to exercise their Warrants for Common Stock against dilution or other impairment, consistent with the terms and provisions of this Agreement. 2.08.7 Other Securities. If and to the extent that, pursuant to the provisions of this Agreement and the Shareholder Agreement, any Capital Stock other than the Common Stock shall be issuable (or stock or other securities of any person other than the Company or cash or any other property shall be deliverable) upon the exercise of this Warrant in lieu of or in addition to any shares of Common Stock that initially would have been issuable upon such exercise, each provision of this Section 2.08 relating to (i) the issuance of shares of Common Stock, (ii) the adjustment of the Shares Purchasable, (iii) the rights of a Holder intended to protect its right to exercise for shares of Common Stock and as a potential holder of shares of Common Stock and (iv) the restrictions on the Company intended to protect such rights shall be deemed to relate to (and/or convey the comparable rights and impose comparable restrictions with respect to) such other Capital Stock (or such stock or other securities of such Person other than the Company or cash or other property). 2.08.8 Determinations by Board of Directors. All determinations which this Agreement specifically provides are to be made by the board of directors of the Company under this Agreement shall be made in good faith with due regard to the interests of the Holders and the other holders of securities of the Company and in accordance with good financial practice, and all valuations made by the board of directors of the Company under the terms of this Agreement must be made with due regard to any market quotations of securities involved in, or related to, the subject of such valuation. 2.09 Lost, Stolen, Mutilated, or Destroyed Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, mutilation, or destruction of a Warrant, and, in the case of any such loss, theft, or destruction, upon delivery of a bond of indemnity in such form and amount as is reasonably satisfactory to the Company or, in the event of such mutilation upon surrender and cancellation of the Warrant, the Company, without charge to the Holder, will make and deliver a new Warrant of like tenor in lieu of such lost, stolen, destroyed, or mutilated Warrant. If any such lost, stolen, or destroyed Warrant is owned by an Initial Holder or any other Holder whose credit is satisfactory to the Company, then the affidavit of an authorized officer of such owner setting forth the fact of loss, theft, or destruction and of its ownership of the Warrant at the time of such loss, theft, or destruction will be accepted as satisfactory evidence, and no further indemnity will be required as a condition to the execution and delivery of a new Warrant, other than a written agreement of such owner (in form reasonably satisfactory to the Company) to indemnify the Company. 2.10 Stock Legend. The Warrants and the Warrant Shares have not been registered under the Securities Act or qualified under applicable state securities laws. Accordingly, unless there is an effective registration statement and qualification respecting the Warrants and the 24 Warrant Shares under the Securities Act or under applicable state securities laws at the time of exercise of a Warrant, any stock certificate issued pursuant to the exercise of a Warrant will bear the following (or substantially equivalent) legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THE SHARES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (I) REGISTRATION UNDER OR EXEMPTION FROM THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS, AND (II) UNDER CERTAIN CIRCUMSTANCES, IF REQUESTED BY PRECISE HOLDING CORPORATION (THE "COMPANY"), AN OPINION OF COUNSEL, WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER DOES NOT VIOLATE THE ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND (B) ARE SUBJECT TO THE TERMS AND PROVISIONS (INCLUDING TRANSFER RESTRICTIONS) OF A WARRANT PURCHASE AGREEMENT, DATED AS OF MARCH 29, 1996, BY AND AMONG THE COMPANY AND RICE PARTNERS II, L.P., JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, DELAWARE STATE EMPLOYEES' RETIREMENT FUND, DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC. AND DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC. (COLLECTIVELY, THE "PURCHASER") AND A SHAREHOLDER AGREEMENT, DATED AS OF MARCH 29, 1996, BY AND AMONG THE COMPANY, THE PURCHASER AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES THERETO (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." In addition, until such time as this Agreement is no longer in effect, the Company will cause any stock certificate evidencing any Capital Stock of the Company to bear the legend set forth above (or a substantially equivalent legend). Article III Representations and Warranties 3.01 Representations and Warranties of the Company. The Company represents and warrants to the Purchaser that: (a) The Company and each of its Subsidiaries is a corporation duly organized and existing and in good standing under the laws of its state of incorporation and is 25 qualified or licensed to do business in all other jurisdictions the laws of which require it to be so qualified or licensed and where the failure to be so qualified or licensed would have a Material Adverse Effect. The Company has no Subsidiaries (other than Precise and the other entities listed on Schedule 4.16 to the Note Agreement) or debt or equity investment in any Person. The Shareholder owns 100% of the issued and outstanding Capital Stock of the Company free and clear of all liens, claims, and encumbrances, except those arising pursuant to the Warrants. The Company owns 100% of the issued and outstanding common stock of Precise free and clear of all liens, claims, and encumbrances, except those in favor of the Senior Lender arising under the Senior Loan Documents. No Person other than the Purchaser, the Shareholders and the holders of Permitted Stock have any rights, whether granted by the Company or any other Person, to acquire any portion of the equity interest of the Company. (b) The Company has, and at all times that this Agreement is in force will have, the right and power, and is duly authorized, to enter into, execute, deliver, and perform this Agreement, the Shareholder Agreement and the Warrants, and the officers of Company executing and delivering this Agreement, the Shareholder Agreement, and the Warrants are duly authorized to do so. This Agreement, the Shareholder Agreement and the Warrants have been duly and validly executed, issued, and delivered and constitute the legal, valid, and binding obligations of the Company, enforceable in accordance with their respective terms, except to the extent that such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors' rights generally, or (b) general principles of equity. (c) The execution, delivery, and performance of this Agreement, the Shareholder Agreement and the Warrants will not, by the lapse of time, the giving of notice, or otherwise, constitute a violation of any applicable provision contained in the charter, bylaws, or organizational documents of the Company or contained in any material agreement, instrument, or document to which the Company is a party or by which it is bound. (d) As of the Closing Date (after giving effect to the Acquisition (as defined in the Note Purchase Agreement), the authorized capital stock of the Company consists of (i) 10,000 shares of Common Stock, no par value, of which 8,285 shares are issued and outstanding and (ii) 1,000 shares of 9.5% preferred stock of which 331.46 shares are issued and outstanding. 1,715 shares of Common Stock are reserved for issuance on exercise of the Warrants. All such issued and outstanding shares have been duly authorized and validly issued, are fully paid and nonassessable, and have been offered, issued, sold, and delivered by Company free from preemptive rights, rights of first refusal, or similar rights and in compliance with applicable federal and state securities laws. Except pursuant to this Agreement, the Shareholder Agreement and the Pecks Securities Purchase Agreement, the Company is not obligated to issue or sell any Capital Stock, and except pursuant to this Agreement, the Shareholder Agreement, the Pecks Securities Purchase Agreement and the Senior Loan Agreement, the Company is not party to, or otherwise bound by, any agreement affecting the voting of any of its Capital 26 Stock. Except for the Shareholder Agreement, the Company is not, nor will it be, a party to, or otherwise bound by, any agreement obligating it to register any of its Capital Stock. (e) The shares of Common Stock and other consideration issuable on exercise of the Warrants have been duly and validly authorized and reserved for issuance and, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid, and nonassessable and free of preemptive rights, rights of first refusal, or similar rights except those arising under the Shareholder Agreement. (f) The Company and each of its Subsidiaries has good, indefeasible, merchantable, and marketable title to, and ownership of, all of its assets free and clear of all liens, pledges, security interests, claims, or other encumbrances except those arising pursuant to or permitted under the Senior Loan Documents or pursuant to or permitted under the Note Agreement. (g) There is not now, and at no time during the term of this Agreement or the Shareholder Agreement will there be, any agreement, arrangement, or understanding involving the Company, other than this Agreement, the Shareholder Agreement, the Pecks Securities Purchase Agreement and the Senior Loan Agreement, and the documents contemplated hereby and thereby, modifying, restricting, or in any way affecting the rights of any security holder to vote securities of the Company. (h) Each of the representations and warranties made by the Company pursuant to the Note Agreement and the Shareholder Agreement is true and correct in all material respects. (i) None of the documents, instruments, or other information furnished to the Purchaser by the Company, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make any statements made therein not misleading. No representation, warranty, or statement made by the Company in this Agreement, the Note Agreement, or the Shareholder Agreement, or in any document, certificate, exhibit or schedule attached hereto or thereto or delivered in connection herewith or therewith, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make any statements made herein or therein not misleading. To the best of the Company's knowledge, there is no fact that materially and adversely affects the condition (financial or otherwise), results of operations, business, properties, or prospects of the Company or any of its Subsidiaries that has not been disclosed in the documents provided to the Purchaser. 3.02 Representations and Warranties of the Purchaser. Each Purchaser, severally and not jointly, represents and warrants to the Company with respect to itself and not with respect to any other Purchaser: (a) It is a corporation or limited partnership duly organized and existing and in good standing under the laws of the state of its organization. 27 (b) It has the right and power and is duly authorized to enter into, execute, deliver, and perform this Agreement and the Shareholder Agreement, and its officers or agents executing and delivering this Agreement and the Shareholder Agreement are duly authorized to do so. This Agreement and the Shareholder Agreement have been duly and validly executed, issued, and delivered and constitute the legal, valid, and binding obligation of the Purchaser, enforceable in accordance with their terms. (c) It (i) is an "accredited investor," as that term is defined in Regulation D under the Securities Act; and (ii) except with respect to Pecks, has such knowledge, skill, and experience in business and financial matters, based on actual participation, that it is capable of evaluating the merits and risks of an investment in the Company and the suitability thereof as an investment for the Purchaser. (d) Except as otherwise contemplated by this Agreement and the Shareholder Agreement, the Purchaser is acquiring its Warrant and any securities issuable upon exercise of the Warrant for investment for its own account and not with a view to any distribution thereof in violation of applicable securities laws. (e) It agrees that the certificates representing its Warrant and any Issued Warrant Shares will bear the legends referenced in this Agreement, and such Warrant or securities issuable upon exercise of the Warrant and pursuant to the Shareholder Agreement, as the case may be, will not be offered, sold, or transferred in the absence of registration or exemption under applicable securities laws. Article IV Covenants The Company covenants and agrees as follows: 4.01 Financial Statements. The Company will cause Precise to keep books of account and prepare financial statements and will cause to be furnished to the Purchaser and each other Holder (all of the foregoing and following to be kept and prepared in accordance with United States generally accepted accounting principles applied on a consistent basis): (a) As soon as available, and in any event within ninety (90) days after the end of each fiscal year of Precise, beginning with the fiscal year ending December 31, 1996, (i) a copy of the consolidated and consolidating financial statements of Precise for such fiscal year containing a balance sheet, statement of income, statement of stockholders' equity, and statement of cash flow as at the end of such fiscal year and for the fiscal year then ended and in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail and audited and certified by Ernst & Young L.L.P., or other independent certified public accountants of recognized national standing selected by Precise and consented to by the Holders to the effect that such statements have been prepared in accordance with generally accepted accounting 28 principles and (ii) a comparison of the actual results during such fiscal year to those originally budgeted by Precise prior to the beginning of such fiscal year, along with management's discussion and analysis of variances, as well as, variances between actual results for such fiscal year and actual results for the previous fiscal year. The annual audit report required by this Agreement will not be qualified or limited (b) As soon as available, and in any event within thirty (30) days after the end of each calendar month, a copy of unaudited consolidated and consolidating financial statements of Precise as of the end of such calendar month and for the portion of the fiscal year then ended, containing balance sheets, statements of income, statement of retained earnings and statements of cash flow, in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year, all in reasonable detail, including, without limitation, a comparison of actual results for such period to those originally budgeted by Precise prior to the beginning of such fiscal period and for the fiscal year to date. (c) On or before thirty (30) days prior to the beginning of each fiscal year of Precise, an annual budget or business plan for such fiscal year, including a projected consolidated and consolidating balance sheet, income statement, and cash flow statement for such year, and, promptly during each fiscal year, all revisions thereto approved by the board of directors of Precise. (d) Concurrently with the delivery of each of the financial statements referred to in Section 4.01(a) and 4.01(b), a certificate of an authorized officer of Precise in form and substance satisfactory to the Holders (i) stating that no Potential Default (as defined in the Note Agreement) or Event of Default (as defined in the Note Agreement) has occurred or is continuing or, if such officer has knowledge of a Potential Default or Event of Default, the nature thereof and specifying the steps taken or proposed to remedy such matter, (ii) showing in reasonable detail the calculations showing compliance with Section 7.9 and 7.10 of the Note Agreement, (iii) stating the financial statements have been prepared in accordance with generally accepted accounting principles and fairly and accurately present (subject to year-end audit adjustments, for the annual certificate) the financial condition and results of operations of Precise at the date and for such period indicated therein, (iv) containing summaries of accounts payable agings, accounts receivable agings, and inventory (provided that such information shall be required only in connection with the delivery of the financial statements referred to in Section 6.1(b) in respect of any month which is the last month of a fiscal quarter of Precise), and (v) containing a schedule of the outstanding Indebtedness for borrowed money of Precise and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan (provided that such information shall be required only in connection with the delivery of the financial statements referred to in Section 6.1(b) in respect of any month which is the last month of a fiscal quarter of Precise.) 29 (e) As soon as available, (i) a copy of each financial statement, report, notice, or proxy statement sent by the Company, Precise or any of their Subsidiaries to their respective shareholders, (ii) a copy of each regular, periodic or special report, registration statement, or prospectus filed by the Company, Precise or any of their Subsidiaries with any securities exchange or the Securities and Exchange Commission or any successor agency, (iii) any material order issued by any court, governmental authority, or arbitrator in any material proceeding to which the Company, Precise or any of their Subsidiaries is a party, (iv) copies of all press releases and other statements made available generally by the Company, Precise or any of their Subsidiaries to the public generally concerning material developments in the Company's, Precise's or any such Subsidiary's business, and (v) a copy of all notices and other correspondence sent by the Company or Precise to the Senior Lender pertaining to the occurrence of any default or event of default under the Senior Loan Documents. (f) Promptly, such additional information concerning the Company or any of its Subsidiaries as any Holder may request, including, without limitation, auditor management reports and audit "waive" lists. 4.02 Laws. The Company will, and the Company will cause each of its Subsidiaries to, comply in all material respects with all applicable statutes, regulations, and orders of the United States, domestic and foreign states, and municipalities, agencies, and instrumentalities of the foregoing applicable to the Company and its Subsidiaries, the failure of which would have a Material Adverse Effect. 4.03 Inspection. The Company will, and the Company will cause each of its Subsidiaries to, permit any representative designated by the Holders at any time and from time to time during normal business hours and upon two (2) Business Days prior notice to (a) visit and inspect any of the properties of the Company and its Subsidiaries; (b) examine the corporate and financial records of the Company and its Subsidiaries and make copies thereof or extracts therefrom; and (c) discuss the affairs, finances, and accounts of the Company and its Subsidiaries with the directors, officers, and independent accountants of the Company and its Subsidiaries. 4.04 Certain Actions. Without the prior written consent of the Holders, which consent may be withheld in the sole discretion of the Holders, the Company will not, and the Company will not permit any of its Subsidiaries to: (a) permit to occur any amendment, alteration or modification of its Articles of Incorporation, Bylaws or other charter or organizational documents, as constituted on the date of this Agreement, the effect of which, in the reasonable credit judgment of the Holders, would be to alter, impair, or affect adversely, either the rights and benefits of the Holders or the duties and obligations of Company under this Agreement, the Warrants, or the Shareholder Agreement; (b) declare or make any dividends or distributions of its cash, stock, property, or assets (other than (i) dividends and distributions which are permitted pursuant to the 30 terms of the Note Agreement and (ii) regularly scheduled dividends on the Hamilton Preferred Stock, subject to the restrictions set forth in Section 4.04 of the Shareholder Agreement) or redeem, retire, purchase, or otherwise acquire, directly or indirectly, any of its Capital Stock or Capital Stock or securities of any Affiliate of the Company, or any securities convertible or exchangeable into Capital Stock or Capital Stock or securities of any Affiliate of the Company; (c) effect any sale, lease, assignment, transfer, or other conveyance of any portion of the assets or operations or the revenue or income generating capacity of the Company or any Subsidiary (other than sales, leases, assignments, transfers and other conveyances which are permitted pursuant to the terms of the Note Agreement) or to take any such action that has the effect of the foregoing; (d) except for Permitted Stock or pursuant to this Agreement, the Shareholder Agreement, the Note Agreement or the Pecks Securities Purchase Agreement, issue or sell, or otherwise dispose of any Capital Stock, or dissolve or liquidate (except that any Inactive Subsidiary may be dissolved or liquidated), or effect any consolidation or merger involving the Company or any Subsidiary (except that any Subsidiary of Precise may be merged with and into (i) Precise, provided that Precise is the surviving corporation or (ii) any other Subsidiary of Precise) or any reclassification, corporate reorganization, stock split or reverse stock split, or other change of any class of Capital Stock; (e) enter into any business that the Company or Precise is not conducting on the date of this Agreement or acquire any substantial business operation or assets (through a stock or asset purchase or otherwise); (f) except for Permitted Stock or as otherwise permitted in the Note Agreement, enter into any transaction or transactions with any director, officer, or shareholder of the Company or the Shareholder, or any Affiliate or relative of the foregoing except upon terms that are disclosed in writing to the Holders and are (i) in the opinion of the Holders, fair and reasonable and (ii) in any event, at least as favorable as would result in a comparable arm's-length transaction with a Person not a director, officer, employee, shareholder, or Affiliate of the Company or the Shareholder or any Affiliate or related party of the foregoing, or advance any monies to any such Persons, except for travel advances in the ordinary course of business; (g) increase the amount of benefits payable under any benefit plan in the aggregate, or increase the aggregate amount of professional, management, consulting or similar fees paid or accrued by the Company or its Subsidiaries during any fiscal year to or for the direct or indirect benefit of any of its officers, directors, or security holders or Affiliates beyond the amounts permitted under the Note Agreement; (h) acquire any debt or equity interest in any Person or establish or acquire a Subsidiary (other than any Subsidiary existing on the date hereof) or, except as otherwise permitted under the Note Agreement, make any additional capital contribution or 31 purchase any additional equity in any Subsidiary or, except as otherwise permitted under the Note Agreement, make any advances or loans to any Subsidiary or transfer any technology or assets to any Subsidiary; (i) allow the aggregate par value of the Capital Stock subject to the Warrants from time to time to exceed the price payable on exercise of the Warrants, as adjusted from time to time; or (j) obligate itself or otherwise agree to take, permit or enter into any of the events described in subsections (a) through (i) above. 4.05 Records. The Company and each of its Subsidiaries will keep books and records of account in which full, true, and correct entries will be made of all dealings and transactions in relation to its business and affairs in accordance with generally accepted accounting principles applied on a consistent basis. 4.06 Accountants. The Company will retain independent public accountants who will certify the consolidated and consolidating financial statements of Precise at the end of each fiscal year, and in the event that the services of the independent public accountants so selected, or any firm of independent public accounts hereafter employed by Company, are terminated, the Company will promptly thereafter notify each Holder. The Company will not terminate the employment of Precise's independent public accountants unless such termination is authorized by the board of directors of Precise and the Company. 4.07 Existence. The Company will maintain, and will cause each of its Subsidiaries (other than Inactive Subsidiaries) to maintain, in full force and effect its corporate existence and all rights, franchises and licenses necessary to the conduct of its business. 4.08 Notice. (a) In the event of (i) any setting by the Company of a record date with respect to the holders of any class of Capital Stock for the purpose of determining which of such holders are entitled to dividends, repurchases of securities or other distributions, or any right to subscribe for, purchase or otherwise acquire any shares of Capital Stock or other property or to receive any other right; or (ii) any capital reorganization of the Company or any of its Subsidiaries, or reclassification or recapitalization of the Capital Stock or any transfer of all or a majority of the assets, business, or revenue or income generating capacity of the Company or any of its Subsidiaries, or consolidation, merger, share exchange, reorganization, or similar transaction involving the Company or any of its Subsidiaries; or (iii) any voluntary or involuntary dissolution, liquidation, or winding up of the Company or any of its Subsidiaries; or (iv) any proposed issue or grant by the Company or any of its Subsidiaries of any Capital Stock, or any right or option to subscribe for, purchase, or otherwise acquire any Capital Stock (other than the issue of Issuable Warrant Shares upon exercise of the Warrants or Permitted Stock), then, in each such event, the Company will deliver or cause to be delivered to the Holders a notice 32 specifying, as the case may be, (A) the date on which any such record is to be set for the purpose of such dividend, distribution, or right, and stating the amount and character of such dividend, distribution, or right; (B) the date as of which the holders of record will be entitled to vote on any reorganization, reclassification, recapitalization, transfer, consolidation, merger, share exchange, conveyance, dissolution, liquidation, or winding up; (C) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, share exchange, conveyance, dissolution, liquidation, or winding-up is to take place and the time, if any is to be fixed, as of which the holders of record of any class of Capital Stock will be entitled to exchange their shares of Capital Stock for securities or other property deliverable upon such event; (D) the amount and character of any Capital Stock, property, or rights proposed to be issued or granted, the consideration to be received therefor, and, in the case of rights or options, the exercise price thereof, the date of such proposed issue or grant and the Persons or class of Persons to whom such proposed issue or grant will be offered or made; and (E) such other information as the Holders may reasonably request. Any such notice will be deposited in the United States mail, postage prepaid, at least fifteen (15) days prior to the date therein specified, and notwithstanding anything in this Agreement or the Warrants to the contrary the Holders may exercise the Warrants within fifteen (15) days from the receipt of such notice. (b) If there is any adjustment as provided above in Article II, or if any Other Securities become issuable in lieu of shares of such Common Stock upon exercise of the Warrants, the Company will immediately cause written notice thereof to be sent to each Holder, which notice will be accompanied by a certificate of the independent public accountants of the Company setting forth in reasonable detail the basis for the Holders' becoming entitled to receive such Other Securities, the facts requiring any such adjustment in the number of shares receivable after such adjustment, or the kind and amount of any Other Securities so purchasable upon the exercise of the Warrants, as the case may be. At the request of any Holder and upon surrender of the Warrant of such Holder, the Company will reissue the Warrant of such Holder in a form conforming to such adjustments. 4.09 Taxes. The Company will, and will cause each of its Subsidiaries to, file all required tax returns, reports, and requests for refunds on a timely basis and will pay on a timely basis all taxes imposed on either of it or upon any of its assets, income, or franchises, except as contested in good faith by appropriate action promptly initiated and diligently conducted, so long as adequate cash reserves have been established on its books in accordance with generally accepted accounting principles. 4.10 Warrant Rights. The Company covenants and agrees that during the term of this Agreement and so long as any Warrant is outstanding, (a) the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock and Other Securities, to provide for the exercise in full of the rights represented by the Warrants and the exercise in full of the rights of the Holders under the Shareholder Agreement; (b) the Company will not increase or permit to be increased the par value per share or stated capital of the Issuable Warrant Shares 33 or the consideration receivable upon issuance of its Issuable Warrant Shares; and (c) in the event that the exercise of the Warrant would require the payment by the Holder of consideration for the Common Stock or Other Securities receivable upon such exercise of less than the par or stated value of such Issuable Warrant Shares, the Company and the Shareholder will promptly take such action as may be necessary to change the par or stated value of such Issuable Warrant Shares to an amount less than or equal to such consideration. 4.11 Board of Directors. In addition to any rights under this Agreement, the Company will deliver to Purchaser (i) a copy of all materials distributed at or prior to all meetings of the Company's board of directors, certified as true and accurate by the Secretary of the Company, promptly following each such meeting and (ii) a copy of the minutes of each of the meetings of the Company's board of directors, certified as true and accurate by the secretary of the Company, as soon as available but in any event promptly following the end of the next subsequent regular meeting of the Company's board of directors. The Company will (a) permit Rice, at all times during which Rice is a Holder or owns any Capital Stock, Warrants or other equity interest in the Company, to designate one (1) Person to attend all meetings of the Company s board of directors and shareholders as an observer, (b) permit John Hancock, at all times during which John Hancock is a Holder or owns any Capital Stock, Warrants or other equity interest in the Company, to designate one (1) Person to attend all meetings of the Company's board of directors and shareholders as an observer, (c) permit Pecks, at all times during which Pecks owns either (A) fifteen percent (15%) or more of the sum of all Warrant Shares and Pecks Common Stock owned by it on the Closing Date or (B) twenty-five percent (25%) or more of the shares of Pecks Preferred Stock owned by it on the Closing Date, to designate (i) prior to the occurrence of either a Board Dividend Adjustment Event or Board Non-Payment Adjustment Event, one (1) Person to serve as a member of the Company's board of directors, and (ii) after the occurrence and during the continuance of either a Board Dividend Adjustment Event or Board Non-Payment Adjustment Event, two (2) Persons to serve as members of the Company's board of directors (provided that Pecks' right to designate two (2) Persons to serve as members of the Company's board of directors and the term of office of the Persons so designated shall automatically terminate as soon as the Board Dividend Adjustment Event or Board Non-Payment Adjustment Event giving rise to such right has ceased to exist or has been cured), and (d) provide such designees not less than twenty-one (21) calendar days actual notice of all regular meetings and not less than seven (7) calendar days actual notice of all special meetings of the Company's board of directors and shareholders (unless any such special meeting of the Company's board of directors is an emergency meeting, in which case the Company shall provide such designees with the same calendar days actual notice as provided to the members of the Company's board of directors). Such board of directors meetings shall be held in person at least quarterly. The Purchaser may change its designees by written notice to the Company. The Company shall reimburse Purchaser for all reasonable expenses incurred in traveling to and from such meetings and attending such meetings. Notwithstanding anything to the contrary contained in this Article IV, in the event that any covenant contained herein (other than Section 4.11) conflicts with, or is more restrictive than, a substantially similar covenant contained in the Note Agreement, then, in such event, the covenant contained in the Note Agreement shall govern and control; provided, however, that the 34 foregoing governance provision shall apply only (a) for so long as the Note Agreement is in effect and (b) with respect to those covenants that relate to Precise and its Subsidiaries (as opposed to those covenants that relate only to the Company). Article V Conditions The obligations of the Purchaser to effect the transactions contemplated by this Agreement are subject to the following conditions precedent: 5.01 Opinion. The Purchaser will have received favorable opinions, dated the Closing Date, from Kelley, McCann & Livingstone, general counsel to the Company, and Winston & Strawn, special New York counsel to the Company, covering matters raised by this Agreement, the Shareholder Agreement, and such other matters as the Purchaser or its counsel may reasonably request, and otherwise in form and substance satisfactory to the Purchaser and its counsel. 5.02 Note Agreement Conditions. All of the conditions precedent to the obligations of the Purchaser under the Note Agreement will have been satisfied in full. 5.03 Material Change. There will have occurred no material adverse change in the business, prospects, results, operations, or condition, financial or otherwise, of the Company. 5.04 Shareholder Agreement. The Company and the Shareholder will have entered into the Shareholder Agreement with Purchaser. 5.05 Representations and Agreements. Each representation and warranty of the Company set forth in this Agreement will be true and correct in all material respects when made and as of the Closing Date, and the Company will have fully performed all its covenants and agreements set forth in this Agreement. 5.06 Proceedings; Consents. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation of this Agreement, will be satisfactory in form and substance to the Purchaser and its counsel, and the Purchaser and its counsel will have received certificates of compliance and copies (executed or certified as may be appropriate) of all documents, instruments, and agreements that the Purchaser or such counsel may request in connection with the consummation of such transactions. All consents of any Person necessary to the consummation of the transactions contemplated by this Agreement and the Shareholder Agreement will have been received, be in full force and effect, and not be subject to any onerous condition. 35 Article VI Miscellaneous 6.01 Indemnification. In addition to any other rights or remedies to which the Purchaser and the Holders may be entitled, the Company agrees to and will indemnify and hold harmless the Purchaser, the Holders, and their Affiliates and their respective successors, assigns, officers, directors, employees, attorneys and agents (individually and collectively, an "Indemnified Party") from and against any and all losses, claims, obligations, liabilities, deficiencies, diminutions in value, penalties, causes of action, damages, costs, and expenses (including, without limitation, costs of investigation and defense, attorneys' fees, and expenses), including, without limitation, those arising out of the sole or contributory negligence (but excluding those arising out of the gross negligence or willful misconduct of such Indemnified Party) of any Indemnified Party, that the Indemnified Party may suffer, incur, or be responsible for, arising or resulting from any misrepresentation, breach of warranty, or nonfulfillment of any covenant or agreement on the part of the Company under this Agreement, the Shareholder Agreement, or under any other agreement to which the Company is a party in connection with this transaction, or from any misrepresentation in or omission from any certificate or other instrument furnished or to be furnished to the Purchaser or the Holders under this Agreement. 6.02 Default. It is agreed that a violation by any party of the terms of this Agreement cannot be adequately measured or compensated in money damages, and that any breach or threatened breach of this Agreement by a party to this Agreement would do irreparable injury to the nondefaulting party. It is, therefore, agreed that in the event of any breach or threatened breach by a party to this Agreement of the terms and conditions set forth in this Agreement, the nondefaulting party will be entitled, in addition to any and all other rights and remedies that it may have in law or in equity, to apply for and obtain injunctive relief requiring the defaulting party to be restrained from any such breach or threatened breach or to refrain from a continuation of any actual breach. 6.03 Integration. This Agreement and the Shareholder Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all previous written, and all previous or contemporaneous oral, negotiations, understandings, arrangements, and agreements. This Agreement may not be amended or supplemented except by a writing signed by Company and each Holder. 6.04 Headings. The headings in this Agreement are for convenience and reference only and are not part of the substance of this Agreement. References in this Agreement to Sections and Articles are references to the Sections and Articles of this Agreement unless otherwise specified. 6.05 Severability. The parties to this Agreement expressly agree that it is not the intention of any of them to violate any public policy, statutory or common law rules, regulations, or decisions of any governmental or regulatory body. If any provision of this Agreement is judicially or administratively interpreted or construed as being in violation of any such policy, rule, regulation, or decision, the provision, section, sentence, word, clause, or combination 36 thereof causing such violation will be inoperative (and in lieu thereof there will be inserted such provision, sentence, word, clause, or combination thereof as may be valid and consistent with the intent of the parties under this Agreement) and the remainder of this Agreement, as amended, will remain binding upon the parties, unless the inoperative provision would cause enforcement of the remainder of this Agreement to be inequitable under the circumstances. 6.06 Notices. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration, or other communication be given to or served upon any of the parties by another, such notice, demand, request, consent, approval, declaration, or other communication will be in writing and will be deemed to have been validly served, given or delivered (and "the date of such notice" or words of similar effect will mean the date) five (5) days after deposit in the United States mails, certified mail, return receipt requested, with proper postage prepaid, or upon receipt thereof (whether by non-certified mail, telecopy, telegram, express delivery, or otherwise), whichever is earlier, and addressed to the party to be notified as follows: If to the Purchaser, at: Address of such Purchaser beneath the name of such Purchaser on the signature pages of this Agreement with courtesy copies to: Hughes & Luce, L.L.P. 1717 Main Street Suite 2800 Dallas, Texas 75201 Attn: Larry A. Makel, Esq. FAX: (214) 939-6100 Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022-4677 Attn: William J. Grant, Jr. FAX: (212) 821-8111 If to the Company, at: Precise Holding Corporation c/o Mentmore Holdings Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 Attn: William L. Remley FAX: (212) 391-1393 with courtesy copies to: Richard C. Hoffman, P.C. 1430 Broadway, 13th Floor New York, New York 10018-3308 FAX: (212) 391-1393 37 Kelley, McCann & Livingstone 200 Public Square, 35th Floor BP America Building Cleveland, Ohio 44114-2302 Attn: Michael D. Schenker FAX: (216) 241-3707 or to such other address as each party may designate for itself by like notice. Notice to any Holder other than the Purchaser will be delivered as set forth above to the address shown on the stock transfer books of the Company or the Warrant Register unless such Holder has advised the Company in writing of a different address to which notices are to be sent under this Agreement. Failure or delay in delivering courtesy copies of any notice, demand, request, consent, approval, declaration, or other communication to the persons designated above to receive copies of the actual notice will in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, or other communication. No notice, demand, request, consent, approval, declaration or other communication will be deemed to have been given or received unless and until it sets forth all items of information required to be set forth therein pursuant to the terms of this Agreement. 6.07 Successors. This Agreement will be binding upon and inure to the benefit of the parties and their respective successors and assigns. 6.08 Remedies. The failure of any party to enforce any right or remedy under this Agreement, or promptly to enforce any such right or remedy, will not constitute a waiver thereof, nor give rise to any estoppel against such party, nor excuse any other party from its obligations under this Agreement. Any waiver of any such right or remedy by any party must be in writing and signed by the party against which such waiver is sought to be enforced. 6.09 Survival. All warranties, representations, and covenants made by any party in this Agreement or in any certificate or other instrument delivered by such party or on its behalf under this Agreement will be considered to have been relied upon by the party to which it is delivered and will survive the Closing Date, regardless of any investigation made by such party or on its behalf. All statements in any such certificate or other instrument will constitute warranties and representations under this Agreement. 6.10 Fees. Any and all fees, costs, and expenses, of whatever kind and nature, including attorneys' fees and expenses, incurred by the Holders in connection with the defense or prosecution of any actions or proceedings arising out of or in connection with this Agreement will be borne and paid by the Company within ten (10) days of demand by the Holders. 6.11 Counterparts. This Agreement may be executed in any number of counterparts, which will individually and collectively constitute one agreement. 38 6.12 Other Business. It is understood and accepted that the Purchaser, the Holders, and their Affiliates have interests in other business ventures that may be in conflict with the activities of the Company and that nothing in this Agreement will limit the current or future business activities of such parties whether or not such activities are competitive with those of the Company. The Company agrees that all business opportunities in any field substantially related to the business of custom injection molding of plastic products will be pursued exclusively through the Company. 6.13 CHOICE OF LAW. THIS AGREEMENT HAS BEEN EXECUTED, DELIVERED, AND ACCEPTED BY THE PARTIES IN NEW YORK, NEW YORK, WILL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK, AND WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. 6.14 Duties Among Holders. Each Holder agrees that no other Holder will by virtue of this Agreement be under any fiduciary or other duty to give or withhold any consent or approval under this Agreement or to take any other action or omit to take any action under this Agreement, and that each other Holder may act or refrain from acting under this Agreement as such other Holder may, in its discretion, elect. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 39 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. COMPANY: PRECISE HOLDING CORPORATION By: /s/ William L. Remley --------------------------------- William L. Remley, President PURCHASER: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ Sandeep Alva --------------------------------- Sandeep Alva, Senior Investment Officer John Hancock Tower 200 Clarendon Street Boston, Massachusetts 02117 Attn: Mr. Sandeep Alva Fax: (617)572-1606 Number of Warrant Shares: 570 Purchase Price: $5.70 --------------------------------- RICE PARTNERS II, L.P. By: Rice Capital Group IV, L.P., its general partner By: RMC Fund Management, L.P., its general partner By: Rice Mezzanine Corporation, its general partner By: /s/ James P. Wilson --------------------- James P. Wilson Vice President 5847 San Felipe Suite 4350 Houston, Texas 77057 Attn: James P. Wilson Fax: (713)783-9750 Number of Warrant Shares: 570 Purchase Price: $5.70 EX-10.6 22 FIRST AMENDMENT TO WARRANT PURCHASE AGREEMENT FIRST AMENDMENT TO WARRANT PURCHASE AGREEMENT This First Amendment to Warrant Purchase Agreement (this "Amendment"), dated as of June 13, 1997, is entered into by and among PRECISE HOLDING CORPORATION, a Delaware corporation (the "Company"), RICE PARTNERS II, L.P., a Delaware limited partnership ("Rice"), JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts mutual life insurance company ("John Hancock"), DELAWARE STATE EMPLOYEES' RETIREMENT FUND, a Delaware corporation ("Delaware"), DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC., a Delaware corporation ("Zeneca"), and DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC., a Delaware corporation ("ICI") (Delaware, Zeneca, and ICI are collectively referred to herein as "Pecks"). RECITALS A. The Company, Rice, John Hancock and Pecks have entered into that certain Warrant Purchase Agreement dated as of March 29, 1996 (the "Warrant Agreement"). B. The Company owns beneficially and of record all of the issued and outstanding common stock of Precise Technology, Inc., a Delaware corporation ("Precise"). C. Precise desires to issue up to $75,000,000 of 11 1/8% Senior Subordinated Notes due 2007 on the terms described in that certain Offering Memorandum dated June 10, 1997 furnished by the Company to Rice, John Hancock and Pecks (the "Public Notes"). D. The Company, Rice, John Hancock and Pecks desire to amend the Warrant Agreement and the Shareholder Agreement to allow and provide for the issuance of the Public Notes and to allow and provide for certain other matters, all as hereinafter set forth. AGREEMENT NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. DEFINITIONS. All capitalized terms used but not otherwise defined in this Amendment shall have the meanings ascribed to them in the Warrant Agreement. 2. AMENDMENTS. The Warrant Agreement is hereby amended as follows: 2.1. Amendment to Article I; Addition of Certain Definitions. Article I of the Warrant Agreement is hereby amended by adding thereto in alphabetical order the following definitions: 1 "Disqualified Stock. This term is defined in Section 1.01 of the Indenture." "Fixed Charge Coverage Ratio. This term is defined in Section 1.01 of the Indenture." "Indenture. The Indenture, to be dated as of June 13, 1997, between Precise and Marine Midland Bank, as trustee, as in effect on June 13, 1997." "Management Agreement. The Management Agreement (Amended and Restated) originally made and entered into March 15, 1996, amended and restated as of June 13, 1997, but effective as of April 1, 1996, between the Company and Mentmore, as in effect on June 13, 1997." "Mentmore. Mentmore Holdings Corporation, a Delaware corporation." "Public Notes. The 11 1/8% Senior Subordinated Notes due 2007 issued by Precise pursuant to the terms of the Indenture." "Senior Loan Agreement. The Credit Agreement, dated as of June 13, 1997, by and among the Company, Precise, certain Subsidiaries of Precise, Fleet National Bank, as Agent, Issuing Bank and as a lender, and each of the other financial institutions a party thereto, as the same may be modified, amended, waived, supplemented or otherwise changed from time to time, and all documents and instruments delivered pursuant thereto in connection with the loans and advances made thereunder." "Sunderland. Sunderland Industrial Holdings Corporation, a Delaware corporation." 2.2. Amendment to Article I; Deletion of Certain Definitions. Article I of the Warrant Agreement is hereby amended by deleting therefrom the definitions for "Board Dividend Adjustment Event", "Board Non-Payment Adjustment Event" and "Senior Subordination Agreement". 2.3. Amendment to Article I; Amendment of Certain Definitions. Article I of the Warrant Agreement is hereby amended by deleting therefrom the definitions for "Senior Lender" and "Senior Loan Documents" and substituting the following in lieu thereof: "Senior Lender. Fleet National Bank, a national banking association, and any other financial institution a party to the Senior Loan Agreement, and their respective successors and assigns." "Senior Loan Documents. The Senior Loan Agreement and the agreements, documents and instruments executed in connection therewith or contemplated thereby, 2 and all amendments, modifications, waivers, renewals, extensions, substitutions, increases or replacements thereof." 2.4. Amendment to Section 4.01(d). Section 4.01(d) of the Warrant Agreement is hereby deleted in its entirety and the following substituted in lieu thereof: "(d) Concurrently with the delivery of each of the financial statements referred to in Section 4.01(a) and 4.01(b), a certificate of an authorized officer of Precise in form and substance satisfactory to the Holders (i) stating the financial statements have been prepared in accordance with generally accepted accounting principles and fairly and accurately present (subject to year-end audit adjustments, for the annual certificate) the financial condition and results of operations of Precise at the date and for such period indicated therein, (ii) containing summaries of accounts payable agings, accounts receivable agings, and inventory (provided that such information shall be required only in connection with the delivery of the financial statements referred to in Section 4.01(b) in respect of any month which is the last month of a fiscal quarter of Precise), and (iii) containing a schedule of the outstanding Indebtedness for borrowed money of Precise and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan (provided that such information shall be required only in connection with the delivery of the financial statements referred to in Section 4.01(b) in respect of any month which is the last month of a fiscal quarter of Precise)." 2.5. Amendment to Section 4.04. Section 4.04 of the Warrant Agreement is hereby deleted in its entirety and the following substituted in lieu thereof: "4.04 Certain Actions. Without the prior written consent of the Holders, which consent may be withheld in the sole discretion of the Holders, the Company will not, and the Company will not permit any of its Subsidiaries to: (a) permit to occur any amendment, alteration or modification of its Articles of Incorporation, Bylaws or other charter or organizational documents, as constituted on the date of this Agreement, the effect of which, in the reasonable credit judgment of the Holders, would be to alter, impair, or affect adversely, either the rights and benefits of the Holders or the duties and obligations of Company under this Agreement, the Warrants, or the Shareholder Agreement; (b) declare or make any dividends or distributions of its cash, stock, property, or assets or redeem, retire, purchase, or otherwise acquire, directly or indirectly, any of its Capital Stock or Capital Stock or securities of any Affiliate of the Company, or any securities convertible or exchangeable into Capital Stock or Capital Stock or securities of any Affiliate of the Company; provided, however, that (i) any Subsidiary of Precise may declare and pay dividends or make other distributions to Precise, (ii) any Subsidiary of Precise may declare and pay dividends or make other distributions to any other wholly-owned Subsidiary of Precise, (iii) Precise may declare and pay dividends to the Company 3 to enable the Company to pay franchise taxes and other ordinary course operating expenses in an amount not to exceed $25,000 in any twelve-month period, (iv) Precise may fund purchases by the Company or Sunderland of the common stock of the Company or Sunderland held by an employee of the Company upon the termination of such individual's employment with the Company (so long as (A) the Company shall give prior written notice thereof to the Purchaser, (B) the aggregate amount of all such repurchases made after the Closing Date does not exceed $3,000,000, (C) the aggregate amount of all such repurchases made during any fiscal year of the Company does not exceed $1,000,000 and (D) no default or event of default shall have occurred and be continuing under this Agreement or the Shareholder Agreement, or would occur after giving effect thereto), (v) Precise may make distributions to the Company to permit the Company to (A) purchase the Warrants upon exercise of the Put Option by the Holders of the Warrants and (B) pay the principal balance of, or any scheduled interest payments due on, any promissory notes issued by the Company to the Holders of the Warrants in accordance with the terms of the Shareholder Agreement, (vi) Precise or any Subsidiary of Precise may make and pay regularly scheduled dividends on, and may make any scheduled redemption or repurchase of, any Disqualified Stock, subject to the restrictions set forth in the Indenture and in Section 4.04 of the Shareholder Agreement, (vii) the Company, Precise and any Subsidiary of Precise may make and pay any distribution permitted under Section 4.04(g) hereof, and (viii) Precise or any Subsidiary of Precise may redeem, repurchase, retire or otherwise acquire any Disqualified Stock in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, other Disqualified Stock, subject to the restrictions set forth in Section 4.04(d)(iii) hereof; (c) effect any sale, lease, assignment, transfer, or other conveyance of any portion of the assets or operations or the revenue or income generating capacity of the Company or any Subsidiary (other than sales, leases, assignments, transfers and other conveyances which are permitted pursuant to the terms of the Indenture) or to take any such action that has the effect of the foregoing; (d) issue or sell, or otherwise dispose of any Capital Stock; provided, however, that (i) the Company may issue or sell Permitted Stock, (ii) the Company may issue or sell any Capital Stock required or permitted to be issued to the Holders pursuant to this Agreement, the Shareholder Agreement or the Pecks Securities Purchase Agreement, (iii) Precise or any Subsidiary of Precise may issue or sell any Disqualified Stock (other than Common Stock) if such issuance or sale is permitted pursuant to the terms of the Indenture, including, without limitation, if applicable, the Fixed Charge Coverage Ratio test set forth in Section 4.12 of the Indenture (except that, for purposes of determining whether any such sale or issuance is permitted pursuant to the terms of this Agreement (as opposed to the Indenture), the Fixed Charge Coverage Ratio test shall be 3.0 to 1.0 rather than 2.0 to 1.0), and (iv) the Company may effect an Initial Public Offering, subject to the terms of this Agreement and the Shareholder Agreement; 4 (e) dissolve or liquidate, or effect any consolidation or merger involving the Company or any Subsidiary, or any reclassification, corporate reorganization, stock split or reverse stock split, or other change of any class of Capital Stock; provided, however, that (i) any Inactive Subsidiary may be dissolved or liquidated, (ii) any wholly-owned Subsidiary of Precise may be merged with and into (A) Precise, provided that Precise is the surviving corporation or (B) any other wholly-owned Subsidiary of Precise, (iii) Precise may effect any consolidation or merger permitted pursuant to the terms of the Indenture if, in addition to the requirements set forth in the Indenture, (A) all of the Capital Stock (other than Disqualified Stock) of the entity or Person formed by or surviving any such consolidation or merger (if other than Precise) will, immediately after giving effect to such transaction, be directly owned and controlled by the Company and (B) except in the case of a merger of Precise with or into a wholly-owned Subsidiary of Precise, Precise or the entity or Person formed by or surviving any such consolidation or merger (if other than Precise) will, if required under the terms of the Indenture, at the time of such transaction and after giving pro-forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 5.01 of the Indenture (except that, for purposes of determining whether any such consolidation or merger is permitted pursuant to the terms of this Agreement (as opposed to the Indenture), the Fixed Charge Coverage Ratio test shall be 3.0 to 1.0 rather than 2.0 to 1.0), and (iv) any Subsidiary of Precise may effect any consolidation or merger permitted pursuant to the terms of the Indenture if, in addition to the requirements set forth in the Indenture, (A) all of the Capital Stock (other than Disqualified Stock) of the entity or Person formed by or surviving any such consolidation or merger (if other than such Subsidiary) will, immediately after giving effect to such transaction, be directly or indirectly owned and controlled by Precise and (B) except in the case of a merger of a Subsidiary of Precise with or into another wholly-owned Subsidiary of Precise, such Subsidiary or the entity or Person formed by or surviving any such consolidation or merger (if other than such Subsidiary) will, if required under the terms of the Indenture, at the time of such transaction and after giving pro-forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.12 of the Indenture (except that, for purposes of determining whether any such consolidation or merger is permitted pursuant to the terms of this Agreement (as opposed to the Indenture), the Fixed Charge Coverage Ratio test shall be 3.0 to 1.0 rather than 2.0 to 1.0); (f) enter into any business that the Company or Precise is not conducting on the date of this Agreement; (g) sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any director, officer, or shareholder of the Company or the Shareholder, or any Affiliate or relative of the foregoing (each of the foregoing, an "Affiliate 5 Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (ii) the Company delivers to the Holders (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; provided, however, that (r) the application of the proceeds of the Public Notes offering and the transactions entered into in connection therewith in the manner contemplated in "Use of Proceeds" section set forth in the Indenture, (s) payments under the Management Agreement in an amount not to exceed $300,000 in any twelve-month period, (t) the payment of $500,000 by the Company or any of its Subsidiaries to Mentmore and/or its Affiliates made for financial advisory services in respect of the Public Notes offering, (u) payments under the tax sharing agreement by and among the Company, Precise, any Subsidiaries of Precise and Sunderland, to the extent that, in the case of Precise and its Subsidiaries, such payments do not otherwise exceed the tax liability that Precise and its Subsidiaries would have had were it not part of a consolidated group, (v) any employment agreement, compensation agreement or employee benefit arrangement entered into by the Company or any of its Subsidiaries in the ordinary course of business, (w) transactions between or among the Company, Precise and/or their Subsidiaries, (x) the payment of reasonable out-of-pocket expenses by Precise to Mentmore pursuant to the Management Agreement, (y) any capital contributions, advances, loans or other investments made by Precise or any of its wholly-owned Subsidiaries to any wholly-owned Subsidiary of Precise, and (z) any dividend or distribution permitted under Section 4.04(b) hereof, in each case, shall not be deemed Affiliate Transactions; (h) increase the aggregate amount of management, consulting or similar fees paid or accrued by the Company or its Subsidiaries during any fiscal year to or for the direct or indirect benefit of any of its officers, directors, security holders or Affiliates, or pay any financial advisory, investment banking or similar fees to or for the direct or indirect benefit of any of its officers, directors, security holders or Affiliates; (i) acquire any substantial business operation or assets (through a stock or asset purchase or otherwise), or acquire any debt or equity interest in any Person, or establish or acquire a Subsidiary (other than any Subsidiary existing on the date hereof), or make any additional capital contribution or purchase any additional equity in any Subsidiary; provided, however, that Precise and its Subsidiaries may effect any of the foregoing transactions if such transaction is permitted pursuant to the terms of the Indenture, including, without limitation, if applicable, the Fixed Charge Coverage Ratio test set forth in Section 4.12 of the Indenture (except that, for purposes of determining 6 whether any such sale or issuance is permitted pursuant to the terms of this Agreement (as opposed to the Indenture), the Fixed Charge Coverage Ratio test shall be 3.0 to 1.0 rather than 2.0 to 1.0); (j) allow the aggregate par value of the Capital Stock subject to the Warrants from time to time to exceed the price payable on exercise of the Warrants, as adjusted from time to time; (k) amend, modify or waive any of the terms or provisions of the Senior Loan Documents if such amendment, modification or waiver (i) is prohibited by the terms of the Indenture or (ii) would extend the final maturity date of the Senior Loans beyond June 30, 2002; or (l) obligate itself or otherwise agree to take, permit or enter into any of the events described in subsections (a) through (k) above. Notwithstanding anything to the contrary contained in this Agreement, this Section 4.04 shall terminate and be of no further force and effect after the occurrence of an Initial Public Offering and after such time as all shares of Capital Stock issuable in respect of such Purchaser's Warrant are released from the terms and provisions of any holdback agreement contemplated by Section 7.07 of the Shareholder Agreement and are registered or otherwise freely transferable." 2.6. Amendment to Section 4.11. Section 4.11 of the Warrant Agreement is hereby deleted in its entirety and the following substituted in lieu thereof: "4.11 Board of Directors. In addition to any rights under this Agreement, the Company will deliver to Purchaser (i) a copy of all materials distributed at or prior to all meetings of the Company's board of directors, certified as true and accurate by the Secretary of the Company, promptly following each such meeting and (ii) a copy of the minutes of each of the meetings of the Company's board of directors, certified as true and accurate by the secretary of the Company, as soon as available but in any event promptly following the end of the next subsequent regular meeting of the Company's board of directors. The Company will (a) permit Rice, at all times during which Rice is a Holder or owns any Capital Stock, Warrants or other equity interest in the Company, to designate one (1) Person to attend all meetings of the Company's board of directors and shareholders as an observer, (b) permit John Hancock, at all times during which John Hancock is a Holder or owns any Capital Stock, Warrants or other equity interest in the Company, to designate one (l) Person to attend all meetings of the Company's board of directors and shareholders as an observer, (c) permit Pecks, at all times during which Pecks owns fifteen percent (15%) or more of the sum of all Warrant Shares and Pecks Common Stock owned by it on the Closing Date, to designate one (l) Person to serve as a member of the Company's and Precise's board of directors, and (d) provide such designees not less than twenty-one (21) calendar days actual notice of all regular meetings and not less than seven (7) calendar days actual notice of all special meetings of the Company's board of directors and shareholders (unless any such special meeting of the Company's board of directors is an emergency meeting, in which case the Company shall provide such designees with the same calendar days actual 7 notice as provided to the members of the Company's board of directors). Such board of directors meetings shall be held in person at least quarterly. The Purchaser may change its designees by written notice to the Company. The Company shall reimburse Purchaser for all reasonable expenses incurred in traveling to and from such meetings and attending such meetings. Notwithstanding anything to the contrary contained in this Agreement, this Section 4.11 shall terminate and be of no further force and effect after the occurrence of an Initial Public Offering and after such time as all shares of Capital Stock issuable in respect of such Purchaser's Warrant are released from the terms and provisions of any holdback agreement contemplated by Section 7.07 of the Shareholder Agreement and are registered or otherwise freely transferable." 2.7. Amendment to Section 6.06. Section 6.06 of the Warrant Agreement is hereby amended by deleting therefrom the notice addresses for the Company and substituting the following in lieu thereof: "If to the Company, at: Precise Holding Corporation c/o Mentmore Holdings Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 Attn: William L. Remley FAX: (212)391-1393 with courtesy copies to: Michael D. Schenker c/o Mentmore Holdings Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 FAX: (212)382-1559 Kelley, McCann & Livingstone 200 Public Square, 35th Floor BP America Building Cleveland, Ohio 44114-2302 Attn: Bruce L. Waterhouse FAX: (216)241-3707" 3. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent, unless specifically waived in writing by the Purchaser: 3.1 Each Purchaser shall have received on its behalf: (a) this Amendment, duly executed by the Company; and 8 (b) such additional documents, instruments and information as such Purchaser or its legal counsel may request. 3.2 No default or event of default shall have occurred and be continuing under either the Warrant Agreement or the Shareholder Agreement, unless such default or event of default has been specifically waived in writing by Purchaser. 3.3 All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to each Purchaser and their respective legal counsel. 3.4 The Public Notes shall have been issued on the terms described in the Offering Memorandum dated June 10, 1997 furnished by the Company to Purchaser. 3.5 The Senior Subordinated Notes (as defined in the Note Agreement), together with all accrued interest and any applicable Prepayment Fee (as defined in the Note Agreement), shall have been paid in full utilizing a portion of the proceeds of the Public Notes. 3.6 The Pecks Preferred Stock, together with all accrued and unpaid dividends thereon, shall have been redeemed and/or paid utilizing a portion of the proceeds of the Public Notes. 4. RATIFICATIONS, REPRESENTATIONS AND WARRANTIES. 4.1. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Warrant Agreement (including, without limitation, all representations, warranties and covenants contained therein) and all other agreements, instruments and documents related thereto, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Warrant Agreement and all other agreements, instruments and documents related thereto are ratified and confirmed and shall continue in full force and effect. The Company and Purchaser agree that the Warrant Agreement and all other agreements, instruments and documents related thereto, in each case as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. 4.2. The Company hereby represents and warrants to Purchaser that (a) the execution, delivery and performance of this Amendment and any and all other agreements executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of the Company and will not violate the Certificate of Incorporation or Bylaws of the Company; (b) the Company is in material compliance with all covenants and agreements contained in the Warrant Agreement, as amended hereby, and all other agreements, instruments and documents related thereto; and (c) the Company has not amended its Certificate of Incorporation or its Bylaws since March 29, 1996, except for such amendments, if any, as have been delivered to Purchaser on the date hereof. 9 5. MISCELLANEOUS. 5.1. Reference to Warrant Agreement. Each of the Warrant Agreement and all other agreements, certificates and documents related thereto, and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Warrant Agreement, as amended hereby, are hereby amended so that any reference in the Warrant Agreement and such agreements, instruments and documents related thereto to the Warrant Agreement shall mean a reference to the Warrant Agreement as amended hereby. 5.2. Headings. The headings of the sections and subsections of this Amendment are inserted for convenience only and do not constitute a part of this Amendment. 5.3. Counterparts. This Amendment may be executed in any number of counterparts, which shall collectively constitute one agreement. 5.4. Law Governing. THIS AMENDMENT HAS BEEN EXECUTED, DELIVERED, AND ACCEPTED BY THE PARTIES IN NEW YORK, NEW YORK, WILL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK, AND WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. 5.5. Final Agreement. The Warrant Agreement and the Shareholder Agreement, in each case as amended, constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all previous written, and all previous or contemporaneous oral, negotiations, understandings, arrangements, and agreements. The Warrant Agreement, as amended hereby, may not be amended or supplemented except by a writing signed by Company and each Holder. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 10 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered as of the date first above written. COMPANY: PRECISE HOLDING CORPORATION By: /s/ William L. Remley --------------------------------------- William L. Remley, President PURCHASER: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ Sandeep Alva --------------------------------------- Sandeep Alva, Senior Investment Officer RICE PARTNERS II, L.P. By: Rice Capital Group IV, L.P., its general partner By: RMC Fund Management, L.P., its general partner By: Rice Mezzanine Corporation, its general partner By: /s/ James P. Wilson ------------------------------ James P. Wilson Managing Director 11 DELAWARE STATE EMPLOYEES' RETIREMENT FUND By: Pecks Management Partners, Ltd., Its Investment Advisor By: /s/ Robert J. Cresci --------------------------------- Robert J. Cresci Managing Director DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC. By: Pecks Management Partners, Ltd., Its Investment Advisor By: /s/ Robert J. Cresci --------------------------------- Robert J. Cresci Managing Director DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC. By: Pecks Management Partners, Ltd., Its Investment Advisor By: /s/ Robert J. Cresci --------------------------------- Robert J. Cresci Managing Director 12 EX-10.7 23 SHAREHOLDER AGREEMENT 10.7 SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (the "Agreement") made as of March 29, 1996, by and among PRECISE HOLDING CORPORATION, a Delaware corporation (the "Company"), and SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION, a Delaware corporation ("Sunderland"), HAMILTON HOLDINGS LTD. CORPORATION, a Texas corporation ("Hamilton"), DELAWARE STATE EMPLOYEES' RETIREMENT FUND, a Delaware corporation ("Delaware"), in its capacity as a shareholder, DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC., a Delaware corporation ("Zeneca"), in its capacity as a shareholder, and DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC., a Delaware corporation ("ICI"), in its capacity as a shareholder (individually and collectively, the "Shareholder"), and RICE PARTNERS II, L.P., a Delaware limited partnership ("Rice"), JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts mutual life insurance company ("John Hancock"), DELAWARE, in its capacity as a warrantholder, ZENECA, in its capacity as a warrantholder, and ICI, in its capacity as a warrantholder (individually and collectively, the "Purchaser") (Delaware, Zeneca and ICI are collectively referred to herein as "Pecks"). W I T N E S S E T H: WHEREAS, the Shareholder owns beneficially and of record all of the issued and outstanding capital stock of the Company; WHEREAS, the Company owns beneficially and of record all of the issued and outstanding common stock of Precise Technology, Inc., a Delaware corporation ("Precise"); WHEREAS, Precise has entered into a Note Purchase Agreement (the "Note Agreement") dated of even date with this Agreement with Rice and John Hancock; WHEREAS, the Company, Precise and Pecks have entered into a Securities Purchase Agreement (the "Pecks Securities Purchase Agreement") dated of even date with this Agreement; WHEREAS, the Company has entered into a Warrant Purchase Agreement (the "Warrant Agreement") dated of even date with this Agreement with the Purchaser; WHEREAS, Rice and John Hancock are willing to enter into and consummate the transactions contemplated by the Note Agreement, and Pecks is willing to enter into and consummate the transactions contemplated by the Pecks Securities Purchase Agreement, only if, among other things, the Company and the Shareholder enter into, and perform under, this Agreement and the Company enters into, and performs under, the Warrant Agreement. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of 1 which are hereby acknowledged, the Purchaser, the Shareholder, and the Company, intending to be legally bound, agree as follows: Article I Definitions 1.01 Definitions. As used in this Agreement, the following terms shall have the following respective meanings: Act. The Securities Act of 1933 located at 15 U.S.C. 77a et seq. Adjustment Event. Any event in which (a) the Company issues any shares of Capital Stock in an Adjustment Public Offering for consideration per share that exceeds the amount received per share by any Holder in connection with the exercise of the Call Option with respect to such Holder; (b) any Shareholder sells, transfers, pledges or otherwise disposes of any Capital Stock for consideration per share that exceeds the amount received per share by any Holder in connection with the exercise of the Call Option with respect to such Holder; (c) any Person acquires Capital Stock in connection with the acquisition of the beneficial ownership of more than fifty percent (50%) of the voting securities of the Company, or acquires Capital Stock and the right to elect a majority of the members of the Company's board of directors for a consideration per share or unit that exceeds the amount received per share by any such Holder in connection with the exercise of such Call Option; (d) the Company sells all or a majority of its assets or revenue or income generating capacity for such amount of consideration that, if the Company were liquidated on the date that such sale is consummated, the holders of any class of Capital Stock would receive per share distributions exceeding the amount received per share by any such Holder in connection with the exercise of such Call Option; or (e) the Company participates in any merger, consolidation, reorganization, share exchange, recapitalization, or similar transaction or series of related transactions involving a change of control of the Company or disposition of all or a majority of its assets or revenue or income generating capacity, directly or indirectly, in which the holders of any class of Capital Stock receive per share consideration for, or distributions with respect to, their shares in an amount that exceeds the amount received per share by such Holder in connection with the exercise of such Call Option. Adjustment Public Offering. Each primary public offering of shares of any class of Capital Stock pursuant to a registration statement filed with the Commission. Affiliate. With respect to any Person, a Person that, directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term "control" as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract, or otherwise. Agreement. This term is defined in the preamble. 2 Appraised Value. The value determined in accordance with the following procedures. For a period of 30 days after the date of a Valuation Event (the "Negotiation Period"), each party to this Agreement agrees to negotiate in good faith with each other party to reach agreement upon the Appraised Value of the securities or property at issue, as of the date of the Valuation Event, which will be the fair market value of such securities or property, without premium for control or discount for minority interests, illiquidity, or restrictions on transfer. In the event that the parties are unable to agree upon the Appraised Value of such securities or other property by the end of the Negotiation Period, then the Appraised Value of such securities or property will be determined for purposes of this Agreement by a recognized appraisal or investment banking firm mutually agreeable to the Holders and the Company (the "Appraiser"). If the Holders and the Company cannot agree on an Appraiser within fifteen (15) days after the end of the Negotiation Period, the Company, on the one hand, and the Holders, on the other hand, shall each select an Appraiser within twenty-one (21) days after the end of the Negotiation Period and those two Appraisers shall select within twenty-five (25) days after the end of the Negotiation Period an independent Appraiser to determine the fair market value of such securities or property, without premium for control or discount for minority interests. Such independent Appraiser shall be directed to determine fair market value of such securities or property as soon as practicable, but in no event later than thirty (30) days from the date of its selection. The determination by an Appraiser of the fair market value will be conclusive and binding on all parties to this Agreement. Appraised Value of each share of Common Stock at a time when (i) the Company is not a reporting company under the Exchange Act and (ii) the Common Stock is not traded in the organized securities markets, will, in all cases, be calculated by determining the Appraised Value of the entire Company taken as a whole (after deducting any liquidation distributions payable with respect to the Hamilton Preferred Stock) and dividing that value by the sum of (x) the number of shares of Common Stock then outstanding plus (y) the number of shares of Common Stock Equivalents, without premium for control or discount for minority interests, illiquidity, or restrictions on transfer. The costs of the Appraiser will be borne by the Company. In no event will the Appraised Value of the Common Stock or Other Securities be less than the per share consideration received or receivable with respect to the Common Stock or securities or property of the same class as the Other Securities, as the case may be, in connection with a pending transaction involving a sale, merger, recapitalization, reorganization, consolidation, or share exchange, dissolution of the Company, sale or transfer of all or a majority of its assets or revenue or income generating capacity, or similar transaction. The prevailing market prices for any security or property will not be dispositive of the Appraised Value thereof. Appraiser. This term is defined in the definition of Appraised Value. Average Market Value. The average of the Closing Prices for the security in question for the thirty (30) trading days immediately preceding the date of determination. Book Value. With respect to shares of Common Stock, an amount equal to the quotient determined by dividing (a) the sum of (x) the total consolidated assets of the Company shown on the consolidated balance sheet of the Company as of the last day of the month preceding the date of the Valuation Event in question minus (y) the (i) total consolidated liabilities of the Company as shown on the consolidated balance sheet of the Company as of the last day of the month 3 preceding the date of the Valuation Event and (ii) any liquidation distributions payable with respect to the Hamilton Preferred Stock by (b) the aggregate number of shares of Common Stock and Common Stock Equivalents as of the date of the Valuation Event. For the purposes of this Agreement, the Book Value of the shares of Common Stock will be determined by the independent certified public accountants then retained by the Company as described in Section 4.06 of the Warrant Agreement. Business Day. Each day of the week except Saturdays, Sundays, and days on which banking institutions are authorized by law to close in the States of New York, North Carolina or Pennsylvania. Buyer. This term is defined in Section 6.02(a)(ii) of this Agreement. Call Option. This term is defined in Section 5.01 of this Agreement. Call Option Closing. This term is defined in Section 5.04 of this Agreement. Call Option Period. This term is defined in Section 5.01 of this Agreement. Capital Stock. As to any Person, its common stock and any other capital stock of such Person authorized from time to time, and any other shares, options, interests, participations, or other equivalents (however designated) of or in such Person, whether voting or nonvoting, including, without limitation, common stock, options, warrants, preferred stock, phantom stock, stock appreciation rights, convertible notes or debentures, stock purchase rights, and all agreements, instruments, documents, and securities convertible, exercisable, or exchangeable, in whole or in part, into any one or more of the foregoing. Closing Date. March 29, 1996. Closing Price. (a) If the primary market for the security in question is a national securities exchange registered under the Exchange Act, the National Association of Securities Dealers Automated Quotation System -- National Market System, or other market or quotation system in which last sale transactions are reported on a contemporaneous basis, the last reported sales price, regular way, of such security for such day, or, if there has not been a sale on such trading day, the highest closing or last bid quotation therefor on such trading day (excluding, in any case, any price that is not the result of bona fide arm's length trading); or (b) If the primary market for such security is not an exchange or quotation system in which last sale transactions are contemporaneously reported, the highest closing or last bona fide bid or asked quotation by disinterested Persons in the over-the-counter market on such trading day as reported by the National Association of Securities Dealers through its Automated Quotation System or its successor or such other generally accepted source of publicly reported bid quotations as the Holders designate from time to time. 4 Common Stock. The common stock, no par value, of the Company. Common Stock Equivalent. Any option, warrant, right, or similar security exercisable into, exchangeable for, or convertible to Common Stock. Commission. The Securities and Exchange Commission and any successor federal agency having similar powers. Company. Precise Holding Corporation and any successor or assign. Co-Sell Shares. This term is defined in Section 6.02(c) of this Agreement. Co-Sellers. This term is defined in Section 6.02(c) of this Agreement. Dilution Dividend. This term is defined in Article III of this Agreement. Election Notice. This term is defined in Section 6.02(b) of this Agreement. Excess Consideration. The amount that a Holder would have realized following the Adjustment Event had the Call Option not been exercised by such Holder until such time, minus the amount that such Holder realized due to the exercise of the Call Option, provided, however, that the amount of Excess Consideration will in all events be deemed to be at least zero. Excess Interest. This term is defined in Section 11.17 of this Agreement. Exchange Act. The Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. Exercise Price. The price per share specified in Section 2.03 of the Warrant Agreement as adjusted from time to time pursuant to the provisions of the Warrant Agreement. Fair Market Value. (a) As to securities regularly traded in the organized securities markets, the Average Market Value; and (b) As to all securities (including, without limitation, the Issuable Warrant Shares) not regularly traded in the securities markets and other property, the fair market value of such securities or property as determined in good faith by the board of directors of the Company at the time it authorizes the transaction (a "Valuation Event") requiring a determination of Fair Market Value under this Agreement; provided, however, that, at the election of the Holders, the Fair Market Value of such securities and other property will be the Appraised Value. Hamilton. Hamilton Holdings Ltd. Corporation, a Texas corporation. 5 Hamilton Preferred Stock. Three hundred thirty-one and forty-six one hundredths (331.46) shares of 9.5% Preferred Stock, $10,000 per share stated value, of the Company beneficially owned by Hamilton on the Closing Date. Holders. The Purchaser, and all Persons holding Registrable Securities, except that neither the Company nor any Shareholder (other than Pecks with respect to its Registrable Securities) nor any Affiliate of the Company or any Shareholder will at any time be a Holder. Unless otherwise provided in this Agreement, in each instance that the Holders are required to request or consent to an action, the Holders will be deemed to have requested or consented to such action if (a) so long as all of the Initial Holders are Holders, the Holders of seventy percent (70%) or more of the Registrable Securities so request or consent and (b) so long as two (2) or more (but less than all) of the Initial Holders are Holders, the Holders of sixty-six and two-thirds percent (66 2/3%) or more of the Registrable Securities so request or consent. In the event that only one (1) or none of the Initial Holders is a Holder, in each instance that the Holders are required to request or consent to an action, the Holders will be deemed to have requested or consented to such action if the Holders of a majority-in-interest of the Registrable Securities so request or consent. Indemnified Party. This term is defined in Section 11.01 of this Agreement. Initial Holders. Rice, John Hancock, Pecks and any Affiliate of Rice, John Hancock or Pecks to which any of the Warrants or any part of or interest in the Warrants is assigned. Initial Public Offering. The first firm commitment underwritten public offering of Common Stock to not less than 200 members of the general public (none of which shall be an Affiliate of another) under the Securities Act completed by the Company and resulting in proceeds (before underwriting discounts and commissions) to the Company of at least $25,000,000. Issuable Warrant Shares. Shares of Common Stock or Other Securities issuable on exercise of the Warrants. Issued Warrant Shares. Shares of Common Stock or Other Securities issued on exercise of the Warrants. Material Adverse Effect. (a) A material adverse effect upon the business, operations, properties, assets or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole or (b) the material impairment of the ability of any party to perform its obligations under this Agreement or the Warrant Agreement or (c) the impairment of the validity of this Agreement or the Warrant Agreement. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing events would result in a Material Adverse Effect. 6 Maximum Rate. This term is defined in Section 11.17 of this Agreement. Negotiation Period. This term is defined in the definition of Appraised Value. New Securities. Any Capital Stock other than (a) the Warrant Shares, (b) Permitted Stock and (c) Capital Stock issued in an Adjustment Public Offering. Note Agreement. This term is defined in the preamble and includes the Note Purchase Agreement of even date with this Agreement by and among Precise, Rice and John Hancock and all documents evidencing indebtedness thereunder or otherwise related to the Note Agreement as the same may be amended from time to time, and any refinancing, refunding, or replacements of the indebtedness under the Note Agreement. Notice of Sale. This term is defined in Section 6.02(a) of this Agreement. Other Holder Call Option Period. This term is defined in Section 5.01 of this Agreement. Other Securities. Any stock (other than Common Stock) and any other securities of the Company or any other person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of Warrants in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock (or Other Securities) pursuant to Section 2.08 of the Warrant Agreement or otherwise. Pecks Call Option Period. This term is defined in Section 5.01 of this Agreement. Pecks Common Stock. This term is defined in Article I of the Warrant Agreement. Pecks Preferred Stock. This term is defined in Section 11.1 of the Note Agreement. Permitted Stock. This term means (a) Common Stock or options or warrants to acquire Common Stock, constituting, in the aggregate, five percent (5%) or less of the outstanding Common Stock, issued or reserved for issuance to present and future key management of the Company pursuant to a management incentive program and (b) the Hamilton Preferred Stock. In no event will the number of shares of Permitted Stock (with respect to clause (a) above) issued or reserved for issuance, in the aggregate, exceed the lesser of the number of shares constituting five percent (5%) of the outstanding Common Stock on (a) the date of this Agreement or (b) the date issued. Person. This term will be interpreted broadly to include any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, company, institution, entity, party, or government (whether national, federal, state, county, city, municipal, or otherwise, including, without limitation, any instrumentality, division, agency, body, or department of any of the foregoing). 7 Precise. This term is defined in the preamble of this Agreement. Public Sale. Any sale of Capital Stock pursuant to an offering pursuant to the Act. Pull Along Sale. This term is defined in Section 6.04 of this Agreement. Pull Along Sale Date. This term is defined in Section 6.04 of this Agreement. Pull Along Sale Notice. This term is defined in Section 6.04 of this Agreement. Purchaser. This term is defined in the preamble of this Agreement. Put Option. This term is defined in Section 4.01 of this Agreement. Put Option Closing. This term is defined in Section 4.05 of this Agreement. Put Option Period. This term is defined in Section 4.01 of this Agreement. Put Price. This term is defined in Section 4.02 of this Agreement. Put Shares. The Warrant Shares plus any other shares of Capital Stock of the Company owned from time to time by a Holder (other than the Pecks Common Stock). "Register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. Registrable Securities. (a) the Issuable Warrant Shares, (b) the Issued Warrant Shares and (c) the Pecks Common Stock that have not been previously sold to the public. Related Party. A Subsidiary of a Selling Shareholder or one or more Related Parties; any Affiliate of the Shareholders a party to this Agreement on the Closing Date; and any member of the immediate family of any such Person. Securities Act. The Securities Act of 1933, as amended, and the rules and regulations thereunder. Securityholders. Any Person other than the Company that is a party to this Agreement on the Closing Date and, thereafter, any Person other than the Company that is or becomes a party to this Agreement; provided, however, that a Person will cease to be a Securityholder hereunder at such time as such Person ceases to hold any Common Stock or Common Stock Equivalents. Selling Shareholder. This term is defined in Section 6.02 of this Agreement. 8 Senior Lender. This term is defined in Section 11.1 of the Note Agreement. Senior Loan Documents. This term is defined in Section 11.1 of the Note Agreement. Senior Subordinated Obligations. This term is defined in Section 11.1 of the Note Agreement. Senior Subordination Agreement. This term is defined in Section 11.1 of the Note Agreement. Shareholder. This term is defined in the preamble. Subsidiary. Each Person of which or in which the Company or its other Subsidiaries own directly or indirectly fifty-one percent (51%) or more of (i) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors or equivalent body of such Person, if it is a corporation or similar person; (ii) the capital interest or profits interest of such Person, if it is a partnership, joint venture, or similar entity; or (iii) the beneficial interest of such Person, if it is a trust, association, or other unincorporated organization. Valuation Event. This term is defined in the definition of Fair Market Value. Voting Stock. With respect to a corporation, the stock of such corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect members of the board of directors (or other governing body) of such corporation. Warrant Agreement. This term is defined in the preamble to this Agreement and includes all documents related thereto as any or all of the same may be amended from time to time. Warrants. This term is defined in the Warrant Agreement. Warrant Shares. The Issued Warrant Shares and the Issuable Warrant Shares. Article II Holders' Preemptive Rights 2.01 Preemptive Right. The Company will not issue or sell any New Securities without first complying with this Article II. The Company hereby grants to each Holder and each Shareholder (without duplication) the preemptive right to purchase, pro rata, all or any part of the New Securities that the Company may, from time to time, propose to sell or issue. In the event New Securities are offered or sold as part of a unit with other New Securities, the preemptive right granted by this Article II will apply to such units and not to the individual New Securities composing such units. Each Holder's pro rata share for purposes of Article II is the ratio that the number of shares of Common Stock issuable to such Holder upon exercise of its Warrant plus the number of shares of Common Stock that are Issued Warrant Shares owned by 9 such Holder immediately prior to the issuance of the New Securities, bears to the sum of (x) the total number of shares of Common Stock then outstanding, plus (y) the number of shares of Common Stock issuable upon exercise of all Warrants then outstanding. 2.02 Notice to Holders. In the event the Company proposes to issue or sell New Securities, it will give each Holder and each Shareholder written notice of its intention, describing the type of New Securities and the price and terms upon which the Company proposes to issue or sell the New Securities. The Company agrees to provide each Holder and each Shareholder with such information they may reasonably request to facilitate their investment decision. Each Holder and each Shareholder will have fifteen (15) days from the date of receipt of any such notice to agree to purchase up to its respective pro rata share of the New Securities for the price (valued at Fair Market Value for any noncash consideration) and upon the terms specified in the notice by giving written notice to the Company stating the quantity of New Securities agreed to be purchased. 2.03 Allocation of Unsubscribed New Securities. In the event a Holder or a Shareholder fails to exercise such preemptive right within such fifteen (15) day period, the other Holders and Shareholders, if any, will have an additional five (5) day period to purchase such Holder's or such Shareholder's portion not so agreed to be purchased in the same proportion in which such other Holders or Shareholders were entitled to purchase the New Securities (excluding for such purposes such nonpurchasing Holder or Shareholder). Thereafter, the Company will have ninety (90) days to sell the New Securities not elected to be purchased by the Holders and Shareholders at the same price and upon the same terms specified in the Company's notice described in Section 2.02. In the event the Company has not sold the New Securities within such ninety (90) day period, the Company will not thereafter issue or sell any New Securities without first offering such securities in the manner provided above. Article III Dilution Dividend In the event that, during the term of the Warrants, the Company pays any cash dividend or makes any cash distribution to any holder of any class of its Capital Stock (other than the payment of the dividends or distributions described in Sections 7.4(ii), (iii) or (vi) of the Note Agreement) with respect to such Capital Stock, each Holder of the Warrants will be entitled to receive in respect of its Warrant a dilution dividend in cash (the "Dilution Dividend") on the date of payment of such dividend or distribution, which Dilution Dividend will be equal to (a) the highest amount per share paid to any class of Capital Stock times (i) the number of Issued Warrant Shares then owned by such Holder plus (ii) the number of Issuable Warrant Shares then owned by such Holder, less (b) the amount of such dividend or distribution otherwise paid to such Holder as a result of its ownership of Issued Warrant Shares. 10 Article IV Put Option 4.01 Grant of Option. The Company hereby grants to each Holder an option to sell to the Company, and the Company is obligated to purchase from each Holder under such option (the "Put Option"), all (or such portion as is designated by any such Holder) of the Put Shares. The Put Option will be effective (i) at any time or times after the fifth anniversary of the date of this Agreement; provided, however, that no Holder may exercise its Put Option on more than one (1) occasion during any calendar quarter, or (ii) at any time or times after the occurrence of any of the following events, and until the occurrence of an Initial Public Offering (the "Put Option Period"): (a) a change in control of the Company (for purposes of this subsection a "change in control" will include, without limitation, (i) the Shareholder ceasing to own, directly or through its Subsidiaries, a number of shares of issued and outstanding voting stock of the Company (without giving effect to the issuance of any shares of Common Stock under the Warrants) to allow the Shareholder to effect all corporate actions or (ii) the Shareholder ceasing to have the legal right or ability, directly or through its Subsidiaries, to elect a majority of the members of the board of directors of the Company) or (iii) the Company ceasing to own, beneficially and of record, all of the issued and outstanding common stock of Precise; or (b) a merger, consolidation, share exchange, or similar transaction involving the Company or sale in one or more related transactions of all or a majority of the assets, business, or revenue or income generating operations of the Company or any substantial change in the type of business conducted by the Company; or (c) after the occurrence and during the continuance of acceleration of the Senior Subordinated Obligations under the Note Agreement; provided, however, that the Put Option Period will continue with respect to such event, even after such default giving rise to such acceleration has been cured, if notice of exercise is provided pursuant to this Article IV prior to such cure. 4.02 Put Price. In the event that any Holder exercises the Put Option, the price (the "Put Price") to be paid to each such Holder pursuant to this Agreement will be cash in the sum of the amount determined by multiplying the higher of (a) Book Value or (b) the Fair Market Value per share of Common Stock (valued as of the end of the month immediately preceding the date notice is given of the exercise of the Put Option pursuant to Section 4.03) times the number of shares of Common Stock for which the Put Option is being exercised by such Holder plus the higher of (a) Book Value or (b) the Fair Market Value of the Other Securities issuable upon exercise of the portion of the Warrant subject to the Put Option. 4.03 Exercise of Put Option. The Put Option may be exercised during the Put Option Period with respect to all or any portion of the Put Shares, by such Holder giving notice to the Company and each other Holder during the Put Option Period of the Holder's election to exercise the Put Option, and the date of the Put Option Closing, which will be not less than 11 fifteen (15) nor more than forty five (45) days after the date of such notice. The Company will provide each Holder desiring to exercise its Put Option the name and address of each other Holder. Notwithstanding the foregoing, if a Holder receives such notice of another Holder's exercise of such other Holder's Put Option, the Holder receiving such notice may elect to exercise its Put Option and designate a Put Option Closing simultaneous and pari passu with that of such other Holder. 4.04 Certain Remedies. In the event that (i) the Company defaults in its obligation to purchase all or any portion of the Put Shares in cash upon exercise of the Put Option, (ii) any Holder exercises the Put Option at a time when the Put Price is not permitted to be paid in cash to such Holder pursuant to applicable law, (iii) any Holder exercises the Put Option at a time when the Senior Loan Documents or the Note Agreement prohibit Precise from paying a dividend to the Company in order to fund the payment of the Put Price in cash, and the Company fails to obtain a waiver of such default from the Senior Lender (with respect to the occurrence of a default under the Senior Loan Documents) or Rice and John Hancock (with respect to the occurrence of a default under the Note Agreement), as the case may be, or (iv) any Holder exercises the Put Option at a time when payment of all or any portion of the Put Price in cash would, after giving effect to such payment, result in Precise's available cash plus availability under the Senior Loan Documents being less than $5,000,000 in the aggregate, then, in any such event, the Company will (a) pay such portion of the Put Price in cash as is not prohibited by clauses (i), (ii), (iii) or (iv) above, (b) upon the request of any Holder and to the extent any portion of the Put Price is not paid in cash under this Section 4.04, execute and deliver to such Holder a promissory note (a "Put Note") in form and substance satisfactory to such Holder evidencing such remaining Put Price, and (c) not declare or make any dividends or distributions of its cash or redeem, retire, purchase, or otherwise acquire, directly or indirectly, any of its Capital Stock or capital stock or securities of any Affiliate of the Company, or any securities convertible or exchangeable into Capital Stock or capital stock or securities of any Affiliate of the Company until the Put Price has been paid in full in cash. Any Put Note issued pursuant to the terms and conditions of this Section 4.04 will (a) be substantially in the form of Exhibit A attached hereto, (b) mature on April 2, 2006 and (c) bear interest at the following rates per annum: (i) 14% per annum for the twelve month period immediately following the date of issuance of such promissory note, (ii) 16% per annum for the next succeeding twelve month period and (iii) 18% per annum thereafter. In addition to the right to request the issuance of a Put Note, any Holder may, upon the failure of the Company to pay any portion of the Put Price not prohibited by clauses (ii), (iii) or (iv) above, exercise all rights or remedies available to such Holder (whether at law or in equity) against the Company, and, in addition thereto, such Holder shall be entitled to liquidated damages in the amount specified in Section 11.02 of this Agreement. 4.05 Put Option Closing. The closing for the purchase and sale of all or such portion of the Put Shares as to which the Holder has notified the Company of its intention to exercise the Put Option, will take place at the office of the Company on the date specified in such notice of exercise (a "Put Option Closing"). At any Put Option Closing, to the extent applicable, the Holder of the Put Shares will deliver the certificate or certificates evidencing the Put Shares being purchased, duly endorsed in blank. In consideration therefor, the Company will deliver to 12 the Holder the Put Price, which will be payable in cash (subject to the terms of Section 4.04 hereof). Article V Call Option 5.01 Grant of Option. Each Holder hereby severally grants to the Company an option to require such Holder to sell to the Company, and each Holder is obligated to sell to the Company under this option (the "Call Option"), all of its Warrant and its Warrant Shares. The Call Option granted by Pecks will be effective after the later to occur of (i) the redemption of all outstanding shares of the Pecks Preferred Stock and (ii) the sixth (6th) anniversary of the date of this Agreement, but shall terminate for all purposes upon the closing of an Initial Public Offering (the "Pecks Call Option Period"). The Call Option granted by each other Holder will be effective after the sixth (6th) anniversary of the date of this Agreement, but shall terminate for all purposes upon the closing of an Initial Public Offering (the "Other Holder Call Option Period", and together with the Pecks Call Option Period, the "Call Option Period"). 5.02 Call Price. In the event that the Company exercises the Call Option, the exercise price to be paid in cash to each Holder will be equal to the Put Price determined in accordance with Section 4.02, except that the Call Option will be exercised with respect to the entire Warrant and all Warrant Shares, and will be increased by an amount in cash equal to any Excess Consideration received within one hundred eighty (180) days following the exercise of the Call Option due to an Adjustment Event. 5.03 Exercise of Call Option. The Call Option may be exercised during the Call Option Period with respect to all of the Warrant and the Warrant Shares of all Holders, by the Company giving notice to each Holder (including Pecks, irrespective of whether such notice occurs during the Peck Call Option Period) during the Call Option Period of the election of the Company to exercise the Call Option, and the date of the Call Option Closing, which in all events will be within at least sixty (60) days after the date of such notice. If such notice does not occur during the Pecks Call Option Period, Pecks shall have the option to participate pro rata with each other Holder in respect of the exercise of any such Call Option. 5.04 Call Option Closing. The closing for the purchase and sale of all of the Warrant and Warrant Shares that the Company has elected to purchase under this Agreement, will take place at the office of the Company, on the date specified in such notice of exercise (the "Call Option Closing"). At the Call Option Closing, the Holders of the Warrants will deliver the Warrants and the certificate or certificates representing the Warrant Shares, duly endorsed in blank. In consideration therefor, the Company will deliver to each Holder the purchase price, which will be payable in immediately available funds. 13 Article VI Co-Sale Rights 6.01 Rights of Co-Sale. In the event that the Shareholder intends to sell or transfer, directly or indirectly, any shares of any class of Capital Stock of the Company held by it to any Person, each Holder will have the right to participate in such sale or transfer on the terms set forth in this Article VI; provided, however, none of the provisions of this Article VI will apply to (i) any sale by the Shareholder of shares of Capital Stock in a bona fide underwritten public offering under the Securities Act, so long as all Holders have had an opportunity to participate in such offering pursuant to the registration rights under this Agreement or (ii) any sale of the Hamilton Preferred Stock or the Pecks Common Stock. 6.02 Method of Electing Sale; Allocation of Sales. No sale or transfer by the Shareholder of any shares of Capital Stock will be valid unless the transferee of such Capital Stock will first agree in writing to be bound by the same terms and conditions that apply to the Shareholder under this Agreement and the Warrant Agreement. In addition, before any shares of Capital Stock held, directly or indirectly, by the Shareholder may be sold or transferred to a Person other than a Related Party, the Shareholder (as such, the "Selling Shareholder") will comply with Section 6.04 or the following provisions: (a) The Selling Shareholder will deliver or cause to be delivered a written notice (the "Notice of Sale") to each Holder at least thirty (30) days prior to making any such sale or transfer. The Company agrees to provide the Selling Shareholder with a list of the names and addresses of each such Holder for such purpose. The Notice of Sale will include (i) a statement of the Selling Shareholder's bona fide intention to sell or transfer; (ii) the name of the and address of the prospective transferee (the "Buyer"); (iii) the number of shares of Capital Stock of the Company to be sold or transferred; (iv) the terms and conditions of the contemplated sale or transfer; (v) the purchase price in cash that the Buyer will pay for such shares of Capital Stock; (vi) the expected closing date of the transaction; and (vii) such other information as the Holders may reasonably request to facilitate their decision as to whether or not to exercise the rights granted by this Article VI. (b) Any Holder receiving the Notice of Sale may elect to participate in the contemplated sale or transfer by exercising its right to co-sell its Capital Stock pursuant to Section 6.02(c). Such right may be exercised in the sole discretion of the Holder by delivering a written notice (an "Election Notice") to the Company and the Selling Shareholder within thirty (30) days after receipt of such Notice of Sale stating the election of the Holder to exercise its right of co-sale pursuant to Section 6.02(c). (c) Each Holder may elect to sell or transfer in the contemplated transaction up to the total of the number of shares of Capital Stock then held by it (including the Issuable Warrant Shares). Promptly after the receipt of an Election Notice exercising such right, the Selling Shareholder will use its best efforts to cause the Buyer to amend its offer so as to provide for the Buyer's purchase, upon the same terms and conditions as those contained in the Notice of Sale, of all of the shares of Capital Stock (including the Issuable Warrant Shares) elected to be sold 14 (the "Co-Sell Shares") in such Election Notices. In the event that the Buyer is unwilling to amend its offer to purchase all of the Co-Sell Shares in addition to the shares of Capital Stock described in the related Notice of Sale, if the Selling Shareholder desires to proceed with the sale, the total number of shares that such Buyer is willing to purchase will be allocated to the Selling Shareholder and each Holder having given an Election Notice exercising its right pursuant to this Section 6.02(c) (the "Co-Sellers") in proportion to the aggregate number of shares of Capital Stock (including Issuable Warrant Shares) held by each such Person; provided, however, that no such Person will be so allocated a number of shares greater than the number of shares that it has sought to sell to such Buyer in the related Notice of Sale or Election Notice. All Capital Stock sold or transferred by the Selling Shareholder and the Co-Sellers with respect to a single Notice of Sale under Section 6.02(b) will be sold or transferred to the Buyer in a single closing on the terms described in such Notice of Sale, and each such share will receive the same per share consideration. 6.03 Sales to Related Parties. No sale or transfer of shares of Capital Stock by the Shareholder to a Related Party will be subject to the provisions of Section 6.02; provided, however, that such Related Party first agrees to assume the obligations of the Shareholder (without relieving the Shareholder of any obligations under this Agreement) under this Agreement with respect to the shares of Capital Stock thereby acquired by it and to be bound by the same terms and conditions that apply to the Shareholder under this Agreement and the Warrant Agreement in a written instrument in a form and substance reasonably satisfactory to the Holders. 6.04 Pull-Along Right. Prior to an Initial Public Offering, if Securityholders of at least sixty-six and two-thirds percent (66-2/3%) of the issued and outstanding Common Stock and Common Stock Equivalents at the time elect to sell such Common Stock or Common Stock Equivalents in a bona fide sale to a third party that is not an Affiliate of the Company or the Securityholders in a transaction that is not a Public Sale, then all Securityholders shall be obligated to sell any Common Stock or Common Stock Equivalents then held by such Securityholders in such sale so long as all other Securityholders sell all of their Common Stock and Common Stock Equivalents in such sale (a "Pull-Along Sale"); provided, however, that not less than thirty (30) days prior to the date such Pull-Along Sale is to take place (the "Pull-Along Sale Date"), the Securityholders initiating such Pull-Along Sale shall deliver a written notice (a "Pull-Along Sale Notice") to each of the Company and all other Securityholders specifying that a Pull-Along Sale is to take place, the identity of the prospective transferee(s) and the terms of the proposed Pull-Along Sale (including the date of the proposed Transfer and the price to be paid for the Common Stock). On the Pull-Along Sale Date, at the time and place designated in the Pull-Along Sale Notice, each Securityholder shall deliver to the purchaser the share certificate(s) and/or warrants representing the Common Stock and Common Stock Equivalents of the Company then held by them, each such certificate or warrant to be properly endorsed for transfer, against payment therefor by certified check or bank draft payable to the order of such Securityholder, or, at the election of such Securityholder, by wire transfer of immediately available funds to such account of such Securityholder as has been specified in a written notice to such purchaser at least three (3) days prior to such date of purchase; provided, however, that the purchase price of each Issuable Warrant Share represented by an unexercised Warrant so 15 delivered by a Holder shall be equal to the per share price paid in such transaction for a share of Common Stock, less the then current per share Exercise Price of such Warrant. 6.05 Lock-Up. Notwithstanding anything to the contrary contained in this Article VI, Sunderland hereby agrees that it will not sell or transfer any shares of the Company's Capital Stock owned by it on the Closing Date until such time as Precise shall have redeemed for cash all of the shares of the Pecks Preferred Stock now or hereafter owned by Pecks or its Affiliates. Article VII Liquidity 7.01 Required Registration. At any time after the Company has consummated an Initial Public Offering, each Holder may, on not more than (2) occasions, make a written request to the Company requesting that the Company effect the registration of Registrable Securities. Following receipt of any such request, the Company shall be obligated to use its best efforts to effect the registration under the Act of Registrable Securities in accordance with the provisions of this Section 7.01. Whenever the Company shall be requested by a Holder, pursuant to this Section 7.01, to effect the registration of any Registrable Securities, the Company shall promptly give written notice of such proposed registration under the Act to all Holders and thereupon shall, as expeditiously as possible, use its best efforts to effect the registration under the Act of: (a) the Registrable Securities which the Company has been requested to register pursuant to the preceding sentence, and (b) all other Registrable Securities which the Holders have, within thirty (30) days after the Company has given such written notice, requested the Company to register, all to the extent required to permit the disposition by the Holders of the Registrable Securities so registered. Such registration shall be underwritten, if requested by the Holders holding a majority of the Registrable Securities, by an underwriter or underwriters named by them and reasonably approved by the Company. No other person shall have any right to have securities included in such registration, except (i) with the prior written consent of the Holders holding a majority of the Registrable Securities or (ii) if the offering is underwritten, the Company; provided, however, that securities not held by Holders may only be included in such registration pursuant to clause (i) or (ii) above if, in the opinion of the underwriter or underwriters managing the offering, the total amount of the securities to be so registered, when added to the total amount of Registrable Securities to be registered, will not exceed the maximum amount of securities of the Company which can then be successfully marketed (1) at a price reasonably related to their then current market value, and (2) without otherwise materially and adversely affecting the entire offering; and provided, further, that the Company shall not have the right to have any securities included in the registration pursuant to clause (ii) above if such inclusion would require that the offering be registered on a registration statement form which would entail a significantly more extensive textual disclosure in the prospectus than would be required by the registration statement form which would be available if no securities were included in the registration at the request of the Company (as, for example, in a case in which the offering could be registered on current registration statement Form S-3, but for the inclusion of securities to be sold for the account of 16 the Company, which would require the use of registration statement Form S-1 or Form S-2). To the extent that the amount of securities to be registered must be reduced in order to obtain the opinion referred to in the preceding sentence, such reduction shall be achieved by first eliminating from the registration some or all of the securities to be offered by the Company and, if such reduction is not sufficient, then by eliminating from the registration some or all of the securities to be offered by any other persons pursuant to clause (i) or (ii) above. 7.02 Incidental Registration. (a) If the Company at any time proposes to register any of its equity securities (as defined in the Act), other than securities which are convertible into shares of Common Stock, under the Act on Forms S-1, S-2 or S-3 (but not Form S-4 or S-8) or on any other form upon which may be registered securities similar to the Registrable Securities (or the Warrants to the extent necessary to be registered in connection with the registration of the underlying Registrable Securities) and other than pursuant to Section 7.01 above, it will at each such time give written notice at least thirty (30) days prior to the filing of the registration statement to all Holders of its intention so to do. Such notice shall specify the proposed date of the filing of the registration statement and advise each Holder of its right to participate therein. Upon the written request of any Holder given not less than ten (10) days prior to the proposed date of filing set forth in such notice, the Company will use its best efforts to cause each Registrable Security which the Company has been requested to register by such Holder to be registered under the Act, all to the extent requisite to permit the sale or other disposition by such Holder of the Registrable Securities so registered. (b) If, in the opinion of the underwriter or underwriters managing the public offering which is the subject of a registration pursuant to clause (a) of this Section 7.02 (or in the event that such distribution shall not be underwritten, in the opinion of an investment banking firm of recognized standing reasonably acceptable to the Holders), and after discussion between such underwriter or underwriters and the Holders, which discussion (but not necessarily the results thereof) shall be reasonably satisfactory to the Holders, the total amount of the securities to be so registered, when added to the total amount of Registrable Securities which the Holders have requested to be registered pursuant to said clause (a), will exceed the maximum amount of securities of the Company which can be successfully marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise materially and adversely affecting the entire offering, then the Company shall have the right to exclude from such registration on a pro rata basis such number of Registrable Securities which it would otherwise be required to register pursuant to said clause (a) as is necessary to reduce the total amount of securities to be so registered to the maximum amount of securities which can, in the reasonable opinion of the underwriter or such investment banking firm, be so successfully marketed; provided, however, that if the securities (other than the Registrable Securities) to be so registered for sale are to be offered for the account of the Company and others, the Company may only exclude Registrable Securities pro rata with the securities held by such other persons (it being agreed that in the case where such registration is to be effected as a result of the exercise by a holder of the Company's securities of such holder's right to cause such securities to be so registered, such pro rata exclusion shall include the Company and exclude such holder). 17 7.03 Form S-3 Registrations. In addition to the registration rights provided in Sections 7.01 and 7.02 above, if at any time the Company is eligible to use Form S-3 (or any successor form) for registration of secondary sales of Registrable Securities, any Holder of Registrable Securities may request in writing that the Company register shares of Registrable Securities on such form. Upon receipt of such request, the Company will promptly notify all Holders of Registrable Securities in writing of the receipt of such request and each such Holder may elect (by written notice sent to the Company within thirty (30) days of receipt of the Company's notice) to have its Registrable Securities included in such registration pursuant to this Section 7.03. Thereupon, the Company will, as soon as practicable, use its best efforts to effect the registration on Form S-3 of all Registrable Securities that the Company has so been requested to register by such Holder for sale. The Company will use its best efforts to qualify and maintain its qualification for eligibility to use Form S-3 for such purposes. 7.04 Registration Procedures. In connection with any registration of Registrable Securities under this Article VII, the Company will, as soon as practicable: (a) prepare and file with the Commission a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become and remain effective until the earlier of such time as all Registrable Securities subject to such registration statement have been disposed of or the expiration of two hundred seventy (270) days; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such registration statement until the earlier of such time as all of such Registrable Securities have been disposed of or the expiration of two hundred seventy (270) days (except with respect to registrations effected on Form S-3 or any successor form, as to which no such period shall apply); (c) furnish to each Holder such number of copies of the registration statement and prospectus (including, without limitation, a preliminary prospectus) in conformity with the requirements of the Securities Act (in each case including all exhibits) and each amendment or supplement thereto, together with such other documents as any Holder may reasonably request; (d) use its reasonable best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions within the United States and Puerto Rico as each Holder reasonably requests, and do such other acts and things as may be reasonably required of it to enable such holder to consummate the disposition in such jurisdiction of the securities covered by such registration statement; (e) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securities holders, as soon as practicable, an earnings statement covering the period of at least twelve months beginning with the first month after the 18 effective date of such registration statement, which earnings statement will satisfy the provisions of Section 11 (a) of the Securities Act; (f) provide and cause to be maintained a transfer agent and registrar for Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement; (g) if requested by the underwriters for any underwritten offering of Registrable Securities on behalf of a Holder of Registrable Securities pursuant to a registration requested under Section 7.01, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, provisions with respect to indemnities and contribution as are reasonably satisfactory to such underwriters and the Holders; the Holders on whose behalf Registrable Securities are to be distributed by such underwriters will be parties to any such underwriting agreement and the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters, will also be made to and for the benefit of such Holders of Registrable Securities; and no Holder of Registrable Securities will be required by the Company to make any representations or warranties to or agreements with the Company or the underwriters other than reasonable and customary representations, warranties, or agreements regarding such Holder, such Holder's Registrable Securities, such Holder's intended method or methods of disposition, and any other representation required by law; (h) furnish, at the written request of any Holder, on the date that such Registrable Securities are delivered to the underwriters for sale pursuant to such registration, or, if such Registrable Securities are not being sold through underwriters, on the date that the registration statement with respect to such Registrable Securities becomes effective, (i) an opinion in form and substance reasonably satisfactory to such Holders, and addressing matters customarily addressed in underwritten public offerings, of the counsel representing the Company for the purposes of such registration (who will not be an employee of the Company and who will be reasonably satisfactory to such Holders), addressed to the underwriters, if any, and to the selling Holders; and (ii) a letter (the "comfort letter") in form and substance reasonably satisfactory to such Holders, from the independent certified public accountants of the Company, addressed to the underwriters, if any, and to the selling Holders making such request (and, if such accountants refuse to deliver the comfort letter to such Holders, then the comfort letter will be addressed to the Company and accompanied by a letter from such accountants addressed to such Holders stating that they may rely on the comfort letter addressed to the Company); and (i) during the period when the registration statement is required to be effective, notify each selling Holder of the happening of any event as a result of which the prospectus included in the registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an 19 untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. It will be a condition precedent to the obligation of the Company to take any action pursuant to this Article VII in respect of the Registrable Securities that are to be registered at the request of any Holder of Registrable Securities that such Holder furnish to the Company such information regarding the Registrable Securities held by such Holder and the intended method of disposition thereof as is legally required in connection with the action taken by the Company. The managing underwriter or underwriters, if any, for any offering of Registrable Securities to be registered pursuant to Section 7.01 or 7.03 will be selected by the Holders of a majority of the Registrable Securities being so registered. 7.05 Allocation of Expenses. Except as provided in the following sentence, the Company will bear all expenses arising or incurred in connection with any of the transactions contemplated by this Article VII, including, without limitation, (a) all expenses incident to filing with the National Association of Securities Dealers, Inc.; (b) registration fees; (c) printing expenses; (d) accounting and legal fees and expenses; (e) expenses of any special audits or comfort letters incident to or required by any such registration or qualification; and (f) expenses of complying with the securities or blue sky laws of any jurisdictions in connection with such registration or qualification. Each Holder will severally bear the expense of its underwriting fees, discounts, or commissions relating to its sale of Registrable Securities. 7.06 Listing on Securities Exchange. If the Company lists any shares of Capital Stock on any securities exchange or on the National Association of Securities Dealers, Inc. Automated Quotation System or similar system, it will, at its expense, list thereon, maintain and, when necessary, increase such listing of, all Registrable Securities. 7.07 Holdback Agreements. (a) If any registration pursuant to Section 7.02 is in connection with an underwritten public offering, each Holder of Registrable Securities agrees, if so required by the managing underwriter, not to effect any public sale or distribution of Registrable Securities (other than as part of such underwritten public offering) during the period beginning seven (7) days prior to the effective date of such registration statement and ending on the forty-fifth (45th) day after the effective date of such registration statement; provided, however, that the Shareholder and each Person that is an officer, director or beneficial owner of five percent (5%) or more of the outstanding shares of any class of Capital Stock enters into such an agreement. (b) The Company and the Shareholder (other than Pecks) agree (i) not to effect any public sale or distribution during the period seven (7) days (or such longer period as may be prescribed by Rule 10b-6 under the Exchange Act) prior to the effective date of the registration statement employed in any underwritten public offering and ending on the one hundred eightieth (180th) day after any such registration statement contemplated by Sections 7.01 or 7.03 has become effective, except as part of such underwritten public offering pursuant to such registration statement and except pursuant to securities registered on Forms S-4 or S-8 of the 20 Commission or any successor forms, (ii) use their best efforts to cause each holder of its equity securities or any securities convertible into or exchangeable or exercisable for any of such securities, in each case purchased from the Company at any time after the date of this Agreement (other than in a public offering), to agree not to effect any such public sale or distribution of such securities during such period, and (iii) if the Company makes a good faith determination that the filing of a registration statement in connection with any registration statement contemplated by this Article VII would interfere with or adversely affect any material transaction then under consideration by the Company's board of directors, the Company may postpone the filing of such registration for an additional period not to exceed ninety (90) days, provided that it gives each Holder of the Warrant and Warrant Shares prompt prior written notice of such postponement, and provided further, that the aggregate number of days the Company has postponed filing of one or more registration statements under this clause (iii) does not exceed ninety (90) days in any period of 365 consecutive days. 7.08 Rule 144. At all times following completion by the Company of an Adjustment Public Offering, the Company will take such action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Registrable Securities without registration pursuant to and in accordance with (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation adopted by the Commission. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. 7.09 Rule 144A. The Company agrees that, upon the request of any Holder or any prospective purchaser of a Warrant or Warrant Shares designated by a Holder, the Company will promptly provide (but in any case within fifteen (15) days of a request) to such Holder or potential purchaser, the following information: (a) a brief statement of the nature of the business of the Company and any Subsidiaries and the products and services they offer; (b) the most recent consolidated balance sheets and profit and losses and retained earnings statements and similar financial statements of the Company for such part of the two preceding fiscal years prior to such request as the Company has been in operation (such financial information will be audited, to the extent reasonably available); and (c) such other information about the Company, any Subsidiaries, and their business, financial condition and results of operations as the requesting Holder or purchaser of such Warrants requests in order to comply with Rule 144A, as amended, and the antifraud provisions of the federal and state securities laws. The Company hereby represents and warrants to any such requesting Holder and any prospective purchaser of Warrants or Warrant Shares from such Holder that the information provided by the Company pursuant to this Section 7.09 will not contain any untrue statement of a material fact or 21 omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. 7.10 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company will not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 7.01, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities will not reduce the amount of the Registrable Securities of the Holders that is included or (b) to make a demand registration that could result in such registration statement being declared effective prior to the effectiveness of the first registration statement effected under Section 7.01 or within one hundred twenty (120) days of the effective date of any registration effected pursuant to Section 7.01. 7.11 Other Rights. The Company will not grant to any person any registration rights without the consent of the Holders. Article VIII Representations and Warranties; Covenants 8.01 Representations and Warranties and Covenants of the Company. Each of the representations and Warranties set forth in Section 3.01 of the Warrant Agreement and each of the covenants set forth in Article IV of the Warrant Agreement are hereby restated and incorporated by reference in this Agreement as though set forth in this Agreement, and is made by the Company as made in the Warrant Agreement for the benefit of each Purchaser. By execution of this Agreement, the Company agrees to be bound by Section 6.21 of the Note Agreement, and, for so long as the Note Agreement is in effect, the Company will at all times take such action as is reasonably necessary to provide Rice and John Hancock with the board observation rights and benefits contemplated by Section 6.21 of the Note Agreement. 8.02 Representations and Warranties of the Shareholders. Each Shareholder severally and not jointly represents and warrants to the Purchaser that: (a) Such Shareholder is either (i) an individual or (ii) a corporation or limited partnership, duly organized and existing and in good standing under the laws of its state of organization and is qualified or licensed to do business in all other states and jurisdictions the laws of which require it to be so qualified or licensed and where the failure to be so qualified or licensed would have a Material Adverse Effect on such Shareholder's obligations under this Agreement and/or the transactions contemplated hereby. Such Shareholder owns 100% of its equity interest in the Company free and clear of all liens, claims, and encumbrances, except those arising pursuant to the Warrant. No Person other than Purchaser and the holders of Permitted Stock have any rights, whether granted by the Company or any other Person, to acquire any portion of the equity interest of the Company. 22 (b) Such Shareholder has, and at all times that this Agreement is in force will have, the right and power, and is duly authorized, to enter into, execute, deliver, and perform this Agreement, and if such Shareholder is not an individual, its officers or agents executing and delivering this Agreement are duly authorized to do so. This Agreement has been duly and validly executed, issued, and delivered and constitutes a legal, valid, and binding obligation of such Shareholder, enforceable in accordance with its terms. (c) The execution, delivery, and performance of this Agreement will not, by the lapse of time, the giving of notice, or otherwise, constitute a violation of any applicable provision contained in any agreement, instrument, or document to which such Shareholder is a party or by which such Shareholder is bound. (d) There is not now, and at no time during the term of this Agreement will there be, any agreement, arrangement, or understanding involving such Shareholder other than this Agreement, the Senior Loan Agreement and the documents contemplated hereby, modifying, restricting, or in any way affecting the rights of such Shareholder to vote securities of the Company. (e) None of the documents, instruments, or other information furnished to the Purchaser by such Shareholder contains any untrue statement of a material fact or omits to state any material fact necessary in order to make any statements made therein not misleading. No representation, warranty, or statement made by such Shareholder in this Agreement or in any document, certificate, exhibit or schedule attached hereto or delivered in connection herewith, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make any such statements made herein or therein not misleading. To the knowledge of such Shareholder, in its capacity as such, there is no fact that materially and adversely affects the condition (financial or otherwise), results of operations, business, properties, or prospects of the Company or any of its Subsidiaries that has not been disclosed in the documents provided by such Shareholder to the Purchaser. Pecks makes no representation with respect to this paragraph (e). 8.03 Representations and Warranties of the Purchaser. Each of the representations and warranties of the Purchaser set forth in Section 3.02 of the Warrant Agreement is hereby restated and incorporated by reference in this Agreement as though set forth in this Agreement, and is made severally and not jointly by each Purchaser for the benefit of the Company and the Shareholder. Article IX Conditions The obligations of the Purchaser to effect the transactions contemplated by this Agreement are subject to the following conditions: 23 9.01 Note Agreement and Warrant Agreement Conditions. All of the conditions precedent to the obligations of the Purchaser under the Note Agreement and the Warrant Agreement will have been satisfied in full or waived. 9.02 Proceedings. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation thereof, will be reasonably satisfactory in form and substance to the Purchaser and its counsel, and the Purchaser and its counsel will have received copies (executed or certified as may be appropriate) of all documents, instruments, and agreements that the Purchaser or its counsel may request in connection with the consummation of such transactions. Article X Directors 10.01 Voting Agreement. To ensure compliance with this Article X, the Shareholders hereby irrevocably covenant and agree to vote, or give or withhold consent with respect to, all shares of Capital Stock now owned or later acquired by it, all in accordance with the terms of this Article X. The agreement to vote contained in this Article X will expire on the earlier to occur of (a) the day prior to maximum period permitted under applicable law or (b) the date that Pecks is no longer entitled to designate a Person to serve on the Company's board of directors in accordance with the terms and conditions of the Warrant Agreement. A counterpart of this Agreement will be deposited with the Company at its principal place of business or registered office and will be subject to the same right of examination by a shareholder of the Company, in person or by agent or attorney, as are the books and records of the Company. 10.02 Board of Directors. So long as the agreement to vote set forth in Section 10.01 remains in effect, each Shareholder will, at the request of Pecks, vote, or give or withhold consent with respect to, all shares of Capital Stock now owned or later acquired by such Shareholder so that at all times the individuals designated as directors by Pecks or its respective designee in accordance with the terms and conditions of the Warrant Agreement will be directors of the Company; provided, however, that Pecks will not have any obligation to designate or cause any individual to serve on the board of directors of the Company. No director designated by Pecks or its designee may be removed without the consent of Pecks unless such designee breaches its/his/her fiduciary duties to the Company and/or the Company's shareholders under applicable law, and in any such case, such designee may be removed only if the Company shall have appointed another individual designated by Pecks to serve on the Company's board of directors. Pecks may, at any time, terminate its rights under this Article X by providing written notice of such termination to the Company. Article XI Miscellaneous 11.01 Indemnification. In addition to any other rights or remedies to which the Purchaser and the Holders may be entitled, the Company and the Shareholder jointly and severally agree to and will indemnify and hold harmless the Purchaser, the Holders, their 24 Affiliates and their respective successors, assigns, officers, directors, employees, attorneys, and agents (individually and collectively, an "Indemnified Party") from and against any and all losses, claims, obligations, liabilities, deficiencies, diminutions in value, penalties, causes of action, damages, out-of-pocket costs, reasonable attorneys' fees, and expenses (including, without limitation, costs of investigation and defense, attorneys' fees, and expenses) including, without limitation, those arising out of the sole or contributory negligence of any Indemnified Party, that the Indemnified Party may suffer, incur, or be responsible for, arising or resulting from any misrepresentation, breach of warranty, or nonfulfillment of any agreement on the part of the Company, or the Shareholder under this Agreement, the Warrant Agreement, or under any other agreement to which the Company or the Shareholder is a party in connection with the transactions contemplated by this transaction, or from any misrepresentation in or omission from any certificate or other instrument furnished or to be furnished by the Company to the Purchaser or the Holders under this Agreement. The foregoing indemnification includes any such claims, actions, damages, costs and expenses incurred by reason of the sole or contributory negligence of the Person to be indemnified, but excludes any of the same incurred by reason of such Person's gross negligence or willful misconduct. 11.02 Default. It is agreed that a violation by any party of the terms of this Agreement cannot be adequately measured or compensated in money damages, and that any breach or threatened breach of this Agreement by a party to this Agreement would do irreparable injury to the nonbreaching party. It is, therefore, agreed that in the event of any breach or threatened breach by a party to this Agreement of the terms and conditions set forth in this Agreement, the nondefaulting party will be entitled, in addition to any and all other rights and remedies that it may have in law or in equity, to apply for and obtain injunctive relief requiring the defaulting party to be restrained from any such breach, or threatened breach or to refrain from a continuation of any actual breach. In addition to the foregoing, if the Company knowingly and intentionally defaults in the performance or observance of any agreement, covenant, term or condition contained in this Agreement (including, without limitation, the Company's obligation to pay any portion of the Put Price upon exercise of the Put Option at a time when the payment of such portion of the Put Price is not prohibited under the circumstances described in clauses (ii), (iii) or (iv) of Section 4.04 hereof) and such default is not cured within five (5) Business Days from and after the giving of notice by the Purchaser to the Company of such default, the Company shall pay to the Holders in cash, as liquidated damages and not as a penalty, an aggregate amount equal to $25,000 per day until such time as such default has been waived in writing or cured to the satisfaction of the Holders. At the request of any Holder, the Company will issue to such Holder a promissory note evidencing the liquidated damages owing by the Company to such Holder. Any such promissory note will be substantially in the form of Exhibit A attached hereto, but shall not bear interest of any kind or amount. 11.03 Integration. This Agreement and the Warrant Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all previous written, and all previous or contemporaneous oral, negotiations, understandings, arrangements, and agreements. This Agreement may not be amended or supplemented except by a writing signed by Company, the Shareholder, and each Holder. 25 11.04 Headings. The headings in this Agreement are for convenience and reference only and are not part of the substance of this Agreement. References in this Agreement to Sections and Articles are references to the Sections and Articles of this Agreement unless otherwise specified. 11.05 Severability. The parties to this Agreement expressly agree that it is not their intention to violate any public policy, statutory or common law rules, regulations, or decisions of any governmental or regulatory body. If any provision of this Agreement is judicially or administratively interpreted or construed as being in violation of any such policy, rule, regulation, or decision, the provision, section, sentence, word, clause, or combination thereof causing such violation will be inoperative (and in lieu thereof there will be inserted such provision, sentence, word, clause, or combination thereof as may be valid and consistent with the intent of the parties under this Agreement) and the remainder of this Agreement, as amended, will remain binding upon the parties to this Agreement, unless the inoperative provision would cause enforcement of the remainder of this Agreement to be inequitable under the circumstances. 11.06 Notices. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration, or other communication be given to or served upon any of the parties by another, such notice, demand, request, consent, approval, declaration, or other communication will be in writing and will be deemed to have been validly served, given, or delivered (and "the date of such notice" or words of similar effect will mean the date) five (5) days after deposit in the United States mails, certified mail, return receipt requested, with proper postage prepaid, or upon receipt thereof (whether by non-certified mail, telecopy, telegram, express delivery, or otherwise), whichever is earlier, and addressed to the party to be notified as follows: If to the Purchaser, at: Address of the Purchaser beneath the name of the Purchaser on the signature pages of this Agreement with courtesy copies to: Hughes & Luce, L.L.P. 1717 Main Street Suite 2800 Dallas, Texas 75201 Attn: Larry A. Makel, Esq. Fax: (214)939-6100 Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022-4677 Attn: William J. Grant, Jr. Fax: (212)821-8211 26 If to the Company, at: Precise Holdings Corporation c/o Mentmore Holdings Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 Attn: Richard C. Hoffman Fax: (212)391-1393 with courtesy copies to: Richard C. Hoffman, P.C. 1430 Broadway, 13th Floor New York, New York 10018-3308 Fax: (212)391-1393 Kelley, McCann & Livingstone 200 Public Square, 35th Floor BP America Building Cleveland, Ohio 44114-2302 Attn: Michael D. Schenker Fax: (216)241-3707 If to the Shareholder, at: Sunderland Industrial Holdings Corporation Hamilton Holdings Ltd. Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 Attn: William L. Remley Fax: (212)391-1393 Delaware State Employees' Retirement Fund Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc. Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. c/o Pecks Management Partners Ltd One Rockefeller Plaza New York, New York 10020 Attn: Robert J. Cresci Fax: (212)332-1334 27 with courtesy copies to: Richard C. Hoffman, P.C. 1430 Broadway, 13th Floor New York, New York 10018-3308 Fax: (212)391-1393 Kelley, McCann & Livingstone 200 Public Square, 35th Floor BP America Building Cleveland, Ohio 44114-2302 Attn: Michael D. Schenker Fax: (216)241-3707 Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022-4677 Attn: William J. Grant, Jr. Fax: (212)821-8211 or to such other address as each party may designate for itself by like notice. Notice to any Holder other than the Purchaser will be delivered as set forth above to the address shown on the stock transfer books of the Company or the Warrant Register unless such Holder has advised the Company in writing of a different address to which notices are to be sent under this Agreement. Failure or delay in delivering the courtesy copies of any notice, demand, request, consent, approval, declaration, or other communication to the persons designated above to receive copies of the actual notice will in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, or other communication. No notice, demand, request, consent, approval, declaration, or other communication will be deemed to have been given or received unless and until it sets forth all items of information required to be set forth therein pursuant to the terms of this Agreement. 11.07 Successors. This Agreement will be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. 11.08 Remedies. The failure of any party to enforce any right or remedy under this agreement, or to enforce any such right or remedy promptly, will not constitute a waiver thereof, nor give rise to any estoppel against such party, nor excuse any other party from its obligations under this Agreement. Any waiver of any such right or remedy by any party must be in writing and signed by the party against which such waiver is sought to be enforced. 28 11.09 Survival. All warranties, representations, and covenants made by any party in this Agreement or in any certificate or other instrument delivered by such party or on its behalf under this Agreement will be considered to have been relied upon by the party to which it is delivered and will survive the Closing Date, regardless of any investigation made by such party or on its behalf. All statements in any such certificate or other instrument will constitute warranties and representations under this Agreement. 11.10 Fees. Any and all fees, costs, and expenses, of whatever kind and nature, including attorneys' fees and expenses, incurred by the Holders in connection with the defense or prosecution of any actions or proceedings arising out of or in connection with this Agreement will, to the extent provided in this Agreement, be borne and paid by the Company or the Shareholder within ten (10) days of demand by the Holders. 11.11 Counterparts. This Agreement may be executed in any number of counterparts, which will individually and collectively constitute one agreement. 11.12 Other Business. It is understood and accepted that the Purchaser, the Holders, and their Affiliates have interests in other business ventures that may be in conflict with the activities of the Company and that nothing in this Agreement will limit the current or future business activities of such parties whether or not such activities are competitive with those of the Company. The Company and Sunderland agree that all business opportunities in any field substantially related to the business of custom injection molding of plastic products will be pursued exclusively through the Company. 11.13 Choice of Law. THIS AGREEMENT HAS BEEN EXECUTED, DELIVERED, AND ACCEPTED BY THE PARTIES IN WILL BE DEEMED TO HAVE BEEN MADE IN NEW YORK, NEW YORK AND WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. 11.14 Nominees for Beneficial Owners. In the event that any Registrable Securities are held by a nominee for the beneficial owner of such Registrable Securities, the beneficial owner of Registrable Securities may, at its election, be treated as the Holder of such Registrable Securities for purposes of any request or other action by any Holder or Holders of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any Holder or Holders of Registrable Securities contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. In no event will a Holder be required to exercise the Warrant as a condition to the registration of such Warrant or Registrable Securities thereunder. 29 11.15 Fiduciary Duties. The Company acknowledges and agrees that, for so long as any Warrant is outstanding and regardless of whether the Holder has exercised any portion of this its Warrant, (a) the officers and directors of the Company will owe the same duties (fiduciary and otherwise) to the Holder as are owed to a stockholder of the Company and (b) the Holder will be entitled to all rights and remedies with respect to such duties or that are otherwise available to a stockholder of the Company under the Delaware General Corporation Law, as amended from time to time. 11.16 Legend. The Company and the Shareholder acknowledge and agree that for so long as this Agreement is in effect, all shares of Capital Stock of the Company will be subject to this Agreement and will bear a legend to such effect. The aforementioned legend shall be in the form set forth in Section 2.10 of the Warrant Agreement (or shall be in a substantially equivalent form). 11.17 Interest Laws. Notwithstanding any provision to the contrary contained in this Agreement or the Warrant Agreement, the Company shall not be required to pay, and Purchaser shall not be permitted to contract for, take, reserve, charge or receive, any compensation which constitutes interest under applicable law in excess of the maximum amount of interest permitted by law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in the Warrant Agreement or otherwise contracted for, taken, reserved, charged or received, then in such event: (a) the provisions of this Section 11.17 shall govern and control; (b) the Company shall not be obligated to pay any Excess Interest; (c) any Excess Interest that Purchaser may have contracted for, taken, reserved, charged or received hereunder shall be, at Purchaser's option, (i) applied as a credit against the outstanding principal balance of any Put Note or accrued and unpaid interest (not to exceed the maximum amount permitted by law), (ii) refunded to the payor thereof, or (iii) any combination of the foregoing; (d) the interest provided for shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Agreement and the Warrant Agreement shall be deemed to have been, and shall be, reformed and modified to reflect such reduction; and (e) the Company shall have no action against Purchaser for any damages arising due to any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Put Note is calculated at the Maximum Rate rather than the applicable rate specified under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Put Note shall remain at the Maximum Rate until Purchaser shall have received the amount of interest which Purchaser would have received during such period on such Put Note had the applicable rate of interest not been limited to the Maximum Rate during such period. All sums paid or agreed to be paid hereunder or under the Warrant Agreement for the use, forbearance or detention of sums due shall, to the extent permitted by applicable law, be amortized, pro-rated, allocated and spread throughout the full term of any Put Note until payment in full so that the rate or amounts of interest on account of any Put Note does not exceed the Maximum Rate. The terms of this Section 11.17 shall be deemed incorporated into the Warrant Agreement and any other document or instrument between the Company and any Purchaser or directed to the Company by any Purchaser, whether or not specific reference to this Section 11.17 is made. 30 11.18 Confidentiality. Each Holder agrees to keep confidential any information delivered by the Company to such Holder under this Agreement that the Company clearly indicates in writing to be confidential information, upon notice to the Company where practicable; provided, however, that nothing in this Section 11.18 will prevent such Holder from disclosing such information (a) to any Affiliate of such Holder or any actual or potential purchaser, participant, assignee, or transferee of such Holder's rights or obligations hereunder that agrees to be bound by the terms of this Section 11.18, (b) upon order of any court or administrative agency, (c) upon the request or demand of any regulatory agency or authority having jurisdiction over such Holder, (d) that is in the public domain, (e) that has been obtained from any Person that is not a party to this Agreement or an Affiliate of any such party without breach by such Person of a confidentiality obligation known to such Holder, (f) in connection with the exercise of any remedy under this Agreement, (g) to the certified public accountants for such Holder, or (h) to any governmental, quasi-governmental or industry regulator having authority over such Holder. The Company agrees that such Holder will be presumed to have met its obligations under this Section 11.18 to the extent that it exercises the same degree of care with respect to information provided by the Company as it exercises with respect to its own information of similar character. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 31 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. COMPANY: PRECISE HOLDINGS, INC. By: /s/ William L. Remley ------------------------------------ William L. Remley, President SHAREHOLDER: SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION By: /s/ William L. Remley ------------------------------------ William L. Remley, President HAMILTON HOLDINGS LTD. CORPORATION By: /s/ William Remley ------------------------------------ Name: William Remley Title: President DELAWARE STATE EMPLOYEES' RETIREMENT FUND By: Pecks Management Partners, Ltd. Its Investment Advisor By: /s/ Robert J. Cresci -------------------------------- Robert J. Cresci Managing Director c/o Pecks Management Partners Ltd. One Rockefeller Plaza New York, New York 10020 Attention: Robert J. Cresci Fax: (212)332-1334 DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC. By: Pecks Management Partners, Ltd., Its Investment Advisor By: /s/ Robert J. Cresci -------------------------------- Robert J. Cresci Managing Director c/o Pecks Management Partners Ltd. One Rockefeller Plaza New York, New York 10020 Attention: Robert J. Cresci Fax: (212)332-1334 PURCHASER: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ Sandeep Alva ------------------------------------ Sandeep Alva, Senior Investment Officer John Hancock Tower 200 Clarendon Street Boston, Massachusetts 02117 Attn: Mr. Sandeep Alva Fax: (617)572-1606 RICE PARTNERS II, L.P. By: Rice Capital Group IV, L.P., its general partner By: RMC Fund Management, L.P., its general partner By: Rice Mezzanine Corporation, its general partner By: /s/ James P. Wilson ------------------------------ James P. Wilson Managing Director 5847 San Felipe, Suite 4350 Houston, Texas 77057 Attn: James P. Wilson Fax: (713)783-9750 EX-10.8 24 FIRST AMENDMENT TO SHAREHOLDER AGREEMENT FIRST AMENDMENT TO SHAREHOLDER AGREEMENT This First Amendment to Shareholder Agreement (this "Amendment"), dated as of June 13, 1997, is entered into by and among PRECISE HOLDING CORPORATION, a Delaware corporation (the "Company"), and SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION, a Delaware corporation ("Sunderland"), HAMILTON HOLDINGS LTD. CORPORATION, a Texas corporation ("Hamilton"), DELAWARE STATE EMPLOYEES' RETIREMENT FUND, a Delaware corporation ("Delaware"), in its capacity as a shareholder, DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC., a Delaware corporation ("Zeneca"), in its capacity as a shareholder, and DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC., a Delaware corporation ("ICI"), in its capacity as a shareholder (individually and collectively, the "Shareholder"), and RICE PARTNERS II, L.P., a Delaware limited partnership ("Rice"), JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts mutual life insurance company ("John Hancock"), DELAWARE, in its capacity as a warrantholder, ZENECA, in its capacity as a warrantholder, and ICI, in its capacity as a warrantholder (individually and collectively, the "Purchaser") (Delaware, Zeneca and ICI are collectively referred to herein as "Pecks"). RECITALS A. The Company, the Shareholder and the Purchaser have entered into that certain Shareholder Agreement dated as of March 29, 1996 (the "Shareholder Agreement"). B. The Company owns beneficially and of record all of the issued and outstanding common stock of Precise Technology, Inc., a Delaware corporation ("Precise"). C. Precise desires to issue up to $75,000,000 of 11 1/8% Senior Subordinated Notes due 2007 on the terms described in that certain Offering Memorandum dated June 10, 1997 furnished by the Company to Rice, John Hancock and Pecks (the "Public Notes"). D. The Company, the Shareholder and the Purchaser desire to amend the Shareholder Agreement to allow and provide for the issuance of the Public Notes and to allow and provide for certain other matters, all as hereinafter set forth. AGREEMENT NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. DEFINITIONS. All capitalized terms used but not otherwise defined in this Amendment shall have the meanings ascribed to them in the Shareholder Agreement. 1 2. AMENDMENTS. The Shareholder Agreement is hereby amended as follows: 2.1 Amendment to Article I; Addition of Certain Definitions. Article I of the Shareholder Agreement is hereby amended by adding thereto in alphabetical order the following definitions: "Indenture. The Indenture, to be dated as of June 13, 1997, between Precise and Marine Midland Bank, as trustee, as in effect on June 13, 1997." "Public Notes. The 11 1/8% Senior Subordinated Notes due 2007 issued by Precise pursuant to the terms of the Indenture." "Senior Loan Agreement. The Credit Agreement, dated as of June 13, 1997, by and among the Company, Precise, certain Subsidiaries of Precise, Fleet National Bank, as Agent, Issuing Bank and as a lender, and each of the other financial institutions a party thereto, as the same may be modified, amended, waived, supplemented or otherwise changed from time to time, and all documents and instruments delivered pursuant thereto in connection with the loans and advances made thereunder." 2.2 Amendment to Article I; Deletion of Certain Definitions. Article I of the Shareholder Agreement is hereby amended by deleting therefrom the definition for "Senior Subordination Agreement". 2.3 Amendment to Article I; Amendment of Certain Definitions. Article I of the Shareholder Agreement is hereby amended by deleting therefrom the definitions for "Senior Lender" and "Senior Loan Documents" and substituting the following in lieu thereof: "Senior Lender. Fleet National Bank, a national banking association, and any other financial institution a party to the Senior Loan Agreement, and their respective successors and assigns." "Senior Loan Documents. The Senior Loan Agreement and the agreements, documents and instruments executed in connection therewith or contemplated thereby, and all amendments, modifications, waivers, renewals, extensions, substitutions, increases or replacements thereof." 2.4 Amendment to Section 4.04. Section 4.04 of the Shareholder Agreement is hereby deleted in its entirety and the following substituted in lieu thereof: "4.04. Certain Remedies. In the event that (i) the Company defaults in its obligation to purchase all or any portion of the Put Shares in cash upon exercise of the Put Option, (ii) any Holder exercises the Put Option at a time when the Put Price is not permitted to be paid in cash to such Holder pursuant to applicable law, (iii) any Holder exercises the Put Option at a time when the Senior Loan Documents or the Indenture prohibit Precise from paying a dividend to the Company in order to fund the payment of 2 the Put Price in cash, and the Company fails to obtain a waiver of such default from the Senior Lender (with respect to the occurrence of a default under the Senior Loan Documents) or the holders of the Public Notes (with respect to the occurrence of a default under the Indenture), as the case may be, or (iv) any Holder exercises the Put Option at a time when payment of all or any portion of the Put Price in cash would, after giving effect to such payment, result in Precise's available cash plus availability under the Senior Loan Documents being less than $5,000,000 in the aggregate, then, in any such event, the Company will (a) pay such portion of the Put Price in cash as is not prohibited by clauses (i), (ii), (iii) or (iv) above, (b) upon the request of any Holder and to the extent any portion of the Put Price is not paid in cash under this Section 4.04, execute and deliver to such Holder a promissory note (a "Put Note") in form and substance satisfactory to such Holder evidencing such remaining Put Price, and (c) not declare or make any dividends or distributions of its cash or redeem, retire, purchase, or otherwise acquire, directly or indirectly, any of its Capital Stock or capital stock or securities of any Affiliate of the Company, or any securities convertible or exchangeable into Capital Stock or capital stock or securities of any Affiliate of the Company until the Put Price has been paid in full in cash. Any Put Note issued pursuant to the terms and conditions of this Section 4.04 will (a) be substantially in the form of Exhibit A attached hereto, (b) mature on April 1, 2006 (unless sooner accelerated pursuant to the terms of the Put Note) and (c) bear interest at the following rates per annum: (i) 14% per annum for the twelve month period immediately following the date of issuance of such promissory note, (ii) 16% per annum for the next succeeding twelve month period and (iii) 18% per annum thereafter. In addition to the right to request the issuance of a Put Note, any Holder may, upon the failure of the Company to pay any portion of the Put Price not prohibited by clauses (ii), (iii) or (iv) above, exercise all rights or remedies available to such Holder (whether at law or in equity) against the Company, and, in addition thereto, such Holder shall be entitled to liquidated damages in the amount specified in Section 11.02 of this Agreement." 2.5. Amendment to Section 11.06. Section 11.06 of the Shareholder Agreement is hereby amended by deleting therefrom the notice addresses for the Company and the Shareholder and substituting the following in lieu thereof: "If to the Company, at: Precise Holding Corporation c/o Mentmore Holdings Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 Attn: William L. Remley FAX: (212)391-1393 with courtesy copies to: Michael D. Schenker c/o Mentmore Holdings Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 FAX: (212)382-1559 3 Kelley, McCann & Livingstone 200 Public Square, 35th Floor BP America Building Cleveland, Ohio 44114-2302 Attn: Bruce L. Waterhouse FAX: (216)241-3707 If to the Shareholder, at: Sunderland Industrial Holdings Corporation Hamilton Holdings Ltd. Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 Attn: William L. Remley Fax: (212)391-1393 Delaware State Employees' Retirement Fund Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc. Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. c/o Pecks Management Partners Ltd. One Rockefeller Plaza New York, New York 10020 Attn: Robert J. Cresci Fax: (212)332-1334 with courtesy copies to: Michael D. Schenker c/o Mentmore Holdings Corporation 1430 Broadway, 13th Floor New York, New York 10018-3308 Fax: (212)391-1393 Kelley, McCann & Livingstone 200 Public Square, 35th Floor BP America Building Cleveland, Ohio 44114-2302 Attn: Bruce L. Waterhouse Fax: (216)241-3707 4 Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022-4677 Attn: William J. Grant, Jr. Fax: (212)821-8211" 3. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent, unless specifically waived in writing by the Purchaser: 3.1 Each Purchaser shall have received on its behalf: (a) this Amendment, duly executed by the Company; and (b) such additional documents, instruments and information as such Purchaser or its legal counsel may request. 3.2 No default or event of default shall have occurred and be continuing under either the Warrant Agreement or the Shareholder Agreement, unless such default or event of default has been specifically waived in writing by Purchaser. 3.3 All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to each Purchaser and their respective legal counsel. 3.4 The Public Notes shall have been issued on the terms described in the Offering Memorandum dated June 10, 1997 furnished by the Company to Purchaser. 3.5 The Senior Subordinated Notes (as defined in the Note Agreement), together with all accrued interest and any applicable Prepayment Fee (as defined in the Note Agreement), shall have been paid in full utilizing a portion of the proceeds of the Public Notes. 3.6 The Pecks Preferred Stock, together with all accrued and unpaid dividends thereon, shall have been redeemed and/or paid utilizing a portion of the proceeds of the Public Notes. 4. RATIFICATIONS, REPRESENTATIONS AND WARRANTIES. 4.1. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Shareholder Agreement (including, without limitation, all representations, warranties and covenants contained therein) and all other agreements, instruments and documents related thereto, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Shareholder Agreement and all other agreements, instruments and documents related thereto are ratified and confirmed and shall 5 continue in full force and effect. The Company and Purchaser agree that the Shareholder Agreement and all other agreements, instruments and documents related thereto, in each case as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. 4.2. The Company hereby represents and warrants to Purchaser that (a) the execution, delivery and performance of this Amendment and any and all other agreements executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of the Company and will not violate the Certificate of Incorporation or Bylaws of the Company; (b) the Company is in material compliance with all covenants and agreements contained in the Shareholder Agreement, as amended hereby, and all other agreements, instruments and documents related thereto; and (c) the Company has not amended its Certificate of Incorporation or its Bylaws since March 29, 1996, except for such amendments, if any, as have been delivered to Purchaser on the date hereof. 5. MISCELLANEOUS. 5.1. Reference to Shareholder Agreement. Each of the Shareholder Agreement and all other agreements, certificates and documents related thereto, and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Shareholder Agreement, as amended hereby, are hereby amended so that any reference in the Shareholder Agreement and such agreements, instruments and documents related thereto to the Shareholder Agreement shall mean a reference to the Shareholder Agreement as amended hereby. 5.2. Headings. The headings of the sections and subsections of this Amendment are inserted for convenience only and do not constitute a part of this Amendment. 5.3. Counterparts. This Amendment may be executed in any number of counterparts, which shall collectively constitute one agreement. 5.4. Law Governing. THIS AMENDMENT HAS BEEN EXECUTED, DELIVERED, AND ACCEPTED BY THE PARTIES IN NEW YORK, NEW YORK, WILL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK, AND WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. 5.5. Final Agreement. The Warrant Agreement and the Shareholder Agreement, in each case as amended, constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all previous written, and all previous or 6 contemporaneous oral, negotiations, understandings, arrangements, and agreements. The Shareholder Agreement, as amended hereby, may not be amended or supplemented except by a writing signed by Company and each Holder. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 7 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered as of the date first above written. COMPANY: PRECISE HOLDING CORPORATION By: /s/ William L. Remley --------------------------------------- William L. Remley, President SHAREHOLDER: SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION By: /s/ William L. Remley --------------------------------------- William L. Remley, President HAMILTON HOLDINGS LTD. CORPORATION By: /s/ William L. Remley --------------------------------------- Name: Title: PURCHASER: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ Sandeep Alva --------------------------------------- Sandeep Alva, Senior Investment Officer 8 RICE PARTNERS II, L.P. By: Rice Capital Group IV, L.P., its general partner By: RMC Fund Management, L.P., its general partner By: Rice Mezzanine Corporation, its general partner By: /s/ James P. Wilson ------------------------- James P. Wilson Managing Director DELAWARE STATE EMPLOYEES' RETIREMENT FUND, as a Shareholder and as a Purchaser By: Pecks Management Partners, Ltd., Its Investment Advisor By: /s/ Robert J. Cresci --------------------------------------- Robert J. Cresci Managing Director 9 DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC., as a Shareholder and as a Purchaser By: Pecks Management Partners, Ltd., Its Investment Advisor By: /s/ Robert J. Cresci --------------------------------------- Robert J. Cresci Managing Director DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC., as a Shareholder and as a Purchaser By: Pecks Management Partners, Ltd., Its Investment Advisor By: /s/ Robert J. Cresci --------------------------------------- Robert J. Cresci Managing Director 10 EX-10.9 25 TAX ALLOCATION AND INDEMNITY AGREEMENT TAX ALLOCATION AND INDEMNITY AGREEMENT Agreement dated as of June 11, 1997 and retroactively applied to the calendar year ended December 31, 1996 by and among, Sunderland Industrial Holding Corporation, a Delaware corporation ("Parent"), Precise Holding Corp. ("Precise Holding") and Precise Technology, Inc. and its direct and indirect subsidiaries ("Precise Group"). WITNESSETH WHEREAS, the parties hereto are members of an affiliated group (the "Affiliated Group") as defined in section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and WHEREAS, an affiliated group as defined in Code section 1504(a) of which Parent is the common parent has filed consolidated Federal income tax returns for prior taxable years, and the Affiliated Group will be required to file a consolidated Federal income tax return for its taxable year ending December 31, 1996 and for subsequent taxable years; and WHEREAS, it is the intent of the parties hereto that an agreement be entered into (i) to allocate the consolidated Federal income tax liability of the Affiliated Group between the Parent, Precise Holding and the Precise Group pursuant to a method specified in regulations of the Treasury Department that would impose on Parent, Precise Holding and Precise Group, for the period beginning January 1, 1996 through December 31, 1996 and for subsequent periods, liability for an amount that approximates the liability that Parent, Precise Holding and Precise Group each would incur if they filed Federal income tax returns as separate affiliated groups; and (ii) to provide that Parent, Precise Holding and Precise Group each shall bear its appropriate portion of the liability of the Affiliated Group for consolidated Federal income tax in respect of prior periods. NOW THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto agree as follows: 1. Filing of Consolidated Returns. A consolidated Federal income tax return shall be filed by Parent for the taxable year ending December 31, 1996, and for each subsequent taxable period in respect of which this Agreement is in effect and for which the Affiliated Group is required or permitted to file a consolidated Federal income tax return. 2. Historical and Future Taxable Periods. For the taxable year of the Affiliated Group ending December 31, 1996 and for each taxable period thereafter, the Affiliated Group shall be divided into three separate groups, one consisting of Parent, one consisting of Precise Holding, and the third and final group consisting of Precise Group. The consolidated Federal income tax liability of the Affiliated Group shall be allocated among the three groups in accordance with the method set forth in Treasury regulation sections 1.1552-1(a)(2) and 1.1502-33(d)(3) (using a fixed percentage of 100%) by considering each group as a separate affiliated group except that (i) modifications to the separate taxable income will be made in accordance with Treasury regulation section 1.1552- l(a)(2)(ii)(a) through (i) in the same manner as if all corporations were members of a single affiliated group, and (ii) carryforwards and carrybacks of losses and credits shall be taken into account, and to the extent of any reduction of tax liability of any separate group member to which the losses or credits did not arise, the amount of tax credit utilized will be remitted to the separate group member to which the losses or credits were generated. The corporate surtax exemption shall be allocated to Parent. Any liability of the Affiliated Group for alternative minimum tax, environmental tax or any other Federal income tax imposed on the Affiliated Group on a consolidated basis by any section of the Code other than Code section 11 shall be allocated in accordance with any reasonable method that is consistent with the principles of this Agreement and the provisions of any governing Treasury regulations or other administrative pronouncements of the Internal Revenue Service. In any event, no individual party to this tax allocation agreement shall pay more income tax in any period of one or more taxable years than it would have paid for the same period if it had filed a separate Federal income tax return, and any taxes not paid by reason of this limitation shall be paid by Parent. 3. Payments. Precise Holding and the Precise Group shall pay to Parent installments, of estimated tax, computed pursuant to the principles set forth in section 2 above, no later than ten days after the due dates for payments of estimated tax by the Affiliated Group. Any payments of estimated tax by Precise Holding or Precise Group to Parent shall be taken into account in determining the payment due from Precise Holding or Precise Group pursuant to section 2, and any overpayment of estimated tax shall be refunded to Precise Holding or Precise Group. A refund or payment of tax, calculated on the basis of the amount of tax payable for the taxable year as calculated by Parent as of the due date (without regard to extensions) for the Federal income tax return of the Affiliated Group, shall be paid within ten days of that due date, and any adjustment to the amount of refund or payment of tax, calculated on the basis of the amount of tax payable for that taxable year as shown on the Federal income tax return of the Affiliated Group as of the due date (with regard to extensions), shall be paid within ten days of that due date. 4. Adjustments to Tax Liability. If the consolidated Federal income tax liability of the Affiliated Group is adjusted for any taxable period, whether by means of an amended return or claim for refund or after an audit by the Internal Revenue Service, the Federal income tax liability of Precise Holding or Precise Group pursuant to section 2 or section 4 of this Agreement shall be recomputed, if necessary, to give effect to those adjustments as if they had been part of the original computation pursuant to section 2 or section 4. The obligation to make any payment of additional Federal income tax or the right to receive any refund of Federal income tax shall be allocated between Parent, Precise Holding and Precise Group accordingly. Any additional tax that Precise Holding or Precise Group is obligated to pay shall be paid to Parent, and any refund of tax to which Precise Holding or Precise Group is entitled to receive shall be paid by Parent, 2 within ten days of, respectively, the date Precise Holding or Precise Group receives notice from Parent or the date Parent receives the refund from the Treasury Department. 5. Appointment of Parent as Agent. Parent shall prepare and file the consolidated Federal income tax returns of the Affiliated Group and any other returns, documents or statements required to be filed with the Internal Revenue Service. In its sole discretion, Parent shall have the right in connection with any of those returns, documents or statements to determine (i) the manner in which the return, document or statement shall be prepared and filed, including, without limitation, the manner in which any item of income, gain, loss, deduction, credit or any other item shall be reported, (ii) whether any extension shall be requested and (iii) the elections that will be made by the Affiliated Group or any members thereof. Each member of the Affiliated Group shall execute and file those consents, elections, appointments, powers of attorney and other documents that Parent determines may be necessary or appropriate for the proper filing of those returns, documents or statements. Each member of the Affiliated Group shall provide Parent or any other member of the Affiliated Group any data necessary for the proper and timely filing of returns, documents or statements and otherwise shall cooperate as necessary to carry out the purposes of this Agreement. 6. New Members. If during any taxable period Parent or any other members of the Affiliated Group acquires or organizes another corporation that is required to be included in the consolidated Federal income tax return of the Affiliated Group, that corporation shall join in and be bound by this Agreement. 7. Indemnification. a. General Principles. It is the intent of this Agreement that Parent, Precise Holding and Precise Group each be liable for an amount in respect of Federal income tax of the Affiliated Group as that amount is determined pursuant to this Agreement and that Parent, Precise Holding and Precise Group each receive its respective share, as so allocated, of any reduction in Federal income tax liability of the Affiliated Group. b. Indemnification. The Parent shall be responsible for, and shall protect, defend, indemnify and hold harmless Precise Holding and Precise Group from, any amount in respect of Federal income tax allocable to Parent pursuant to this Agreement. Precise Holding and Precise Group, jointly and severally, shall be responsible for, and shall protect, defend, indemnify and hold harmless the Parent from, any amount in respect of Federal income tax allocable to Precise Holding or Precise Group pursuant to this Agreement. 8. Retention of Books and Records. No member of the Affiliated Group shall destroy or permit the destruction of any books, records or files pertaining to any other member of the Affiliated Group without first having offered in writing to deliver those books, records and files to the other member, and the other member shall have the 3 right upon prior notice to inspect and to copy the same at any time during business hours for any proper purpose 9. Other Income and Franchise Taxes. The liability of Parent, Precise Holding and Precise Group in respect of state, local and foreign income and franchise taxes that are computed pursuant to provisions applicable to affiliated, combined, unitary or other groups shall be determined and paid in a manner consistent with the provisions of this Agreement used to determine the liability of Parent, Precise Holding, and Precise Group in respect of Federal income tax. Calculation of the separate liability of Parent, Precise Holding, and Precise Group for these other taxes shall conform to the appropriate state, local and foreign income and franchise tax provisions governing affiliated, combined, unitary or other groups. Notwithstanding the foregoing, the credit against Florida corporate income tax for Florida intangible tax shall not be computed on a separate company basis to the extent a computation on that basis would disentitle any member of the Affiliated Group to a credit that is available to that member by reason of joining in the filing of a consolidated return of Florida corporate income tax with any member of the Affiliated Group. 10. Entire Understanding. This Agreement constitutes the entire agreement of the parties concerning the subject matter hereof and, effective as of the date hereof and for the taxable periods to which this Agreement applies, supersedes all other agreements. This Agreement shall allocate the tax liabilities of the Affiliated Group for the period January 1, 1996 through December 31, 1996, and all subsequent taxable years unless Parent, Precise Holding and Precise Group mutually agree to terminate this Agreement. Notwithstanding its termination, this Agreement shall continue in effect with respect to any payment or refunds due for all taxable periods prior to termination. 11. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of any successor, whether by statutory merger, acquisition of assets or otherwise, to any of the parties hereto, to the same extent as if the successor had been an original party to the Agreement. 12. Expenses. Parent, Precise Holding and Precise Group each shall bear any and all expenses that arise from its obligations under this Agreement. 13. Notices. All notices and other communications hereunder shall be in writing and shall be delivered by hand or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and shall be deemed given on the date on which the notice is received. 4 If to Parent: 1430 Broadway, 13th Floor New York, New York 10018 If to Precise Holding: 1430 Broadway, 13th Floor New York, New York 10018 If to Precise Group: 501 Mosside Boulevard North Versailles, Pennsylvania 15137-2553 14. Resolution of Dispute. Any dispute between the parties with respect to this Agreement shall be resolved by a public accounting firm or a law firm reasonably satisfactory to Parent, Precise Holding and Precise Group or pursuant to an alternative dispute arrangement agreed to by the parties. 15. Legal Enforceability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective as to that jurisdiction to the extent of that prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable that provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to any party hereto, each party hereto acknowledges that damages would be an inadequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder shall be specifically enforceable. 16. Controlling Law. This Agreement shall be governed by the laws of the State of New York. 5 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above. Sunderland Industrial Holding Corporation by /s/ William L. Remley ------------------------------------------- its President Precise Holding Corporation by /s/ William L. Remley ------------------------------------------- its President Precise Technology, Inc. by /s/ John R. Weeks ------------------------------------------- its President Precise Technology of Illinois, Inc. by /s/ John R. Weeks ------------------------------------------- its President Precise Technology of Delaware, Inc. by /s/ John R. Weeks ------------------------------------------- its President Precise TMP, Inc. by /s/ John R. Weeks ------------------------------------------- its President 6 Precise Polestar, Inc. by /s/ John R. Weeks ------------------------------------------- its President Massie Tool, Mold & Die, Inc. by /s/ John R. Weeks ------------------------------------------- its President Darlene B. Deffenbaugh 9/12/97 - -------------------------------------------- [Notarial Seal] Darlene B. Deffenbaugh, Notary Public North Versailles Twp., Allegheny County My Commission Expires Sept. 25, 2000 Member, Pennsylvania Association of Notaries - -------------------------------------------- 7 EX-10.10 26 MANAGEMENT AGREEMENT MANAGEMENT AGREEMENT (Amended and Restated) THIS MANAGEMENT AGREEMENT (this "Agreement"), originally made and entered into the 15th day of March, 1996, amended and restated as of June 13, 1997, but effective for all purposes and in all respects as of the 1st day of April, 1996 (the "Effective Date"), by and between PRECISE TECHNOLOGY, INC., a Delaware corporation ("Precise"), and MENTMORE HOLDINGS CORP., a Delaware corporation ("Mentmore"). Recitals A. WHEREAS, Precise desires to engage Mentmore to perform management advisory and consulting services under the terms and conditions set forth in this Agreement; and B. WHEREAS, Mentmore desires to be engaged by Precise to perform management advisory and consulting services under the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Engagement. Precise hereby engages Mentmore to provide the management advisory and consulting services described in paragraph 3 hereof, and Mentmore hereby accepts such engagement. 2. Term. The term of this Agreement shall commence as of the Effective Date and shall continue until March 31, 2006, which term shall be automatically extended for an additional year as of April 1 of each year, commencing April 1, 1997, unless either party shall have previously notified the other in writing that the term of this Agreement shall not be further extended (the "Term"), it being the intent of the parties that this Agreement shall have a rolling "evergreen" term of ten (10) years. To illustrate, if neither party has notified the other in writing before April 1, 1997 that the term of this Agreement shall not be further extended, as of such date the term of this Agreement shall continue until March 31, 2007. As used herein, "term of this Agreement" shall include all extensions. Upon the expiration of the final term of this Agreement, all unpaid amounts due and owing to Mentmore shall be paid in full by Precise. 3. Termination. (a) Notwithstanding the terms of Section 2 above, Mentmore may terminate this Agreement upon ninety (90) days' prior written notice to Precise. (b) Notwithstanding the terms of Section 2 above, Precise may terminate this Agreement "for cause" upon the occurrence of: (i) the commission of a felony, 1 embezzlement, or any act of material dishonesty by any individual providing services to Precise hereunder on behalf of Mentmore which causes material harm to Precise, or (ii) a material failure of Mentmore to provide the services contemplated hereunder and the failure of Mentmore to cure the same within ninety (90) days following the date of receipt of written notice thereof setting forth in detail the nature of such failure. (c) In the event of the termination of this Agreement by Precise "for cause," Mentmore shall receive payment in full of all amounts due and payable hereunder through the effective date of such termination and during the period of any judicial appeal of such termination, and in no event shall the effective date of termination be earlier than the date of expiration of the ninety (90) day cure period specified in Section 3 (b) above. In the event of any termination of this Agreement, amounts payable pursuant to Articles 5 and 6 below shall be prorated based upon the ratio of the number of days during the year of the Term during which Mentmore shall be deemed hereunder to have provided such services to two hundred fifty (250). All such amounts shall be paid by Precise to Mentmore in cash or its equivalent within a reasonable period of time, not to exceed thirty (30) days, following such termination. (d) In the event of the termination of this Agreement, Mentmore will cooperate and assist Precise in order to effectuate a smooth and orderly transition in the management of Precise. 4. Duties. During the Term, Mentmore shall provide to Precise and its subsidiaries such management advisory and consulting services with respect to Precise's business and with respect to such other matters as Precise may reasonably request from time to time, including, but not limited to, strategic planning, financial planning, business acquisition and general business development services. Such services shall be provided through the use of Mentmore employees who Mentmore reasonably deems to be qualified to provide such services. The manner in which Mentmore shall perform such services shall be determined by Mentmore in its sole discretion. 5. Management Fees. As compensation for Mentmore's performance of its duties hereunder, Mentmore shall earn management fees (the "Management Fees") from Precise in the annual amount of $300,000 for each year during the Term. Precise shall pay the Management Fees to Mentmore and such fees shall be due monthly in arrears, commencing with the month ended June 30, 1997, in the amount of Twenty Five Thousand Dollars ($25,000.00) for each month, or portion thereof, during the Term. If Precise is unable to pay any Management Fees earned by Mentmore hereunder for any reason, then such Management Fees shall nevertheless be accrued. 6. Expenses. Precise shall promptly reimburse Mentmore for all reasonable and customary out-of-pocket business expenses incurred by Mentmore at any time during the Term in connection with the performance of its duties hereunder, provided that: 2 (a) Each such expenditure is incurred by Mentmore in accordance with the policies and procedures reasonably established by Precise's board of directors from time to time; (b) Each such expenditure is of a nature qualifying it as a proper deduction on Precise's federal, state and local income tax returns, as applicable; and (c) Mentmore furnishes to Precise such records and documentary evidence as may be required by applicable statutes and regulations for the substantiation of Precise's deduction of each such expenditure on such income tax returns. 7. Indemnification. Each of Mentmore and Precise agrees to indemnify, defend and hold the other harmless from and against any and all losses, liabilities, damages, costs, fines, expenses of counsel and agents, including, but not limited to, any costs involved in the course of enforcing this paragraph 7 (hereinafter referred to in this paragraph 7 as "Losses"), which may be sustained, suffered or incurred by the indemnified party as a result of, arising from or in connection with any material failure by the indemnifying party to comply with or perform any term or covenant of this Agreement. In furtherance of and not in limitation of the foregoing, Precise agrees to indemnify, defend and hold Mentmore harmless from and against any and all Losses which may be sustained, suffered or incurred by Mentmore as a result of, arising from or in connection with Mentmore's performance of its obligations under this Agreement. 8. Arbitration. If any dispute arises between the parties with respect to the subject matter of this Agreement, and if such dispute is not resolved within fourteen (14) days after it arises, then either party may submit the dispute to the New York City office of the American Arbitration Association (the "AAA") for resolution by one (1) arbitrator in accordance with the AAA's commercial arbitration rules then in effect. The arbitrator may award any relief which he or she deems proper under the circumstances, without regard to the relief which would otherwise be available to a prevailing party in a court of law or equity. The decision of the arbitrator, unless obtained by fraud, shall be final and binding on all parties, enforceable in any court of competent jurisdiction. All filing fees. arbitrator's fees, court reporter's fees and transcript costs shall be allocated between the parties as determined by the arbitrator. 9. Governing Law. This Agreement shall be governed in all respects by the law of the State of New York without regard to its principles of conflicts of laws. 10. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 11. Entire Agreement; No Waiver. This Agreement and the other documents described herein constitute the full and entire understanding and agreement among the parties with regard to the subject matter contained herein and supersede all prior written or oral agreements, understandings, representations and warranties made with respect thereto. No 3 amendment, supplement or modification of this Agreement, nor any waiver of any provision hereof, shall be effective unless the same is in writing and executed by the party against whom enforcement of such amendment, supplement or modification is sought. 12. Miscellaneous. Any Management Fees, if not paid when due hereunder, shall thereafter bear interest at the lesser of: (a) the rate of twelve percent (12%) per annum, or (b) the maximum rate allowed by law until such time as such Management Fees may be paid. 13. Notices. Any notice or other communication required or permitted hereunder shall be in writing and personally delivered, mailed by registered or certified mail (return receipt requested and postage prepaid), sent by telegram (with messenger service specified), or sent by prepaid overnight courier service, and addressed to the relevant party at its current business address, or at such other address as such party may, by written notice, designate as its address for purposes of notice hereunder. If mailed, notice shall be deemed to be given five (5) days after being sent, or if sent by personal delivery or by prepaid courier or telegraph service, notice shall be deemed to be given when delivered. 14. Severability. If any term, covenant or condition of this Agreement, or the application of such term, covenant or condition to any party or circumstance shall be found by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, covenant, or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition shall be valid and enforced to the fullest extent permitted by law. Upon determination that any such term is invalid, illegal or unenforceable, the parties hereto shall amend this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner. 15. Interpretation. No provision of this Agreement or any agreement ancillary hereto shall be interpreted or construed against any party because that party or its legal representative drafted that provision. The titles of the paragraphs of this Agreement are for convenience of reference only and are not intended to be considered in construing this Agreement. Any pronoun used in this Agreement shall be deemed to include the singular and plural and the masculine, feminine and neuter gender, as the case may be or as the context otherwise requires. The words "herein," "hereof," and "hereunder" shall be deemed to refer to this entire Agreement, except as the context otherwise requires. 16. No Waiver. No waiver by any party hereto of any one or more defaults by the other party in the performance of any of the provisions of this Agreement shall operate or be construed as a waiver of any future default or defaults, whether of a like or different nature. No failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or 4 remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any party hereto at law, in equity or otherwise. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed under seal as of the date first set forth above. WITNESS/ATTEST: PRECISE TECHNOLOGY, INC., a Delaware corporation /s/ Darlene B. Deffenbaugh By: /s/ John Weeks - ------------------------------ ---------------------------------- John Weeks, President WITNESS/ATTEST: MENTMORE HOLDINGS CORPORATION, a Delaware corporation /s/ [ILLEGIBLE] By: /s/ William L. Remley - ------------------------------ ---------------------------------- William L. Remley, President 5 9/12/97 -------------------------------------------- Notarial Seal Darlene B. Deffenbaugh, Notary Public North Versailles Twp., Allegheny County My Commission Expires Sept. 25, 2000 -------------------------------------------- Member, Pennsylvania Association of Notaries EX-10.11 27 1997 KEY EMPLOYEE NONQUALIFIED STOCK OPTION PLAN SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION 1997 Key Employee Nonqualified Stock Option Plan This is the 1997 Key Employee Nonqualified Stock Option Plan (the "Plan") of SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION, a Delaware corporation (the "Company"), effective as of April 24, 1997. 1. Purpose of Plan. The purpose of the Plan is to advance the interests of the Company and its shareholders by (i) providing an incentive to certain key employees of the Company and its subsidiaries, (ii) encouraging stock ownership by certain key employees of the Company and its subsidiaries so that such key employees may acquire or increase their proprietary interest in the success of the Company and its subsidiaries, and (iii) encouraging certain key employees to remain in the employ of the Company and its subsidiaries. 2. Shares Under the Plan. The shares of stock subject to any option granted pursuant to the Plan shall be shares of common stock, par value $.01 per share, of the Company ("Stock"). The aggregate number of shares of Stock which may be subject to, and issued under, options granted pursuant to the Plan shall not exceed 15% of issued and outstanding shares; provided, however, that whatever number of shares that remain reserved for issuance pursuant to the Plan at the time of any stock split, stock dividend, or other change in the Company's capitalization shall be appropriately and proportionately adjusted in accordance with paragraph 6(g) hereof to reflect such stock split, stock dividend, or other change in capitalization. Any Stock issued upon exercise of options granted under the Plan may be shares of Stock held by the Company in its treasury. In the event that any outstanding option under the Plan expires, is terminated, or (with the consent of the Optionee) is canceled, those shares of Stock allocable to the unused portion of such option may thereafter be subject to new options granted pursuant to the Plan. 3. Administration. The Plan shall be administered by the Board of Directors of the Company (the "Board"). The Board shall have authority to make all determinations that in the judgment of the Board are necessary or desirable for interpretation of the Plan, including but not limited to the authority to construe and interpret the Plan; to establish, amend or rescind appropriate rules relating to the Plan; to select participants in the Plan; to determine the number of shares of Stock subject to each option, the date on which each option is to be granted and the provisions of each agreement covering the options; and to take any other steps deemed necessary or advisable to administer the Plan. All actions by the Board under the provisions of this Section shall be conclusive for all purposes. 4. Eligible Employees. The persons who shall be eligible to be granted options under the Plan shall be such employees of the Company and its subsidiaries as the Board shall select in the Board's sole discretion ("Optionees"). 5. Effective Date of Plan. The Plan shall be effective upon adoption of the Plan by the Board and the shareholders of the Company as of the April 24, 1997 effective date specified above. Any options granted under the Plan prior to the date of approval by said shareholders shall be void if such approval is not obtained. 6. Terms and Conditions of Options. Each option granted pursuant to the Plan shall be evidenced by a written option agreement (the "Option Agreement") between an Optionee and the Company in such form as the Board shall from time to time approve. The Option Agreement shall contain such terms and conditions as the Board shall deem appropriate, including, but not limited to, the terms and conditions set forth below: (a) Number of Shares. The Option Agreement shall set forth the number of shares of Stock subject to the option or options granted to the Optionee pursuant to the Plan. (b) No Obligation to Exercise. The Option Agreement shall provide that there is no obligation on the Optionee to exercise any option. (c) Option Price. The Option Agreement shall set forth the option price per share of Stock for each option as determined by the Board. (d) Period of Exercise. The Option Agreement shall set forth the period for exercise of each option. (e) Medium and Time of Payment. The Option Agreement shall set forth the method of payment required under each option, as well as the period within which such payment must be made. (f) Exercise of Options. The Option Agreement shall provide for (and may limit or restrict) the date or dates and the conditions on which the options may be exercised. The Option Agreement may provide for exercise of the options in installments on such terms and conditions as the Board may determine. (g) Adjustment. The Option Agreement may contain such provisions as the Board considers appropriate to adjust the number of shares of Stock subject to an option in the event of a stock split, stock dividend, or other change in the Company's capitalization. Such adjustments shall be made by the Board, whose determination in that respect shall be final, binding, and conclusive upon the Company and all Optionees. The grant of an option pursuant to the Plan shall not affect the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital -2- or business structure, or to merge, consolidate, dissolve, liquidate, or sell or transfer all or any part of its business or assets. (h) Put. The Option Agreement may, but shall not be required to, provide for the right of the Optionee to cause the Company to repurchase at a price determined under the Option Agreement all shares of Stock purchased by the Optionee under the Plan at any time after the termination of such Optionee's employment with the Company or its subsidiaries for any reason. (i) Call. The Option Agreement may, but shall not be required to, provide for the Company's right to repurchase at a price determined under the Option Agreement some or all of the shares of Stock purchased by an Optionee under the Plan upon specified events or circumstances. (j) Transferability. The Option Agreement shal1 specify whether or not and to the extent to which each option and the shares of Stock issued pursuant to the exercise of each option shall be transferable. 7. Rights as a Shareholder. An Optionee shall have no rights as a shareholder with respect to any shares of Stock subject to such option until the date of the issuance of a stock certificate to such Optionee for such shares of Stock 8. Modification, Extension and Renewal of Options. Subject to the terms and conditions and within the limitations of the Plan, the Board may modify, extend or renew outstanding options granted under this Plan, or accept the surrender of outstanding options and authorize the granting of new options in substitution therefor. Notwithstanding the foregoing, however, no modification of an option shall, without the consent of the Optionee, alter or impair any rights or obligations under any option theretofore granted to the Optionee under the Plan. 9. Amendment, Suspension, or Termination of Plan. The Board may, with respect to any shares of Stock not subject to options at such time, suspend, terminate, revise or amend the Plan in any respect for any purpose which it may deem advisable; provided, however, that, except as provided in paragraph 6(g) hereof, the Board shall not, without the approval of the shareholders of the Company, increase the aggregate number of shares of Stock subject to the Plan, or change the designation of the class of employees eligible for participation in the Plan. 10. Application of Funds. The proceeds received by the Company from the sale of shares of Stock pursuant to options granted under the Plan shall be used for general corporate purposes. 11. Name of Plan. The Plan shall be known as the Sunderland Industrial Holdings Corporation 1997 Key Employee Nonqualified Stock Option Plan. 12. Unfunded Plan. This Plan shall be unfunded and the Company shall be under no obligation to segregate or reserve any Stock, funds or other assets for purposes relating to this Plan -3- and no Optionee shall have any rights whatsoever in or with respect to any Stock, funds or assets of the Company. 13. Delaware Law to Apply. The place of administration of the Plan shall be conclusively deemed to be within the State of Delaware, and the validity, construction, interpretation, administration, and effect of the Plan and the rights of any person having or claiming to have an interest therein or thereunder shall be governed by and determined exclusively and solely in accordance with the laws of the State of Delaware. SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION By: /s/ William L. Remley ------------------------------------- Title: ------------------------------------- Date: ------------------------------------- -4- EX-10.12 28 NONQUALIFIED STOCK OPTION AGREEMENT Exhibit 10.12 SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION Nonqualified Stock Option Agreement This Nonqualified Stock Option Agreement (the "Agreement") is entered into as of April 24, 1997 ("Grant Date"), between SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION, a Delaware corporation (the "Company"), and JOHN R. WEEKS, an executive employee of the Company's indirect subsidiary, Precise Technology, Inc. (the "Optionee"). 1. Grant of Options. Pursuant to the Company's 1997 Key Employee Nonqualified Stock Option Plan, a copy of which is attached hereto (the "Plan"), and authorization by the Board of Directors of the Company ("Board"), the Company hereby grants to the Optionee (i) an option (the "First Option") to purchase 1,200 shares of the Company's common stock, par value $.01 per share ("Stock"); and (ii) an option (the "Second Option") to purchase 225 shares of Stock, at the prices and on such other terms and conditions as are hereinafter provided. Such options to purchase Stock shall hereinafter be collectively referred to as the "Options." The Options shall not constitute an "incentive stock option" as that term is used in Section 422 of the Internal Revenue Code of 1986, as amended ("Code"). The Optionee agrees that as holder of the Options such Optionee shall have no rights of or as a shareholder or otherwise in respect of any of the shares of Stock as to which the Options shall not have effectively been exercised as herein provided. 2. Option Price. The Options shall be exercisable at a price of $1,500.00 per share of Stock. 3. Exercise Period. A. Except as provided in Paragraph 13, the First Option may be exercised by the Optionee, in whole or in part, prior to the earlier of (i) the termination of the Optionee's employment with the Company or any of its subsidiaries for any reason, or (ii) January 31, 2005, in accordance with the following schedule: 40% commencing on the Grant Date 60% commencing April 1, 1998 80% commencing April 1, 1999 100% commencing April l, 2000 B. Except as provided in Paragraph 13, the Second Option may be exercised by the Optionee, in whole or in part, prior to the earlier of (i) the termination of the Optionee's employment with the Company or any of its subsidiaries for any reason, or (ii) January 31, 2005, as follows: 25% of the Second Option shall become exercisable 90 days after the Board's determination of the "EBITDA" (i.e., earnings before interest, taxes, depreciation and amortization as conclusively determined by the Board in its sole discretion) of the Company for the year ended December 31, 1997 if such EBITDA shall exceed $16.4MM. 25% of the Second Option shall become exercisable 90 days after the Board's determination of the EBITDA of the Company for the year ended December 31, 1998 if such EBITDA shall exceed the "1998 Target." 25% of the Second Option shall become exercisable 90 days after the Board's determination of the EBITDA of the Company for the year ended December 31, 1999 if such EBITDA shall exceed the "1999 Target." 25% of the Second Option shall become exercisable 90 days after the Board's determination of the EBITDA of the Company for the year ended December 31, 2000 if such EBITDA shall exceed the "2000 Target." In each year, if any, in which the EBITDA requirements, as set forth above, shall not have been met, twenty-five percent (25%) of the Second Option shall be immediately canceled and of no further force and effect. The 1998, 1999, and 2000 Targets shall be determined by the Board in its reasonable business discretion on or before April 1 of each respective year. 4. Exercise of the Option. The Options shall be exercised by delivery to the Company of a written statement in the form attached hereto entitled "Nonqualified Stock Option Exercise Form." At the time of exercise of the Options by such delivery, the Optionee shall pay such amount as required under Paragraph 5 herein together with an amount in cash equal to the amount of all applicable withholding taxes (or, in the Board's sole discretion, a withholding authorization acceptable to the Board). Upon receipt of such payment for the Stock being purchased and compliance by the Optionee with the terms and conditions hereunder, the Company shall cause certificates for such Stock to be delivered to the Optionee within ten (10) business days after the Company's receipt of such payment. 5. Payment of Option Price. A. At the time of exercise of the Options, the Optionee shall pay to the Company either: (i) the full Option Price for the Stock being purchased in cash, or, (ii) with the consent of the Company in the sole discretion of the Board, a minimum of ten percent (10%) of the Option Price for the Stock being purchased in cash together with delivery of a promissory note and -2- pledge of the Optionee's Stock in forms acceptable to the Board, in the Board's sole discretion, providing for the payment of the balance of the Option Price. B. Notwithstanding the foregoing, Optionee may elect to exercise the Options, in whole or in part, to the extent the Options are then exercisable, by receiving shares of Stock equal to the value (as herein determined) of the portion of such Options then being exercised after deduction of the exercise price, in which event the Company shall issue to Optionee the number of shares of stock determined by using the following formula: X = Y (A-B) x (100% - C) A where: X = The number of shares of Stock to be issued Paragraph 5. Y = The number of shares of Stock that would otherwise be issued upon such exercise. A = The Fair Market Value (as hereinafter defined) of one share of Stock. B = The exercise price of the Options specified in Paragraph 2. C = Applicable income tax withholding rate. Fair Market Value Defined. As used in this Agreement, "Fair Market Value" shall mean (i) if the Stock is publicly traded, the average closing market price (or if no shares of Stock are traded on any date within such period, the average of the closing bid and asked price on such date) for the twenty business days immediately prior to the date on which such value is to be determined, or (ii) if the Stock is not publicly traded, the fair market value, on the applicable date, of the shares of Stock then being valued as determined in good faith by the Board of Directors. 6. Compliance With Securities Laws. The exercise of the Options and the issuance of Stock pursuant thereto shall be contingent upon either the prior registration of the Stock under the Securities Act of 1933, as amended (the "Securities Act") and such federal and state laws, rules, and regulations as may be applicable or promulgated thereunder, or a determination by the Company that the issuance of such Stock will be a transaction exempt from such registration. The Company anticipates that shares of Stock, when and if issued to the Optionee, will be "restricted securities" as that term is defined in Rule 144 under the Securities Act and, accordingly, such shares of Stock must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from registration is available. The Optionee understands and agrees that the Company is not under any obligation to register shares of Stock or to comply with Regulation A or any other exemption under the Securities Act. As a condition to the grant and/or -3- exercise of the Options, the Optionee agrees to execute one or more undertakings, in the form prescribed by the Board, that the Stock is being acquired for investment only and without any present intention of resale or other distribution, or that the Stock will not be offered for sale or other distribution otherwise and pursuant to such condition or conditions as the Board approves. The Company shall have the right to place upon any certificate or certificates evidencing shares of Stock any such legends as the Board may -3- prescribe, including legends providing that the shares are subject to registration requirements under the Securities Act and state securities laws and that the shares are subject to the terms of this Agreement and the Plan. 7. Non-transferability and Termination of Options. Except as otherwise provided in Paragraph 8, the Options shall not be transferable or assignable and, during the Optionee's lifetime, shall be exercisable solely by the Optionee. Except as otherwise provided in Paragraph 8, the Options shall terminate upon termination of the Optionee's employment with the Company or its subsidiaries for any reason or any attempted sale, transfer or assignment of any such Options, whether voluntarily or involuntarily. A transfer of employment between and among the Company and its subsidiaries shall be considered as continuing employment and shall not be a termination of employment for purposes of this Agreement. In addition, temporary interruptions in employment caused by sickness or other approved leave of absence shall not constitute termination of employment for purposes of this Agreement. 8. Retirement, Disability of Optionee or Death. If the Optionee retires on or after the attainment of age 65, becomes permanently and totally disabled within the meaning of Section 22(e)(3) of the Code or dies while in the employ of the Company or one of its subsidiaries, the Options may be exercised during the time period from the date of the Optionee's retirement, permanent and total disability, or death until the expiration of one year after the date of the Optionee's retirement, permanent and total disability, or death by the Optionee or by the deceased Optionee's personal representative, as applicable, or by any person who acquired the Options by bequest or inheritance as a result of the death of the Optionee, subject to the terms and conditions set forth herein. 9. Call. At any time after a "Call Event" (as hereafter defined) the Company shall have the irrevocable right, but not the obligation, at its sole discretion to repurchase some or all of the Stock Optionee purchased under the Plan and this Agreement. The purchase price in connection with a Call Event defined in paragraphs (1) and (2) below shall be the Fair Market Value per share and the purchase price in connection with a Call Event defined in paragraphs (3) through (8) below shall be seventy-five percent (75%) of the Fair Market Value per share. Such purchase price shall be payable in the discretion of the Board either (i) in cash within ninety (90) days of the date of purchase, or (ii) by the Company's delivery of a promissory note providing for equal annual installments of principal payments over a period of up to five (5) years with interest on the unpaid balance at a rate determined by the Board in its sole discretion; provided, however, that in the event any life insurance on Optionee's life is obtained by the Company pursuant to paragraph l5.c., below, and as a result of Optionee's death, proceeds of such life insurance are paid to the Company, the Company shall use such proceeds (up to the purchase price) as and for a cash payment hereunder, with the balance of the purchase price, if any, payable in the discretion of the -4- Board as specified herein. As used herein, the term "Call Event" shall mean any one or more of the following: (1) The termination of the Optionee's employment with the Company and its subsidiaries for any reason; (2) The proposed or attempted voluntary sale, assignment, transfer, conveyance or other disposition, mortgage, pledge, grant of security interest in or other encumbrance of, any or all shares of Stock by the Optionee; (3) The Optionee making an assignment for the benefit of creditors; (4) The Optionee instituting, or having instituted against him, any bankruptcy, insolvency, reorganization, arrangement, debt adjustment, liquidation or receivership proceedings in which he is alleged to be insolvent or unable to pay his debts as they mature, and the Optionee shall consent thereto or admit in writing the material allegations of the petitions filed in said proceedings, or said proceedings shall remain undismissed after ninety (90) days; (5) The attachment of the Optionee's shares of Stock for any reason and such attachment remains undismissed after ninety (90) days; (6) The rendering of a final judgment against the Optionee in any legal or equitable proceeding which (i) purports to or attempts to sell, assign, transfer, convey or otherwise dispose of, mortgage, pledge, grant a security interest in or otherwise encumber, any or all shares of Stock or (ii) otherwise affects any of the foregoing; (7) The institution of any execution process against the Optionee's shares of Stock; or (8) The existence of any other situation or legal proceeding involving the Optionee such that the Optionee's shares of Stock may be involuntarily sold, transferred, assigned, or otherwise disposed of. In the event the Company undertakes an initial public offering or sells all or substantially all of its stock or assets within the six (6) month period following such purchase, the Company shall pay to the Optionee (a) in the case of a purchase in connection with a Call Event defined in paragraphs (1) or (2), above, the difference between the purchase price and the Fair Market Value of the Stock on the date of such transaction and (b) in the case of a purchase in connection with a Call Event defined in paragraphs (3) through (8) above, seventy-five percent -5- (75%) of the difference between the purchase price and the Fair Market Value of the Stock on the date of such transaction. Notwithstanding the provisions of this Agreement to the contrary, in the event the Optionee proposes to dispose of any or all of his shares of Stock acquired as a result of the Optionee's exercise of the Options (the "Offered Shares"), pursuant to a bona fide offer therefor from a third party (the "Purchase Offer"), the Optionee shall give written notice to the Company (the "Offer Notice"), stating that he has received the Purchase Offer, the terms thereof (the "Purchase Offer Terms"), and the identity of the third party who made the Purchase Offer. The Company shall have the right to purchase the Offered Shares by delivering to the Optionee a written notice of its intention to do so (a "Purchase Notice") within forty-five (45) days of having received the Offer Notice. In such Purchase Notice, the Company shall advise the Optionee as to whether it elects to purchase the shares of Stock on the Purchase Offer Terms or for an amount equal to the Fair Market Value of such shares of Stock and the Optionee shall sell such shares of Stock to the Company for such consideration within two (2) days of the Optionee's receipt of such Purchase Notice, with payment by the Company of such purchase price to be as specified in the first paragraph of this Paragraph 9. 10. Adjustment for Stock Dividend, Stock Split or Capital Contribution. In the event that a stock dividend is hereafter paid on outstanding Stock, or in the event that the number of outstanding shares of Stock is hereafter increased as a result of a stock split, and the Option is then unexercised, the number of shares of Stock subject to the Option shall thereupon be increased by that number of shares of Stock which would have been distributed with respect to the Stock subject to the Option if the Stock subject to the Option had been outstanding at the time of the dividend or stock split and the Option price per share shall be adjusted to reflect such increased number of shares of Stock subject to the Option. If any shareholder of the Company or any other person should make a contribution to the capital of the Company without receiving any securities of the Company in exchange therefor, then, and in such event, the Option price per share shall be increased by an amount which is equal to the amount of such contribution to the capital of the Company divided by the number of issued and outstanding shares of common stock of the Company at the time of such contribution. 11. Additional Adjustments. In the event that there is any change in the number of outstanding shares of Stock (other than issuance of Stock for consideration approved by the Board) for which an adjustment is not provided by Paragraph 10 of this Agreement, and the Option is then unexercised, the Board may, in its sole discretion, require an adjustment in the number or kind of shares of Stock subject to the Option and the option price and such adjustment shall be binding and effective for all purposes hereof. 12. Elimination of Fractional Shares. Any addition or adjustment provided for in Paragraphs 10 and 11 hereof may be limited to the extent necessary to prevent fractions of shares of Stock from becoming available under the Option. -6- 13. Termination Upon Reorganization or Merger. In the event that outstanding shares of Stock are hereafter changed into or exchanged for a different number or kind of shares of stock or securities of another corporation or corporations, whether as a result of a reorganization, recapitalization, reclassification, merger, consolidation or otherwise, or in the event all or substantially all of the Stock or assets of the Company are sold to a third party (any such event being a "Change in Control"), and any portion of the First Option is not yet exercisable, then all of the First Option shall immediately become exercisable and the Company shall give at least ten (10) business days' prior notice of such Change in Control to the Optionee. The Optionee shall have ten (10) business days from the date of receipt of said notice to exercise the First Option. In the event any portion of the First Option is not exercised within the above-referenced ten (10) day period, such portion of the First Option shall automatically be canceled. In the event of a Change in Control, then the Optionee shall have ten (10) business days from receipt of the notice provided above to exercise that portion of the Second Option which is already exercisable and that portion of the Second Option which is not yet exercisable shall automatically be canceled. In the event that any portion of the Second Option so exercisable is not exercised within the above-referenced ten (10) day period, such portion of the Second Option shall also automatically be canceled. Upon cancellation of all of the Options, this Agreement shall terminate. 14. Optionee Bound by the Plan. The Optionee hereby agrees to be bound by all applicable provisions of the Plan. If any of the terms and provisions of this Agreement are inconsistent or in conflict with the terms and provisions of the Plan, the Plan shall supersede and prevail over such inconsistent provisions hereof. The Board shall have authority, subject to the express provisions of the Plan and this Agreement, to establish, amend, and rescind rules and regulations relating to the Plan, and to make all other determinations in the judgment of the Board necessary or desirable for the administration of the Plan. The Board may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in this Agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All actions by the Board under the provisions of this Paragraph 14 shall be conclusive for all purposes. 15. Miscellaneous. a. No Shareholder Rights. The Optionee shall not, by virtue of holding the Option, be entitled to any rights of a shareholder of the Company or any of its subsidiaries. b. Lock-Up. The Optionee agrees that in connection with an initial public offering of the Stock he will, if required by the Board, agree to such restrictions on the resale of his Stock as shall be agreed to by other members of management in connection therewith. c. Life Insurance. The Optionee understands that the Company may, but shall not be required to, obtain a life insurance policy on Optionee's life in order to enable the Company to comply with its obligations under the Agreement and Optionee hereby agrees to cooperate with the Company in obtaining any such insurance including submitting applications and submitting to physical examinations in connection therewith. -7- d. Continued Employment. Nothing herein shall be deemed to create any employment agreement or guaranty of continued employment or limit in any way the Company's or any subsidiary's right to terminate the Optionee's employment at any time. e. Legend. The certificates for the shares of Stock issued pursuant to exercise of the Options shall bear the following legend: The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or under any state securities laws, and may not be sold or otherwise disposed of until the sale shall have been registered under said Act and any applicable state securities laws, or until the Corporation shall have received an opinion of counsel satisfactory to it that such shares may be legally sold or otherwise transferred without such registration. The shares represented by this certificate have been issued pursuant to the exercise of an option to purchase such shares and are subject to certain restrictions on transfer contained in the Corporation's 1997 Key Employee Nonqualified Stock Option Plan and a Nonqualified Stock Option Agreement entered into pursuant to such Plan. f. Entire Agreement. This Agreement, together with the Plan, constitutes the entire agreement of the Company and its subsidiaries and the Optionee regarding the subject matter of this Agreement and the Plan; and all prior or contemporaneous agreements, understandings, representations and statements, written or oral, are hereby merged herein. g. Binding Effect. This Agreement shall be binding upon the parties hereto, their successors, heirs and permitted assigns. 16. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to be part hereof. 17. Delaware Law to Apply. The place of administration of the Plan and this Agreement shall be conclusively deemed to be within the State of Delaware, and the validity, construction, interpretation, administration, and effect of the Plan and this Agreement and the rights of any person having or claiming to have an interest therein or thereunder shall be governed by and determined exclusively and solely in accordance with the laws of the State of Delaware. 18. Counterparts. This Agreement may be executed in multiple counterparts; each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. -8- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed. OPTIONEE SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION /s/ John R. Weeks /s/William L. Remley - ------------------------------- ------------------------------ JOHN R. WEEKS Title: -9- SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION NONQUALIFIED STOCK OPINION EXERCISE FORM The undersigned holder of an option to purchase shares of common stock, par value $.01 per share, of Sunderland Industrial Holdings Corporation (the "Company") under a Nonqualified Stock Option Agreement with the Company dated hereby exercises his [First/Second] Option to purchase shares of such common stock of the Company at the option price of $______ per share in accordance with the terms and conditions of such Nonqualified Stock Option Agreement. - --------------------------------------- ------------------------------------- Date of Exercise Signature of Person Exercising Option Please type or print legibly your name as you want it to appear on your stock certificate, your address and your social security number in the space provided below. Name:___________________________________________________________________________ Address:________________________________________________________________________ (Street) ________________________________________________________________________ (City) (State) (Zip Code) Social Security Number: -10- EX-10.13 29 NON QUALIFIED STOCK OPTION AGREEMENT SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION Nonqualified Stock Option Agreement This Nonqualified Stock Option Agreement (the "Agreement") is entered into as of April 24, 1997 ("Grant Date"), between SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION, a Delaware corporation (the "Company"), and MICHAEL M. FARRELL, an executive employee of the Company's indirect subsidiary, Precise Technology, Inc. (the "Optionee"). 1. Grant of Options. Pursuant to the Company's 1997 Key Employee Nonqualified Stock Option Plan, a copy of which is attached hereto (the "Plan"), and authorization by the Board of Directors of the Company ("Board"), the Company hereby grants to the Optionee (i) an option (the "First Option") to purchase 400 shares of the Company's common stock, par value $.01 per share ("Stock"); and (ii) an option (the "Second Option") to purchase 75 shares of Stock, at the prices and on such other terms and conditions as are hereinafter provided. Such options to purchase Stock shall hereinafter be collectively referred to as the "Options." The Options shall not constitute an "incentive stock option" as that term is used in Section 422 of the Internal Revenue Code of 1986, as amended ("Code"). The Optionee agrees that as holder of the Options such Optionee shall have no rights of or as a shareholder or otherwise in respect of any of the shares of Stock as to which the Options shall not have effectively been exercised as herein provided. 2. Option Price. The Options shall be exercisable at a price of $1,500.00 per share of Stock. 3. Exercise Period. A. Except as provided in Paragraph 13, the First Option may be exercised by the Optionee, in whole or in part, prior to the earlier of (i) the termination of the Optionee's employment with the Company or any of its subsidiaries for any reason, or (ii) January 31, 2005, in accordance with the following schedule: 40% commencing on the Grant Date 60% commencing April 1, 1998 80% commencing April 1, 1999 100% commencing April 1, 2000 B. Except as provided in Paragraph 13, the Second Option may be exercised by the Optionee, in whole or in part, prior to the earlier of (i) the termination of the Optionee's employment with the Company or any of its subsidiaries for any reason, or (ii) January 31, 2005, as follows: 25 % of the Second Option shall become exercisable 90 days after the Board's determination of the "EBITDA" (i.e., earnings before interest, taxes, depreciation and amortization as conclusively determined by the Board in its sole discretion) of the Company for the year ended December 31, 1997 if such EBITDA shall exceed $16.4MM. 25% of the Second Option shall become exercisable 90 days after the Board's determination of the EBITDA of the Company for the year ended December 31, 1998 if such EBITDA shall exceed the "1998 Target." 25% of the Second Option shall become exercisable 90 days after the Board's determination of the EBITDA of the Company for the year ended December 31, 1999 if such EBITDA shall exceed the "1999 Target." 25% of the Second Option shall become exercisable 90 days after the Board's determination of the EBITDA of the Company for the year ended December 31,2000 if such EBITDA shall exceed the "2000 Target." In each year, if any, in which the EBITDA requirements, as set forth above, shall not have been met, twenty-five percent (25%) of the Second Option shall be immediately canceled and of no further force and effect. The 1998, 1999, and 2000 Targets shall be determined by the Board in its reasonable business discretion on or before April l of each respective year. 4. Exercise of the Option. The Options shall be exercised by delivery to the Company of a written statement in the form attached hereto entitled "Nonqualified Stock Option Exercise Form." At the time of exercise of the Options by such delivery, the Optionee shall pay such amount as required under Paragraph 5 herein together with an amount in cash equal to the amount of all applicable withholding taxes (or, in the Board's sole discretion, a withholding authorization acceptable to the Board). Upon receipt of such payment for the Stock being purchased and compliance by the Optionee with the terms and conditions hereunder, the Company shall cause certificates for such Stock to be delivered to the Optionee within ten (10) business days after the Company's receipt of such payment. 5. Payment of Option Price. A. At the time of exercise of the Options, the Optionee shall pay to the Company either (i) the full Option Price for the Stock being purchased in cash, or, (ii) with the consent of the Company in the sole discretion of the Board, a minimum of ten percent (10%) of the Option Price for the Stock being purchased in cash together with delivery of a promissory note and -2- pledge of the Optionee's Stock in forms acceptable to the Board, in the Board's sole discretion, providing for the payment of the balance of the Option Price. B. Notwithstanding the foregoing, Optionee may elect to exercise the Options, in whole or in part, to the extent the Options are then exercisable, by receiving shares of Stock equal to the value (as herein determined) of the portion of such Options then being exercised after deduction of the exercise price, in which event the Company shall issue to Optionee the number of shares of stock determined by using the following formula: X = Y (A-B) x (100% - C) A where: X = The number of shares of Stock to be issued to Optionee under the provisions of this Paragraph 5. Y = The number of shares of Stock that would otherwise be issued upon such exercise. A = The Fair Market Value (as hereinafter defined) of one share of Stock. B = The exercise price of the Options specified in Paragraph 2. C = Applicable income tax withholding rate. Fair Market Value Defined. As used in this Agreement, "Fair Market Value" shall mean (i) if the Stock is publicly traded, the average closing market price (or if no shares of Stock are traded on any date within such period, the average of the closing bid and asked price on such date) for the twenty business days immediately prior to the date on which such value is to be determined, or (ii) if the Stock is not publicly traded, the fair market value, on the applicable date, of the shares of Stock then being valued as determined in good faith by the Board of Directors. 6. Compliance With Securities Laws. The exercise of the Options and the issuance of Stock pursuant thereto shall be contingent upon either the prior registration of the Stock under the Securities Act of 1933, as amended (the "Securities Act") and such federal and state laws, rules, and regulations as may be applicable or promulgated thereunder, or a determination by the Company that the issuance of such Stock will be a transaction exempt from such registration. The Company anticipates that shares of Stock, when and if issued to the Optionee, will be "restricted securities" as that term is defined in Rule 144 under the Securities Act and, accordingly, such shares of Stock must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from registration is available. The Optionee understands and agrees that the Company is not under any obligation to register shares of Stock or to comply with Regulation A or any other exemption under the Securities Act. As a condition to the grant and/or -3- exercise of the Options, the Optionee agrees to execute one or more undertakings, in the form prescribed by the Board, that the Stock is being acquired for investment only and without any present intention of resale or other distribution, or that the Stock will not be offered for sale or other distribution otherwise and pursuant to such condition or conditions as the Board approves. The Company shall have the right to place upon any certificate or certificates evidencing shares of Stock any such legends as the Board may prescribe, including legends providing that the shares are subject to registration requirements under the Securities Act and state securities laws and that the shares are subject to the terms of this Agreement and the Plan. 7. Non-transferability and Termination of Options. Except as otherwise provided in Paragraph 8, the Options shall not be transferable or assignable and, during the Optionee's lifetime, shall be exercisable solely by the Optionee. Except as otherwise provided in Paragraph 8, the Options shall terminate upon termination of the Optionee's employment with the Company or its subsidiaries for any reason or any attempted sale, transfer or assignment of any such Options, whether voluntarily or involuntarily. A transfer of employment between and among the Company and its subsidiaries shall be considered as continuing employment and shall not be a termination of employment for purposes of this Agreement. In addition, temporary interruptions in employment caused by sickness or other approved leave of absence shall not constitute termination of employment for purposes of this Agreement. 8. Retirement, Disability of Optionee or Death. If the Optionee retires on or after the attainment of age 65, becomes permanently and totally disabled within the meaning of Section 22(e)(3) of the Code or dies while in the employ of the Company or one of its subsidiaries, the Options may be exercised during the time period from the date of the Optionee's retirement, permanent and total disability, or death until the expiration of one year after the date of the Optionee's retirement, permanent and total disability, or death by the Optionee or by the deceased Optionee's personal representative, as applicable, or by any person who acquired the Options by bequest or inheritance as a result of the death of the Optionee, subject to the terms and conditions set forth herein. 9. Call. At any time after a "Call Event" (as hereafter defined) the Company shall have the irrevocable right, but not the obligation, at its sole discretion to repurchase some or all of the Stock Optionee purchased under the Plan and this Agreement. The purchase price in connection with a Call Event defined in paragraphs (1) and (2) below shall be the Fair Market Value per share and the purchase price in connection with a Call Event defined in paragraphs (3) through (8) below shall be seventy-five percent (75%) of the Fair Market Value per share. Such purchase price shall be payable in the discretion of the Board either (i) in cash within ninety (90) days of the date of purchase, or (ii) by the Company's delivery of a promissory note providing for equal annual installments of principal payments over a period of up to five (5) years with interest on the unpaid balance at a rate determined by the Board in its sole discretion; provided, however, that in the event any life insurance on Optionee's life is obtained by the Company pursuant to paragraph 15.c., below, and as a result of Optionee's death, proceeds of such life insurance are paid to the Company, the Company shall use such proceeds (up to the purchase price) as and for a cash payment hereunder, with the balance of the purchase price, if any, payable in the discretion of the -4- Board as specified herein. As used herein, the term "Call Event" shall mean any one or more of the following: (1) The termination of the Optionee's employment with the Company and its subsidiaries for any reason; (2) The proposed or attempted voluntary sale, assignment, transfer, conveyance or other disposition, mortgage, pledge, grant of security interest in or other encumbrance of, any or all shares of Stock by the Optionee; (3) The Optionee making an assignment for the benefit of creditors; (4) The Optionee instituting, or having instituted against him, any bankruptcy, insolvency, reorganization, arrangement, debt adjustment, liquidation or receivership proceedings in which he is alleged to be insolvent or unable to pay his debts as they mature, and the Optionee shall consent thereto or admit in writing the material allegations of the petitions filed in said proceedings, or said proceedings shall remain undismissed after ninety (90) days; (5) The attachment of the Optionee's shares of Stock for any reason and such attachment remains undismissed after ninety (90) days; (6) The rendering of a final judgment against the Optionee in any legal or equitable proceeding which (i) purports to or attempts to sell, assign, transfer, convey or otherwise dispose of, mortgage, pledge, grant a security interest in or otherwise encumber, any or all shares of Stock or (ii) otherwise effects any of the foregoing; (7) The institution of any execution process against the Optionee's shares of Stock; or (8) The existence of any other situation or legal proceeding involving the Optionee such that the Optionee's shares of Stock may be involuntarily sold, transferred, assigned, or otherwise disposed of. In the event the Company undertakes an initial public offering or sells all or substantially all of its stock or assets within the six (6) month period following such purchase, the Company shall pay to the Optionee (a) in the case of a purchase in connection with a Call Event defined in paragraphs (1) or (2), above, the difference between the purchase price and the Fair Market Value of the Stock on the date of such transaction and (b) in the case of a purchase in connection with a Call Event defined in paragraphs (3) through (8) above, seventy-five percent -5- (75%) of the difference between the purchase price and the Fair Market Value of the Stock on the date of such transaction. Notwithstanding the provisions of this Agreement to the contrary, in the event the Optionee proposes to dispose of any or all of his shares of Stock acquired as a result of the Optionee's exercise of the Options (the "Offered Shares"), pursuant to a bona fide offer therefor from a third party (the "Purchase Offer"), the Optionee shall give written notice to the Company (the "Offer Notice"), stating that he has received the Purchase Offer, the terms thereof (the "Purchase Offer Terms"), and the identity of the third party who made the Purchase Offer. The Company shall have the right to purchase the Offered Shares by delivering to the Optionee a written notice of its intention to do so (a "Purchase Notice") within forty-five (45) days of having received the Offer Notice. In such Purchase Notice, the Company shall advise the Optionee as to whether it elects to purchase the shares of Stock on the Purchase Offer Terms or for an amount equal to the Fair Market Value of such shares of Stock and the Optionee shall sell such shares of Stock to the Company for such consideration within two (2) days of the Optionee's receipt of such Purchase Notice, with payment by the Company of such purchase price to be as specified in the first paragraph of this Paragraph 9. 10. Adjustment for Stock Dividend, or Stock Split or Capital Contribution. In the event that a stock dividend is hereafter paid on outstanding Stock, or in the event that the number of outstanding shares of Stock is hereafter increased as a result of a stock split, and the Option is then unexercised, the number of shares of Stock subject to the Option shall thereupon be increased by that number of shares of Stock which would have been distributed with respect to the Stock subject to the Option if the Stock subject to the Option had been outstanding at the time of the dividend or stock split and the Option price per share shall be adjusted to reflect such increased number of shares of Stock subject to the Option. If any shareholder of the Company or any other person should make a contribution to the capital of the Company without receiving any securities of the Company in exchange therefor, then, and in such event, the Option price per share shall be increased by an amount which is equal to the amount of such contribution to the capital of the Company divided by the number of issued and outstanding shares of common stock of the Company at the time of such contribution. 11. Additional Adjustments. In the event that there is any change in the number of outstanding shares of Stock (other than issuance of Stock for consideration approved by the Board) for which an adjustment is not provided by Paragraph 10 of this Agreement, and the Option is then unexercised, the Board may, in its sole discretion, require an adjustment in the number or kind of shares of Stock subject to the Option and the option price and such adjustment shall be binding and effective for all purposes hereof. 12. Elimination of Fractional Shares. Any addition or adjustment provided for in Paragraphs 10 and 11 hereof may be limited to the extent necessary to prevent fractions of shares of Stock from becoming available under the Option. -6- 13. Termination Upon Reorganization or Merger. In the event that outstanding shares of Stock, are hereafter changed into or exchanged for a different number or kind of shares of stock or securities of another corporation or corporations, whether as a result of a reorganization, recapitalization, reclassification, merger, consolidation or otherwise, or in the event all or substantially all of the Stock or assets of the Company are sold to a third party (any such event being a "Change in Control"), and any portion of the First Option is not yet exercisable, then all of the First Option shall immediately become exercisable and the Company shall give at least ten (l0) business days' prior notice of such Change in Control to the Optionee. The Optionee shall have ten (10) business days from the date of receipt of said notice to exercise the First Option. In the event any portion of the First Option is not exercised within the above-referenced ten (10) day period, such portion of the First Option shall automatically be canceled. In the event of a Change in Control, then the Optionee shall have ten (10) business days from receipt of the notice provided above to exercise that portion of the Second Option which is already exercisable and that portion of the Second Option which is not yet exercisable shall automatically be canceled. In the event that any portion of the Second Option so exercisable is not exercised within the above-referenced ten (10) day period, such portion of the Second Option shall also automatically be canceled. Upon cancellation of all of the Options, this Agreement shall terminate. 14. Optionee Bound by the Plan. The Optionee hereby agrees to be bound by all applicable provisions of the Plan. If any of the terms and provisions of this Agreement are inconsistent or in conflict with the terms and provisions of the Plan, the Plan shall supersede and prevail over such inconsistent provisions hereof. The Board shall have authority, subject to the express provisions of the Plan and this Agreement, to establish, amend, and rescind rules and regulations relating to the Plan, and to make all other determinations in the judgment of the Board necessary or desirable for the administration of the Plan. The Board may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in this Agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All actions by the Board under the provisions of this Paragraph 14 shall be conclusive for all purposes. 15. Miscellaneous. a. No Shareholder Rights. The Optionee shall not, by virtue of holding the Option, be entitled to any rights of a shareholder of the Company or any of its subsidiaries. b. Lock-Up. The Optionee agrees that in connection with an initial public offering of the Stock he will, if required by the Board, agree to such restrictions on the resale of his Stock as shall be agreed to by other members of management in connection therewith. c. Life Insurance. The Optionee understands that the Company may, but shall not be required to, obtain a life insurance policy on Optionee's life in order to enable the Company to comply with its obligations under the Agreement and Optionee hereby agrees to cooperate with the Company in obtaining any such insurance including submitting applications and submitting to physical examinations in connection therewith. -7- d. Continued Employment. Nothing herein shall be deemed to create any employment agreement or guaranty of continued employment or limit in any way the Company's or any subsidiary's right to terminate the Optionee's employment at any time. e. Legend. The certificates for the shares of Stock issued pursuant to exercise of the Options shall bear the following legend: The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or under any state securities laws, and may not be sold or otherwise disposed of until the sale shall have been registered under said Act and any applicable state securities laws, or until the Corporation shall have received an opinion of counsel satisfactory to it that such shares may be legally sold or otherwise transferred without such registration. The shares represented by this certificate have been issued pursuant to the exercise of an option to purchase such shares and are subject to certain restrictions on transfer contained in the Corporation's 1997 Key Employee Nonqualified Stock Option Plan and a Nonqualified Stock Option Agreement entered into pursuant to such Plan. f. Entire Agreement. This Agreement, together with the Plan, constitutes the entire agreement of the Company and its subsidiaries and the Optionee regarding the subject matter of this Agreement and the Plan; and all prior or contemporaneous agreements, understandings, representations and statements, written or oral, are hereby merged herein. g. Binding Effect. This Agreement shall be binding upon the parties hereto, their successors, heirs and permitted assigns. 16. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to be part hereof. 17. Delaware Law to Apply. The place of administration of the Plan and this Agreement shall be conclusively deemed to be within the State of Delaware, and the validity, construction, interpretation, administration, and effect of the Plan and this Agreement and the rights of any person having or claiming to have an interest therein or thereunder shall be governed by and determined exclusively and solely in accordance with the laws of the State of Delaware. 18. Counterparts. This Agreement may be executed in multiple counterparts; each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. -8- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed. OPTIONEE SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION /s/ Michael M. Farrell /s/ William L. Remley - ---------------------------------- ------------------------------------------- MICHAEL M. FARRELL Title: ----------------------------------- -9- SUNDERLAND INDUSTRIAL HOLDINGS CORPORATION NONQUALIFIED STOCK OPTION EXERCISE FORM The undersigned holder of an option to purchase shares of common stock, par value $.01 per share, of Sunderland Industrial Holdings Corporation (the "Company") under a Nonqualified Stock Option Agreement with the Company dated ___________________ hereby exercises his [First/Second] Option to purchase ________ shares of such common stock of the Company at the option price of $ _______________ per share in accordance with the terms and conditions of such Nonqualified Stock Option Agreement. - ---------------------------------- ------------------------------------- Date of Exercise Signature of Person Exercising Option Please type or print legibly your name as you want it to appear on your stock certificate, your address and your social security number in the space provided below. Name: __________________________________________________________________________ Address:________________________________________________________________________ (Street) ________________________________________________________________________ (City) (State) (Zip Code) Social Security Number:_________________________________________________________ -10- EX-10.14 30 MEMORANDUM OF AGREEMENT Procter & Gamble - -------------------------------------------------------------------------------- The Procter & Gamble Company Sharon Woods Technical Center 11520 Reed Hartman Highway, Cincinnati, Ohio 45241-2422 MEMORANDUM OF AGREEMENT Fabric Care Purchases Sharon Woods Technical Center 11520 Reed Hartman Highway Cincinnati, Ohio 45241 (1) Buyer: The Procter & Gamble Manufacturing Company (2) Seller: Tredegar Molded Products Company 1100 Boulders Parkway Richmond, Virginia 23225 (3) Commodity: The Fabric Care & Conditioners product ("FCC Product") is Downy Liquid Fabric Conditioner Collars and Cups. Specification numbers are included on attachment titled "Specification Numbers." The Automatic Downy Dispenser product parts ("ADD Parts") are components of the Downy Liquid Dispensing unit. Specification numbers are included on attachment titled "Specification Numbers." The Hard Surface Cleaners product ("HSC Product") is Comet Powder Sifter Caps. Specification numbers are included on attachment titled "Specification Numbers." "Products" are the FCC Products, ADD Parts, and HSC Products. (4) Quantity: 100% of Buyer's requirements, estimated at [_____]* FCC Products per year, [_____]* ADD Parts per year, and [_____]* HSC Parts per year, for the period of this agreement. (5) Quality: (a) Products are to be equal to or superior to Buyer's applicable general and individual specifications and other written quality standards, including any subsequent additions or alterations agreeable to Buyer and Seller. The quality throughout the Agreement Period shall equal or surpass that of commercially available competitive products. (b) Seller will work with Buyer to continuously improve the quality of the products Seller provides to Buyer. Quality targets will include, but will not be limited to, zero short shipments and zero contamination of the Product. Further quality performance targets will be developed jointly by Buyer and Seller to ensure superior products. - --------------- * Confidential portion omitted and filed separately with the Securities and Exchange Commission. Page 2 of 8 (5) Quality (continued): (c) Seller, at its own expense, will clean, inspect, and perform all routine maintenance on all equipment and tooling required to manufacture the Products on a regular basis, such as replacement of leader pin bushings, leader pins, standard ejector pins, and heater bands (if a hot runner system). Buyer will be responsible for performing all other maintenance on the tools required to manufacture the Products, including repair or replacement of components, provided that Buyer may ask Seller to perform such maintenance at Buyers expense. (6) Period: The contract will commence on July 1, 1995 and terminate on September 30, 1998. (7) Price: (a) Base Pricing Products' base pricing will be as per Attachment 1. Seller's obligation to price Products in accordance with Attachment 1 is contingent on Buyer's annual purchases of the volume estimates set forth in Paragraph 4, plus or minus fifteen (15) percent. If Buyer's annual purchases of any of the Products falls outside this range (noted on Table 1 below), either Buyer or Seller has the option to open discussion of price changes. Table 1 Minimum Amount Maximum Amount -------------- -------------- FCC Product [_____]* [_____]* ADD Parts [_____]* [_____]* HSC Parts [_____]* [_____]* (b) (De)escalation Factors The base price is based on Polypropylene ("PP") and High Density Polyethylene ("HDPE") prices as of June 1, 1995. Seller has the right to escalate and the obligation to de-escalate the price of the Products based on actual changes in Seller's resin costs. Price changes on HDPE and PP will be subject to the attached policy dated July 18, 1994 and titled "Procter & Gamble Injection-Molding Resin Price Change Policy". (De)escalation factors for Products will be as per Attachment 2. - --------------- * Confidential portion omitted and filed separately with the Securities and Exchange Commission. Page 3 of 8 (7) Price (continued): (c) Non-Material Price Increases Both parties agree that non-material price increases (understood to be all increases not related to resin, colorant, or other packaging materials) will be negotiated annually (on September 30, 199X) with a maximum of a [_____]* increase each year. This provision is independent of any volume-related price change that may occur under the provisions of Paragraph 7(a). (8) Shipments: From time to time as Buyer may request on specific purchase orders or releases. (9) Terms: Seller agrees to invoice Buyer for Products and applicable freight charges at the time of Products' shipment by Seller to Buyer or Buyer's designee. Invoice payment is due net thirty (30) days from Buyers receipt of invoice. (I0) Environmental Compliance: Seller warrants that all goods comply in all respects with the applicable requirements of the Canadian Environmental Protection Act, the US Toxic Substance Control Act, including all Regulations under said Acts and all other relevant legislation. Seller warrants that all substances it provides to Buyer will accurately correspond to Buyer's specification(s) and that it will notify Buyer in advance of any proposed change in the substance(s) specified and supplied hereunder which could alter or add to any of the Chemical Abstract (CAS) number(s) for those substances which are listed in the Raw Material Specification(s) cited herein. Any such changes must be mutually agreed upon by Buyer and Seller prior to shipment to Buyer. Seller agrees to indemnify and hold harmless Buyer and its affiliates from all damages and liability resulting from a breach of these warranties by Seller. - --------------- * Confidential portion omitted and filed separately with the Securities and Exchange Commission. Page 4 of 8 (11) Termination Should Buyer by reason of package redesign, product reformulation, process change or similar good faith commercial reason deem it necessary to reduce or discontinue its usage of any item covered by this Agreement, Buyer shall have the right to reduce or discontinue Seller's shipments hereunder. Any such reduction or discontinuance will be in the same proportion as applied by Buyer to other suppliers, if any, supplying this material to Buyer, and provided further, that Buyer has given Seller not less than thirty (30) days' notice of such reduction or discontinuance, with the understanding that Buyer will give Seller as much notice as is possible for the given circumstances, and provided further that Buyer agrees to purchase from Seller commercially reasonable quantities of its inventory (whether finished goods or raw materials) designated for the manufacture of Products or readied for shipment to Buyer that cannot be used elsewhere by Seller. For safety or health-related reductions or discontinuances, Seller agrees to discontinue production immediately upon receipt of written notice and justification from Buyer. (12) Releases To enable Buyer to maintain inventory control, Products are to be manufactured by Seller only upon receipt of specific authority, including releases from the Procter & Gamble Lima, OH Plant ("Lima"), Owens-Brockway - Findlay, OH Plant ("Owens"), or the Procter & Gamble - St. Louis, MO Plant ("St. Louis"). Products are to be released and shipped by Seller in accordance with the Lima's, Owens', or St. Louis' instructions. Seller may not accrue storage charges for Buyer's account unless specifically authorized to do so in writing by Buyer. (13) Specification Changes: (a) If at any time during the period of the Agreement, Buyer and Seller are unable to agree on any portion of Buyer's specifications, and Buyer can purchase material meeting said specifications from another supplier(s), Buyer shall notify Seller and Seller shall have the opportunity to meet said specifications. If Seller fails to do so within thirty (30) days from said notification, with the understanding that Buyer will give Seller as much notice as is possible for the given circumstances, Buyer shall have the right to purchase elsewhere the quantities required for consumption for the balance of the contract period. (b) If Buyer desires to make minor changes in the specifications of any of the materials covered herein during the period of this Agreement, it shall be Buyer's privilege to do so, and Seller shall have the right to change prices accordingly, provided that any changes in price shall be based only upon any increase or decrease in the cost of material and labor involved in producing materials under the revised specifications provided any changes do not materially affect Seller's production speed or efficiency. If Seller is unable to produce the materials in quantities required by Buyer, in accordance with the new specifications established by Buyer, with thirty (30) days notice, and at a price acceptable by both parties, Buyer shall have the option of purchasing such materials from another source and terminating its obligations under this Agreement for the item involved. Page 5 of 8 (14) Warranty: (a) In the event of any failure or defect in Products produced hereunder resulting from Seller's failure to comply with the terms of this Agreement, including but not limited to Buyers specifications, Seller agrees, if Buyer so requests, to rework and/or scrap any defective product, or authorizes Buyer to do so, and Seller shall, at Buyer's option, replace any defective Products or credit Buyer for total cost thereof, including, to the extent undertaken by Buyer at Sellers request, the cost of inspecting, sorting, reworking, and scrapping. In addition, Seller shall be responsible for claims by third parties against Buyer for loss or damage to the extent such loss or damage is the result of Seller's failure to produce Products of merchantable quality. (b) By acceptance of this Agreement and in consideration thereof, Seller warrants and agrees that it will defend any suit that may arise against the Buyer or any subsidiary or affiliated company thereof for alleged infringement of any patents relating to any Products, article or articles furnished hereunder, and that the Seller will indemnify and save harmless the Buyer and any subsidiary or affiliated company thereof, against any loss. including damages, costs and expenses, including attorneys' fees, which may be incurred by the assertion of any patent rights by other persons. Buyer agrees to hold Seller harmless with respect to liability for infringement of a design patent by reason of making or furnishing to Buyer hereunder, any article or articles the ornamental appearance of which was specified by Buyer and not offered by Seller as an option. (c) Seller warrants that Products will conform to the provisions of Paragraph 5. (d) Seller makes no other warranties, express or implied, regarding the Products other than as expressly set forth in this Agreement. (15) Trial Orders: Buyer reserves the right to place trial orders outside of this Agreement for any materials included herein if this becomes necessary in the process of qualifying new suppliers. Such trial orders will be limited in size and/or frequency so that the intent of Paragraph 4 is not violated. (16) Cost Savings: Buyer and Seller agree to engage in cost savings projects to improve and/or reduce costs of the Products. Buyer and Seller will negotiate the sharing of net cost savings from such projects on a case by case basis. (17) Confidentiality: Seller agrees to take all reasonable precautions to ensure the confidentiality of Buyer's Products and/or confidential information related to all materials necessary to make Buyer's Products. If this confidentiality is breached, Buyer shall have the right to terminate this Agreement immediately. Page 6 of 8 (18) Transferability: This Agreement shall not be transferred or assigned by a party to any third party without prior consent of Buyer. Buyer at its sole discretion may terminate this Agreement without further obligation if there is a change in controlling ownership of Seller. (19) Robinson-Patman Act: Seller warrants that the prices set forth in this Agreement are valid under the provisions of the Robinson-Patman (Price Discrimination) Act and all other pertinent laws, orders and regulations. (20) Meet Or Release: If at any time during the period of this Agreement Buyer can purchase Products of like quality and like quantity at a price which will result in a delivered cost to Buyer that is lower than the delivered cost of the material purchased hereunder, Buyer may notify Seller of such a delivered cost and Seller shall have an opportunity of pricing material hereunder on such a basis as to result in the same delivered cost to Buyer within forty-five (45) days of said notification. If Seller fails to do so or cannot legally do so, Buyer may purchase from the supplier of the lower delivered cost material, and any purchase so made shall be held to apply on this Agreement, and the obligation of Buyer and Seller shall be reduced accordingly. The spirit of this Paragraph is to protect Buyer from being disadvantaged by manufacturing breakthroughs in Seller's industry, If such breakthroughs would enable Buyer to achieve superior value by purchasing any of the Products covered by this agreement from another source, it will be Buyer's right to do so. (21) Favored Nations: If, during the life of this Agreement, the Seller sells any products or articles substantially the same as those listed herein at prices, including applicable freight equalization terms, lower than the prices then effective under this Agreement, said lower price shall apply on all goods thereafter shipped under this Agreement during the period of sale at such lower price to others, provided Seller can legally extend such lower price to Buyer. (22) Freight: On goods bought "delivered" or "F.O.B. destination," Seller should prepay freight or other transportation charges. On goods bought "F.O.B. point of origin" or 'F.O.B. Sellers Plant," on which Seller prepays freight and invoices Buyer, invoice including transportation charges must show weight of shipment, freight rate charged, and name of carrier, or be accompanied by a copy of the prepaid freight bill: Buyer may withhold payment of freight portion of Seller's invoice until date that this condition has been fulfilled. The "non-recourse" clause an the bill of lading covering the shipments must not be signed, and any over-charges which may accrue will be for Seller's account. Page 7 of 8 (23) Force Majeure: Fire, flood, strikes, lock-out, epidemic, accident, shortage of customarily used transportation equipment (or suitable substitute), or other causes beyond the reasonable control of the parties, which prevent Seller from delivering or Buyer receiving and/or using the Products covered by this Agreement, shall operate to reduce or suspend deliveries during the period required to remove such cause. In the event of reduced deliveries by Seller under the provisions of this paragraph, Seller shall allocate its available supply of Products, component raw materials, and related manufacturing facilities among purchasers and Seller's divisions, departments, and affiliates on such basis that Buyer's percentage reduction will not be greater than the overall percentage reduction in total quantity of Products, component raw materials, and related manufacturing facilities Seller has available for supply. Any deliveries suspended under this paragraph shall be canceled without liability, and the Agreement quantity shall be reduced by the quantities so omitted. In the event non-availability of raw materials causes Seller to reduce shipments to Buyer, Seller agrees to give Buyer the option to provide such raw materials to Seller at a price not to exceed Buyer's market place. If Buyer provides such raw materials to Seller at such price, Seller will increase deliveries of Products to Buyer by the amount produced with the raw materials supplied by Buyer up to the quantity specified in the Agreement. (24) Compliance With Other Laws: Whether this Agreement refers to manufactured items or to work, Seller warrants and agrees that it has complied, and will comply, with (1) applicable employment laws of the U.S., including without limitation Social Security, unemployment compensation, unemployment insurance, workers' compensation laws and the Fair Labor Standards Act as amended, (Each invoice must bear the following certification: "Materials or work covered by this invoice were produced in conformity with the Fair Labor Standards Act as amended.") and (2) all other applicable U.S. laws, codes, regulations, rules, and orders, and all other applicable Canadian laws, codes, regulations, rules and orders to Seller's knowledge. Seller agrees to indemnify Buyer and save Buyer harmless from any damage to Buyer resulting from Seller's failure to comply with the foregoing, and in the event of such failure Buyer may, in addition, cancel this Agreement. (25) Headings: Paragraph headings or titles are intended for ease of reading and are not intended to have any legal meaning. Page 8 of 8 (26) U.S. Government Contract: Some of the material or services covered by this Agreement is to be used on a contract with the Federal Government to which the provisions of Section 202 of Executive Order 11246, Section 402 of The Vietnam Era Veterans Readjustment Act of 1974 and Section 503 of The Rehabilitation Act of 1973 apply, and consequently the provisions of Section 202, Section 402 and 503 will become binding upon the Seller upon acceptance of this Agreement, if this Agreement exceeds $10,000 or applies against a contract exceeding $10,000 in one year with respect to Sections 202 and 402, and $2,500 with respect to Section 503. Regulations under the Executive Order, The Vietnam Era Veteran's Readjustment Act and the Rehabilitation Act may require Seller to develop an Affirmative Action Compliance Program, to file an Employee Information Report EEO-1 or other reports as prescribed, and to certify that its facilities are not segregated on the basis of race, color, religion, or national origin. (See 41.CFR 60.) (27) Jurisdiction: The parties hereto agree that all of the provisions of this contract and any questions concerning the interpretations and enforcement shall be governed by the internal laws of the state of Ohio, U.S.A. The Procter & Gamble Manufacturing Company Tredegar Molded Products BUYER SELLER BY: /s/ J.M. Kelly BY /s/ David Reed ---------------------------------- ------------------------------- (Signature) (Signature) J.M. Kelly David Reed - ------------------------------------- ---------------------------------- TITLE: Purchasing Director TITLE: General Manager-Molded Products Division ------------------------------- ---------------------------- DATE: 8/8/85 DATE: 8/4/95 ------------------------------- ---------------------------- Specification Numbers Production Description Spec. Number ---------------------- ------------ FCC Products 3X Collar - Blue (World Color) 1862226 3X Cap - Pink (AF) 1862234 3X Cap - Yellow (SR) 1863034 3X Cap - Green (MS) 1863042 3X Cap - White (FR) 1863059 1 X Collar - Blue (AF) 1864248 1X Cap - Pink (AF) 1864192 ADD Products Valve 1451616 Weight 1451608 Chain 1451624 Collar 1451632 HSC Product Red Sifter Cap 1860071-2 Procter & Gamble July 18, 1994 PROCTER & GAMBLE INJECTION-MOLDING RESIN PRICE CHANGE POLICY This document outlines Procter & Gamble's policy regarding resin-based price changes for all resins used in the production of Procter & Gamble's injection-molded products. This policy is in effect as of July, 1994 and applies to all items not previously covered by a written price escalation/de-escalation clause in a Memorandum of Agreement or purchase order. BACKGROUND Procter & Gamble is pursuing several objectives with this policy. Our company is working very hard to manage and improve all aspects of product cost, so as to deliver greater value to the consumer. Plastic resin across all packaging forms is a huge cost category for our company and, specifically, it is a major cost component for injection-molded parts. Historically, P&G has taken a "hands-off" approach to the Purchase of resin, allowing our suppliers to purchase these commodities directly on our behalf. However, in most of our commercial arrangements, P&G has assumed the risk of resin market fluctuations by allowing cent-for-cent direct price change pass-throughs from molders when increases or decreases occurred in the market. Net, we have borne the impact of resin changes with little involvement in, or verification of, the process. As we work to better manage our costs, however, it has become clear to us that resin is an area that deserves more attention. First, we intend to gain a better understanding of resin attributes and markets, so that we can play a more proactive role in developing technical and commercial synergy in this area across our businesses. We obviously want to work with our key suppliers in this effort. Second, we want to better understand how well our suppliers manage the resin costs that go into the final price that we pay. We plan to keep track of each supplier's resin-based price change history which P&G. Companies that aggressively and professionally manage resin costs on our behalf will be better positioned to grow their business with us in the future. Third. recent movements in resin markets and the way that they have been implemented lead us to feel that verification of the resin prices used in our products is a key step it we are to better manage costs. POLICY PROVISIONS These objectives have led us to implement the following resin price change policy: 1 ) All communication concerning resin-based price change requests - increases or decreases should be directed to a single contact within P&G. For all injection-molding resins, with the exception of HDPE, SAN, and ABS, that contact will be Lynne Keister, Associate Director, Procter & Gamble Purchases. The contact for HDPE changes will be Karen Eller, Associate Director, Procter & Gamble Purchases, and the contact for SAN/ABS will be John Lown, Purchasing Manager, P&G Cosmetics & Fragrances Purchases. These three contacts will be responsible for communicating the fact that a supplier has made a price change request to the pertinent buyers within P&G. If a supplier wishes, they may communicate a requested change to the individual buyers at the same time that the change is communicated to the resin contact person specified above, but the single notification contact - and single contact for providing P&G's official response - will be the three individuals previously identified. Addresses for Ms. Eller, Ms. Keister and Mr. Lown are attached. Once we have indicated official acceptance of a change, price change sheets for individual parts should be sent to the appropriate buyer - you do not need to send these via Ms. Eller, Ms. Keister or Mr. Lown. 2 ) P&G will continue to assume the risk for resin market moves via direct price change pass-through if a supplier so desires, as we have in the past. However, we will be requesting verification of resin price changes that the supplier is seeking to pass on to our company. We are defining verification as the submission of copies of resin invoices to P&G that the molder has received from its resin vendor "before" and "after" the resin price change. The set of invoices should demonstrate the magnitude of the change and the effective date to the molder of the change. There should be a set of invoices for each product code on which a change is being requested. Increases - - P&G will accept any reasonable resin-based price increase that a supplier may request in its entirety if the supplier provides us with a set of "before" and "after" resin invoices that demonstrate the increase magnitude and timing that the molder has accepted from its resin suppliers. These invoices should be provided by resin product code and should be sent to Ms. Eller, Ms. Keister or Mr. Lown, depending on the resin involved. If the invoices verify the request that is being made, the increase will be effective 30 days from the date of receipt of the invoices, to reflect standard customer notification timing. Requests for increases from suppliers who verify can be made at anytime. Suppliers that can work to keep costs flat or declining over time will hold particular value for P&G. - - Suppliers that decline to submit invoices verifying increase requests are subject to the following. Increase requests may be made once a quarter and must be submitted no later than the first day of the month preceding the start of the calendar quarter, if they are to be considered for implementation the following quarter. For example, an increase request must be received by September 1st for the increase to become effective October 1st. It the September 1st deadline is missed, the supplier would not have the opportunity to realize a resin-based price increase until the following quarter or January 1st. Suppliers choosing not to verify will be granted the average of the increase requests made by the suppliers that verify for that quarter. The average will be calculated across the number of vendors that sell us parts using the resin in question, to include "zeros" for suppliers that have not requested an increase for that quarter. For example, if there are ten suppliers selling P&G LDPE parts, the average would include the verified requests for that quarter, including zeros for the suppliers not requesting increases and the sum would be divided by ten to get the average. The quarterly system is aimed at simplifying the execution and is effective immediately. - - Our long-term vision for this system is to ultimately eliminate the averaging mechanism and offer suppliers two options: either quote on our business with verified direct increase pass-throughs or submit quotations that do not call for resin escalation over the life of the agreement ("flat" pricing proposals). We expect to implement this vision in the second phase of our team's supply base consolidation efforts, in 1-2 years. To emphasize the point, no supplier will be disadvantaged if they use the verification mechanism. Decreases - - P&G will accept all resin-based decreases - those resulting from broad market moves and more narrow supplier negotiations - at any time. We will expect to receive all market decreases that are reported by reliable industry trade publications like Plastics News and ChemData and that are legal and in compliance with the Robinson-Patman Act. - - P&G will monitor market news as we do now, and when a decrease is reported, we will notify molders of our read on the decrease in question, both in terms of magnitude and timing (a hypothetical example - "we believe that prices decreased $.01/lb. in August"). We would expect to receive the decrease per our read on the market, unless a supplier informs us that they have not realized the decrease either on the same timing or in the same magnitude as we have suggested. If the supplier can verify via "before" and "after" invoices that there is, in fact, a different set of circumstances in their situation they will, of course, be honored. If P&C's view of the market decrease cannot be disproved, we would expect to receive the decrease per our notification. Again, no supplier will be disadvantaged if they verify their individual circumstances with invoices. 3) All resin price information disclosed via the invoice system will be quarantined with the single point contact (Ms. Eller, Ms. Keister or Mr. Lown). We will monitor each supplier's resin-based price change history and how competitively suppliers purchase resin will be used as one factor in business awards. However, no supplier's individual resin price will be shared within P&G. Today, some suppliers choose to discuss their resin pricing with individual buyers. Suppliers may continue that practice it they wish to but we would like to have an idea of where this is happening so that we can maintain the integrity of the confidentiality that we have promised in this situation. To repeat, our goals are to work to more carefully manage our resin costs, to develop a better understanding of resin market issues and to use resin purchasing effectiveness as an element of value in future sourcing decisions. We believe that this modification to our "pass-through" policy meets our objectives and still affords the supplier every opportunity to pass the risk for resin movements onto P&G, it they are verified. L. D. Keister for the P&G North American Injection-Molded Parts Strategy Team RESIN CONTACTS Mr. John R. Lown - SAN/ABS Purchasing Manager The Procter & Gamble Cosmetics & Fragrances Company 11050 York Road Hunt Valley, Maryland 21030 Phone: (410) 527-5857 FAX: (410) 785-4661 Ms. Karen A. Eller - HDPE Associate Director The Procter & Gamble Company 1 Procter & Gamble Plaza Cincinnati, Ohio 45202 Phone: (513) 945-9284 FAX: (513) 945-9547 Ms. Lynne D. Keister - for all other resins Associate Director The Procter & Gamble Company Sharon Woods Technical Center 11520 Reed Hartman Highway Cincinnati, Ohio 45241-2422 Phone: (513) 626-3520 FAX : (5l3) 626-4155 ATTACHMENT 1 Base Pricing Product Description Price (Per M) Downy 3X Cup - Red Spec. #1862234 [_____]* Downy 3X Cup - Green Spec. #1863042 [_____]* Downy 3X Cup - Yellow Spec. #1863034 [_____]* Downy 3X Cup - white Spec- #1863059 [_____]* Downy 3X Collar - Blue Spec. 11862226 [_____]* Downy 1X Cup - Pink Spec. 11864198 [_____]* Spec. 0270081310.1 (Canadian) [_____]* Downy 1X Collar - Blue Spec. #1864206 [_____]* Comet Powder Sifter Cap - Red Spec. #1860071 [_____]* - --------------- * Confidential portion omitted and filed separately with the Securities and Exchange Commission. ATTACHMENT 1 (continued) Base Pricing Downy Ball (ADD) Annual Volume Below 5.5mm Units Description Price (Molding only) ADD Valve [_____]* ADD Weight [_____]* ADD Collar [_____]* ADD Chain [_____]* Assembly [_____]* Building Lease [_____]* Annual Volume Above 5.5mm Units Description Price (Molding only) ADD Assembly [_____]* ADD Valve [_____]* ADD Weight [_____]* ADD Collar [_____]* ADD chain [_____]* Building Lease [_____]* Freight - F.O.B. Seller's Plant - --------------- * Confidential portion omitted and filed separately with the Securities and Exchange Commission. Attachment 2 Resin (De)Escalation Factors Product Factor (per $.01/lb change) Downy 1X Cup [_____]* Downy 3X Cup [_____]* Downy 1X Collar [_____]* Downy 3X Collar [_____]* ADD Valve [_____]* ADD Weight [_____]* ADD Collar [_____]* ADD Chain [_____]* Comet Sifter Cap [_____]* - --------------- * Confidential portion omitted and filed separately with the Securities and Exchange Commission. EX-12.1 31 RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 PRECISE TECHNOLOGY, INC. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 AND FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992 (DOLLARS IN THOUSANDS)
Unaudited Three Months ended Unaudited Year ended December 31, March 31, Pro Forma -------------------------------------------------------- ------------------ Year Ended December 31 1992 1993 1994 1995 1996 1996 1997 1996 ------ ------ ------ ------ ------ ------ ------ ------ Earnings before fixed charges: Net income (loss) $ 409 $ 421 $ 950 $1,275 $ 466 $ 287 $ 150 $ (423) Provision for income taxes -- 66 574 941 1,265 245 304 578 ------ ------ ------ ------ ------ ------ ------ ------ Income before income taxes 409 487 1,524 2,216 1,731 532 454 155 Interest expense 703 706 956 810 5,559 261 1,690 9,897 Interest portion of rental expenses 75 88 124 103 304 76 84 304 Current period interest amortization of interest capitalized in prior periods -- -- -- 2 2 -- -- 2 ------ ------ ------ ------ ------ ------ ------ ------ Earnings before fixed charges 1,187 1,281 2,604 3,131 7,596 869 2,228 10,358 ------ ------ ------ ------ ------ ------ ------ ------ Fixed charges Interest expense 703 706 956 810 5,559 261 1,690 9,897 Interest portion of rental expenses 75 88 124 103 304 76 84 304 Interest capitalized during the period -- -- 17 -- -- -- -- -- ------ ------ ------ ------ ------ ------ ------ ------ Total fixed charges 778 794 1,097 913 5,863 337 1,774 10,201 Excess of earnings to fixed charges $ 409 $ 487 $1,507 $2,218 $1,733 $ 532 $ 454 $ 157 ===== ====== ====== ====== ====== ====== ====== ====== Ratio of Earnings to fixed charges 1.5x 1.6x 2.4x 3.4x 1.3x 2.6x 1.3x 1.0x ====== ====== ====== ===== ====== ====== ====== =======
EX-21.1 32 SUBSIDIARIES OF THE REGISTRANTS Exhibit 21.1 SUBSIDIARIES OF THE REGISTRANTS Subsidiaries of Precise Technology, Inc. Precise Technology of Delaware, Inc. (Delaware) Precise Technology of Illinois, Inc. (Delaware) Precise TMP, Inc. (Virginia) -- Precise Polestar, Inc. (Virginia) -- Massie Tool, Mold & Die, Inc. (Florida) EX-23.1 33 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated March 14, 1997 (except Note 16, as to which the date is April 14, 1997) in the Registration Statement (Form S-4) and the related Prospectus of Precise Technology, Inc. for the registration of $75,000,000 of its Series B 11 1/8% Senior Subordinated Notes due 2007. Ernst & Young LLP Pittsburgh, Pennsylvania July 22, 1997 EX-23.2 34 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We have issued our report dated February 10, 1995 accompanying the December 31, 1994 consolidated statements of income, stockholder's equity and cash flows of Precise Technology, Inc. and subsidiaries contained in the Registration Statement on form S-4 and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus and to the use of our name as it appears under the caption "Experts". GRANT THORNTON LLP Chicago, Illinois July 21, 1997 EX-23.3 35 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-4 of Precise Technology, Inc. of our report dated February 26, 1996 on our audits of the consolidated financial statements of Tredegar Molded Products Company and Subsidiaries as of December 31, 1995 and 1994 and for each of the two years in the period ended December 31, 1995. We also consent to the references to our firm under the caption "Experts." Coopers & Lybrand L.L.P. Richmond, Virginia July 22, 1997 EX-25.1 36 STATEMENT OF ELIGIBILITY Conformed Copy SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ----------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ----------- Marine Midland Bank (Exact name of trustee as specified in its charter) New York 16-1057879 (Jurisdiction of incorporation (I.R.S. Employer or organization if not a U.S. Identification No.) national bank) 140 Broadway, New York, N.Y. 10005-1180 (212) 658-1000 (Zip Code) (Address of principal executive offices) Charles E. Bauer Vice President Marine Midland Bank 140 Broadway New York, New York 10005-1180 Tel: (212) 658-1792 (Name, address and telephone number of agent for service) PRECISE TECHNOLOGY, INC. (Exact name of obligor as specified in its charter) Delaware 25-1205268 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 501 Mosside Blvd. North Versailles, Pennsylvania 15137-2553 (412) 823-2100 (Zip Code) (Address of principal executive offices) Precise Technology of Delaware, Inc. Precise Technology of Illinois, Inc. Precise TMP, Inc. Precise Polestar, Inc. Massie Tool, Mold & Die, Inc. (Exact name of registrants as specified in their respective charters) Delaware 51-0351451 Delaware 36-4068725 Virginia 54-1253743 Virginia 54-1675114 Florida 54-1683716 Series B 11 1/8% Senior Subordinated Notes due 2007 Guarantees of Series B 11 1/8% Senior Subordinated Notes due 2007 (Title of Indenture Securities) Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervisory authority to which it is subject. State of New York Banking Department. Federal Deposit Insurance Corporation, Washington, D.C. Board of Governors of the Federal Reserve System, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None Item 16. List of Exhibits. Exhibit T1A(i) * - Copy of the Organization Certificate of Marine Midland Bank. T1A(ii) * - Certificate of the State of New York Banking Department dated December 31, 1993 as to the authority of Marine Midland Bank to commence business. T1A(iii) - Not applicable. T1A(iv) * - Copy of the existing By-Laws of Marine Midland Bank as adopted on January 20, 1994. T1A(v) - Not applicable. T1A(vi) * - Consent of Marine Midland Bank required by Section 321(b) of the Trust Indenture Act of 1939. T1A(vii) - Copy of the latest report of condition of the trustee (March 31, 1997), published pursuant to law or the requirement of its supervisory or examining authority. T1A(viii) - Not applicable. T1A(ix) - Not applicable. * Exhibits previously filed with the Securities and Exchange Commission with Registration No. 33-53693 and incorporated herein by reference thereto. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, Marine Midland Bank, a banking corporation and trust company organized under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York on the 23rd day of July, 1997. MARINE MIDLAND BANK By: /s/Eileen M. Hughes ------------------------ Eileen M. Hughes Assistant Vice President Exhibit T1A (vii) Board of Governors of the Federal Reserve System OMB Number: 7100-0036 Federal Deposit Insurance Corporation OMB Number: 3064-0052 Office of the Comptroller of the Currency OMB Number: 1557-0081 Federal Financial Institutions Examination Council Expires March 31, 1999 - -------------------------------------------------------------------------------- 1 This financial information has not been reviewed, or confirmed for accuracy or relevance, by the Federal Reserve System. Please refer to page i, Table of Contents, for the required disclosure of estimated burden. - -------------------------------------------------------------------------------- Consolidated Reports of Condition and Income for A Bank With Domestic and Foreign Offices--FFIEC 031 (950630) Report at the close of business March 31, 1997 ---------- (RCRI 9999) This report is required by law; 12 U.S.C. ss.324 (State member banks); 12 U.S.C. ss. 1817 (State nonmember banks); and 12 U.S.C. ss.161 (National banks). This report form is to be filed by banks with branches and consolidated subsidiaries in U.S. territories and possessions, Edge or Agreement subsidiaries, foreign branches, consoli- dated foreign subsidiaries, or International Banking Facilities. - -------------------------------------------------------------------------------- NOTE: The Reports of Condition and Income must be signed by an authorized officer and the Report of Condition must be attested to by not less than two directors (trustees) for State nonmember banks and three directors for State member and National Banks. I, Gerald A. Ronning, Executive VP & Controller -------------------------------------------- Name and Title of Officer Authorized to Sign Report of the named bank do hereby declare that these Reports of Condition and Income (including the supporting schedules) have been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and are true to the best of my knowledge and believe. /s/ Gerald A. Ronning - ----------------------------------------------- Signature of Officer Authorized to Sign Report 4/28/97 - ----------------------------------------------- Date of Signature The Reports of Condition and Income are to be prepared in accordance with Federal regulatory authority instructions. NOTE: These instructions may in some cases differ from generally accepted accounting principles. We, the undersigned directors (trustees), attest to the correctness of this Report of Condition (including the supporting schedules) and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /s/ James H. Cleave - ----------------------------------------------- Director (Trustee) /s/ Bernard J. Kennedy - ----------------------------------------------- Director (Trustee) /s/ Malcom Burnett - ----------------------------------------------- Director (Trustee) - -------------------------------------------------------------------------------- For Banks Submitting Hard Copy Report Forms: State Member Bank: Return the original and one copy to the appropriate Federal Reserve District Bank. State Nonmember Banks: Return the original only in the special return address envelope provided. If express mail is used in lieu of the special return address envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114. National Banks: Return the original only in the special return address envelope provided. If express mail is used in lieu of the special return address envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114. - -------------------------------------------------------------------------------- FDIC Certificate Number 0 0 5 8 9 ------------------- (RCRI 9030) NOTICE This form is intended to assist institutions with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements. REPORT OF CONDITION Consolidating domestic and foreign subsidiaries of the Marine Midland Bank of Buffalo Name of Bank City in the state of New York, at the close of business March 31, 1997 ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances currency and coin .............................. $ 1,026,267 Interest-bearing balances ...................... 2,219,196 Held-to-maturity securities .................... 0 Available-for-sale securities .................. 3,728,393 Federal funds sold and securities purchased under agreements to resell ..................... 1,830,419 Loans and lease financing receivables: Loans and leases net of unearned income ......................................... 21,110,911 LESS: Allowance for loan and lease losses ......................................... 441,315 LESS: Allocated transfer risk reserve .......... 0 Loans and lease, net of unearned income, allowance, and reserve ................. 20,669,596 Trading assets ................................. 1,005,199 Premises and fixed assets (including capitalized leases) ............................ 217,027 Other real estate owned ........................... 18,586 Investments in unconsolidated subsidiaries and associated companies ............. 0 Customers' liability to this bank on acceptances outstanding ........................... 21,351 Intangible assets ................................. 495,502 Other assets ...................................... 709,342 Total assets ...................................... 31,940,878 LIABILITIES Deposits: In domestic offices ............................ 20,236,232 Noninterest-bearing ............................ 4,166,679 Interest-bearing ............................... 16,069,553 In foreign offices, Edge, and Agreement subsidiaries, and IBFs ............................ 2,639,327 Noninterest-bearing ............................ 0 Interest-bearing ............................... 2,639,327 Federal funds sold and securities purchased under agreements to resell ..................... 3,281,586 Demand notes issued to the U.S. Treasury .......... 197,415 Trading Liabilities ............................... 267,837 Other borrowed money: With a remaining maturity of one year or less ........................................ 1,800,280 With a remaining maturity of more than one year ....................................... 371,195 Bank's liability on acceptances executed and outstanding .......................... 21,351 Subordinated notes and debentures ................. 497,585 Other liabilities ................................. 525,585 Total liabilities ................................. 29,838,393 Limited-life preferred stock and related surplus ................................... 0 EQUITY CAPITAL Perpetual preferred stock and related surplus ........................................... 0 Common Stock ...................................... 205,000 Surplus ........................................... 1,983,378 Undivided profits and capital reserves ............ (76,867) Net unrealized holding gains (losses) on available-for-sale securities .................. (9,026) Cumulative foreign currency translation adjustments ....................................... 0 Total equity capital .............................. 2,102,485 Total liabilities, limited-life preferred stock, and equity capital ............... 31,940,878 EX-27 37 FDS WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (1) THE CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS OF PRECISE TECHNOLOGY, INC. AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS THEN ENDED AND (2) THE CONSOLIDATED FINANCIAL STATEMENTS OF PRECISE TECHNOLOGY, INC. AS OF DECEMBER 31, 1996 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 12-MOS MAR-31-1997 DEC-31-1996 MAR-31-1997 DEC-31-1996 525 1,311 0 0 13,294 13,182 223 60 9,369 9,856 25,527 27,125 51,165 49,927 9,161 7,864 97,215 99,059 20,888 21,766 0 0 8,250 8,250 0 0 3,316 3,316 3,582 3,637 97,215 99,059 26,325 93,289 26,325 93,289 21,613 76,477 24,184 86,024 (4) (25) 0 0 1,690 5,559 454 1,731 304 1,265 150 466 0 0 0 0 0 0 150 466 0.0 0.0 0.0 0.0
EX-99.1 38 LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL To Tender for Exchange 11 1/8% Senior Subordinated Notes due 2007 of PRECISE TECHNOLOGY, INC. Pursuant to the Prospectus Dated , 1997 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997 UNLESS EXTENDED. To: Marine Midland Bank, The Exchange Agent By Registered or Certified Mail; By Facsimile: By Overnight Courier; or By Hand: (212) 658-2292 Attention: Corporate Trust Services 140 Broadway -- Level A New York, New York 10005-1180 Confirm by Telephone: Attention: Corporate Trust Services (212) 658-5931 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS INSTRUMENT VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned acknowledges receipt of the Prospectus, dated, 1997 (the 'Prospectus') of Precise Technology, Inc. (the 'Company') and this Letter of Transmittal (the 'Letter of Transmittal'), which together describe the Company's offer (the 'Exchange Offer') to exchange $1,000 principal amount of its Series B 11 1/8% Senior Subordinated Notes due 2007 (the 'Exchange Notes'), which have been registered under the Securities Act of 1933, as amended (the 'Securities Act'), pursuant to a Registration Statement, for each $1,000 principal amount of its outstanding 11 1/8% Senior Subordinated Notes due 2007 (the 'Notes'), of which $75,000,000 principal amount is outstanding. The term 'Expiration Date' shall mean 5:00 p.m., New York City time, on , 1997, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term shall mean the latest date and time to which the Exchange Offer is extended. The term 'Holder' with respect to the Exchange Offer means any person in whose name Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. Capitalized terms used but not defined herein have the respective meanings set forth in the Prospectus. This Letter of Transmittal is to be used by holders of Notes if (i) certificates representing the Notes are to be physically delivered to the Exchange Agent herewith, (ii) tender of the Notes is to be made by book entry transfer to the Exchange Agent's account at The Depository Trust Company (the 'Book-Entry Transfer Facility') pursuant to the procedures set forth in the Prospectus under the caption 'The Exchange Offer--Procedures for Tendering' by any financial institution that is a participant in the Book-Entry Transfer Facility and whose name appears on a security position listing as the owner of Notes (such participants acting on behalf of holders, are referred to herein, together with such holders, as 'Authorized Holders') or (iii) tender of the Notes is to be made according to the guaranteed delivery procedures described in the Prospectus under the caption 'The Exchange Offer -- Guaranteed Delivery Procedures.' See Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Notes must complete this letter in its entirety. 2 / / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ____________________________________________ Account Number: ___________________________________________________________ Transaction Code Number: __________________________________________________ Principal Amount of Tendered Notes: _______________________________________ If Holders desire to tender Notes pursuant to the Exchange Offer and (i) time will not permit this Letter of Transmittal, certificates representing Notes or other required documents to reach the Exchange Agent prior to the Expiration Date, or (ii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date, such Holders may effect a tender of such Notes in accordance with the guaranteed delivery procedures set forth in the Prospectus under the caption 'The Exchange Offer -- Guaranteed Delivery Procedures.' See Instruction 2 below. / / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING (See Instruction 2): Name of Registered or Authorized Holder(s): _______________________________ Window Ticket No. (if any): _______________________________________________ Date of Execution of Notice of Guaranteed Delivery: _______________________ Name of Eligible Institution that Guaranteed Delivery: _________________________________________________ If Delivered by Book-Entry Transfer, the Account Number: _____________________________________________ Transaction Code Number: __________________________________________________ / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF ONE YEAR AFTER THE EXCHANGE OFFER EFFECTIVENESS DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE NOTES. Name: _____________________________________________________________________ Address: __________________________________________________________________ Attention: ________________________________________________________________ List below the Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and principal amount of Notes should be listed on a separate signed schedule affixed hereto. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE BOXES 3
BOX 1 - DESCRIPTION OF 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007* PRINCIPAL AMOUNT TENDERED (MUST BE NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL AN INTEGRAL REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED MULTIPLE (PLEASE FILL IN, IF BLANK) NUMBER(S) BY CERTIFICATE(S) OF $1,000**) ------------------ ------------------- ------------------- ------------------ ------------------- ------------------- ------------------ ------------------- ------------------- ------------------ ------------------- ------------------- ------------------ ------------------- ------------------- TOTAL ------------------ ------------------- -------------------
* Need not be completed by Holders tendering by book-entry transfer. ** Unless indicated in the column labeled 'Principal Amount Tendered,' any tendering Holder of 11 1/8% Senior Subordinated Notes due 2007 will be deemed to have tendered the entire aggregate principal amount represented by the column labeled 'Aggregate Principal Amount Represented by Certificate(s).' If the space provided above is inadequate, list the certificate numbers and principal amounts on a separate signed schedule and affix the list to this Letter of Transmittal. The minimum permitted tender is $1,000 in principal amount of 11 1/8% Senior Subordinated Notes due 2007. All other tenders must be in integral multiples of $1,000. 4 BOX 2 SPECIAL REGISTRATION INSTRUCTIONS (SEE INSTRUCTIONS 4, 5 AND 6) To be completed ONLY if certificates for Notes in a principal amount not tendered, or Exchange Notes issued in exchange for Notes accepted for exchange, are to be issued in the name of someone other than the undersigned. Issue certificate(s) to: Name ___________________________________________________________________________ (PLEASE PRINT) Address ________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (INCLUDE ZIP CODE) ________________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) BOX 3 SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 4, 5 AND 6) To be completed ONLY if certificates for Notes in a principal amount not tendered, or Exchange Notes issued in exchange for Notes accepted Notes accepted for exchange, are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Deliver certificate(s) to: Name ___________________________________________________________________________ (PLEASE PRINT) Address ________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (INCLUDE ZIP CODE) ________________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) BOX 4 BROKER-DEALER STATUS / / Check this box if the Beneficial Owner of the Notes is a Participating Broker-Dealer and such Participating Broker-Dealer acquired the Notes for its own account as a result of market-making activities or other trading activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THIS LETTER OF TRANSMITTAL TO JOHN R. WEEKS, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY, VIA FACSIMILE: (412) 823-4110. 5 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY LADIES AND GENTLEMEN: Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to Precise Technology, Inc. (the 'Company') the principal amount of Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Notes tendered in accordance with this Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to the Notes tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company) with respect to the tendered Notes with the full power of substitution to (i) present such Notes and all evidences of transfer and authenticity to, or transfer ownership of, such Notes on the account books maintained by the Book-Entry Transfer Facility to, or upon the order of, the Company, (ii) deliver certificates for such Notes to the Company and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Company and (iii) present such Notes for transfer on the books of the Company and receive all benefits and otherwise exercise all rights of beneficial ownership of such Notes, all in accordance with the terms of the Exchange Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Notes tendered hereby and that the Company will acquire good, valid and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims, when the same are acquired by the Company. The undersigned hereby further represents that any Exchange Notes acquired in exchange for Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the undersigned, that neither the undersigned nor any other such person has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that neither the undersigned nor any such other person is an 'affiliate,' as defined in Rule 405 under the Securities Act, of the Company. In addition, the undersigned and any such person acknowledge that (a) any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must, in the absence of an exemption therefrom, comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale of the Exchange Notes and cannot rely on the position of the Staff of the Securities and Exchange Commission enunciated in no-action letters and (b) failure to comply with such requirements in such instance could result in the undersigned or such person incurring liability under the Securities Act for which the undersigned or such person is not indemnified by the Company. The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the assignment, transfer and purchase of the Notes tendered hereby. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a Prospectus in connection with any resale of such Exchange Notes, however, by so acknowledging and by delivering a Prospectus, the undersigned will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. Unless otherwise notified in accordance with the instructions set forth herein in Box 4 under 'Broker-Dealer Status,' the Company will assume that the undersigned is not a Participating Broker-Dealer. For purposes of the Exchange Offer, the Company shall be deemed to have accepted validly tendered Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. If any Notes tendered herewith are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Notes will be returned, without expense, to the undersigned at the address shown below or to a different address as may be indicated herein in Box 3 under 'Special Delivery Instructions' as promptly as practicable after the Expiration Date. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned, and every obligation of the undersigned under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representative, successors and assigns. 6 The undersigned understands that tenders of Notes pursuant to the procedures described under the caption 'The Exchange Offer -- Procedures for Tendering' in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption 'The Exchange Offer -- Withdrawal of Tenders.' Unless otherwise indicated in Box 2 under 'Special Registration Instructions,' please issue the certificates (or electronic transfers) representing the Exchange Notes issued in exchange for the Notes accepted for exchange and any certificates (or electronic transfers) for Notes not tendered or not exchanged, in the name(s) of the undersigned. Similarly, unless otherwise indicated in Box 3 under 'Special Delivery Instructions,' please send the certificates, if any, representing the Exchange Notes issued in exchange for the Notes accepted for exchange and any certificates for Notes not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below in the undersigned's signature(s). In the event that both 'Special Registration Instructions' and 'Special Delivery Instructions' are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Notes accepted for exchange in the name(s) of, and return any certificates for Notes not tendered or not exchanged to, the person(s) so indicated. The undersigned understands that the Company has no obligation pursuant to the 'Special Registration Instructions' and 'Special Delivery Instructions' to transfer any Notes from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the Notes so tendered. Holders who wish to tender their Notes and (i) whose Notes are not immediately available or (ii) who cannot deliver the Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date, may tender their Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption 'The Exchange Offer -- Guaranteed Delivery Procedures.' See Instruction 2 regarding the completion of this Letter of Transmittal printed below. 7 The below lines must be signed by the registered holder(s) exactly as their name(s) appear(s) on the Notes or by a participant in the Book-Entry Transfer Facility, exactly as such participant's name appears on a security position listing as the owner of the Notes, or by person(s) authorized to become registered holder(s) by a properly completed bond power from the registered holder(s), a copy of which must be transmitted with this Letter of Transmittal. If Notes to which this Letter of Transmittal relate are held of record by two or more joint holders, then all such holders must sign this Letter of Transmittal. PLEASE SIGN HERE WHETHER OR NOT NOTES ARE BEING PHYSICALLY TENDERED HEREBY X Date: ------------------------------------ --------------------------------- X Date: ------------------------------------ --------------------------------- Area Code and Telephone Number: ---------------------------------------------- If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, then such person must (i) set forth his or her full title below and (ii) submit evidence satisfactory to the Company of such person's authority so to act. See Instruction 5 regarding the completion of this Letter of Transmittal printed below. Name(s): ---------------------------------------------------------------------- (Please Print) Capacity: ---------------------------------------------------------------------- Address: ---------------------------------------------------------------------- (Include Zip Code) MEDALLION SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 5) CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION Signature(s) Guaranteed by an Eligible Institution: ------------------------------------------------------ (Authorized Signature) - ------------------------------------------------------------------------------- (Title) - ------------------------------------------------------------------------------- (Name of Firm) - ------------------------------------------------------------------------------- (Address, Include Zip Code) - ------------------------------------------------------------------------------- (Area Code and Telephone Number) Dated: ------------------------------------------------------------------------- 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a confirmation of book-entry transfer into the Exchange Agent's account with the Book-Entry Transfer Facility for tendered Notes transferred electronically), as well as a properly completed and duly executed copy of this Letter of Transmittal (or facsimile thereof), a Substitute Form W-9 (or facsimile thereof) and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. The method of delivery of certificates for Notes and all other required documents is at the election and sole risk of the tendering holder and delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. As an alternative to delivery by mail, the holder may wish to use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. Neither the Company nor the Exchange Agent is under an obligation to notify any tendering holder of the Company's acceptance of tendered Notes prior to the completion of the Exchange Offer. 2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes but whose Notes are not immediately available and who cannot deliver their certificates for Notes (or comply with the procedures for book-entry transfer prior to the Expiration Date), the Letter of Transmittal and any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Notes according to the guaranteed delivery procedures set forth below. Pursuant to such procedures: (i) such tender must be made by or through a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States (an 'Eligible Institution'); (ii) prior to the Expiration Date, the Exchange Agent must have received from the holder and the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or hand delivery) setting forth the name and address of the holder, the certificate number or numbers of the tendered Notes, and the principal amount of tendered Notes and stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof), together with the tendered Notes (or a confirmation of book-entry transfer into the Exchange Agent's account with the Book-Entry Transfer Facility for Notes transferred electronically) and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal and certificates representing the tendered Notes in proper form for transfer (or a confirmation of book-entry transfer into the Exchange Agent's account with the Book-Entry Transfer Facility for Notes transferred electronically) must be received by the Exchange Agent within three New York Stock Exchange trading days after the Expiration Date. Any holder who wishes to tender Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery relating to such Notes prior to the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by a Holder who attempted to use the guaranteed delivery person. 3. TENDER BY HOLDER. Only a holder of Notes may tender such Notes in the Exchange Offer. Any beneficial owner of Notes who is not the registered holder and who wishes to tender should arrange with such holder to execute and deliver this Letter of Transmittal on such owner's behalf or must, prior to completing and executing this Letter of Transmittal and delivering such Notes, either make appropriate arrangements to register ownership of the Notes in such owner's name or obtain a properly completed bond power from the registered holder. 4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral multiples of $1,000 in principal amount. If less than the entire principal amount of Notes is tendered, the tendering holder should fill in the principal amount tendered in the column labeled 'Aggregate Principal Amount Tendered' of the box entitled 'Description of Notes' (Box 1) above. The entire principal amount of Notes delivered to the Exchange Agent 9 will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of Notes is not tendered, Notes for the principal amount of Notes not tendered and Exchange Notes exchanged for any Notes tendered will be sent to the holder at his or her registered address (or transferred to the account of the Book-Entry Facility designated above), unless a different address (or account) is provided in the appropriate box on this Letter of Transmittal, as soon as practicable following the Expiration Date. 5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Notes tendered herewith, the signatures must correspond with the name(s) as written on the face of the tendered Notes without alteration, enlargement, or any change whatsoever. If this Letter of Transmittal is signed by a participant in the Book-Entry Transfer Facility, the signature must correspond with the name as it appears on the security position listing as the owner of the Notes. If any of the tendered Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Notes are held in different names on several Notes, it will be necessary to complete, sign, and submit as many separate copies of the Letter of Transmittal documents as there are names in which tendered Notes are held. If this Letter of Transmittal is signed by the registered holder or Authorized Holder, and Exchange Notes are to be issued and any untendered or unaccepted principal amount of Notes are to be reissued or returned to the registered holder or Authorized Holder, then, the registered holder or Authorized Holder need not and should not endorse any tendered Notes nor provide a separate bond power. In any other case, the registered holder or Authorized Holder must either properly endorse the Notes tendered or transmit a properly completed separate bond power with this Letter of Transmittal (in either case, executed exactly as the name(s) of the registered holder(s) appear(s) on such Notes, and, with respect to a participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Notes, exactly as the name(s) of the participant(s) appear(s) on such security position listings), with the signature(s) on the endorsement or bond power guaranteed by an Eligible Institution unless such certificates or bond powers are signed by an Eligible Institution. If this Letter of Transmittal or any Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and evidence satisfactory to the Company of their authority to so act must be submitted with this Letter of Transmittal. No medallion signature guarantee is required if (i) this Letter of Transmittal is signed by the registered holder(s) of the Notes tendered herewith (or by a participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of the Tendered Notes) and the issuance of Exchange Notes (and any Notes not tendered or not accepted) are to be issued directly to such registered holder(s) (or, if signed by a participant in the Book-Entry Transfer Facility, any Exchange Notes or Notes not tendered or not accepted are to be deposited to such participant's account at such Book-Entry Transfer Facility) and neither the 'Special Delivery Instructions' (Box 3) nor the 'Special Registration Instructions' (Box 2) has been completed, or (ii) such Notes are tendered for the account of an Eligible Institution. In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. 6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the applicable box, the name and address (or account at the Book-Entry Transfer Facility) in which the Exchange Notes and/or substitute Notes for principal amounts not tendered or not accepted for exchange are to be sent (or deposited), if different from the name and address or account of the person signing this Letter of Transmittal. In the case of issuance in a different name, the employer identification number or social security number of the person named must also be indicated and the indicated and the tendering holders should complete the applicable box. If no such instructions are given, the Exchange Notes (and any Notes not tendered or not accepted) will be issued in the name of and sent to the Authorized Holder of the Notes or deposited at such Authorized Holders' account at the Book-Entry Transfer Facility. 7. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the sale and transfer of Notes to it or its order pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other 10 than the transfer and sale of Notes to the Company or its order pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or on any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption from taxes therefrom is not submitted with this Letter of Transmittal, the amount of transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the Notes listed in this Letter of Transmittal. 8. TAX IDENTIFICATION NUMBER. Federal income tax law required that a holder of any Notes which are accepted for exchange must provide the Company (as payor) with its correct taxpayer identification number ('TIN'), which, in the case of a holder who is an individual, is his or her social security number. If the Company is not provided with the correct TIN, the Holder may be subject to a $50 penalty imposed by Internal Revenue Service. (If withholding results in an over-payment of taxes, a refund may be obtained.) Certain holders (including, among other, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed 'Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9' for additional instructions. To prevent backup withholding, each tendering holder must provide such holder's correct TIN by completing the Substitute Form W-9 set forth herein, certifying that the TIN provided is correct (or that such holder is awaiting a TIN), and that (i) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of failure to report a interest or dividends or (ii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the Notes are registered in more than one name or are not in the name of the actual owner, see the enclosed 'Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9' for information on which TIN to report. The Company reserves the right in its sole discretion to take whatever steps are necessary to comply with the Company's obligation regarding backup withholding. 9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of tendered Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Notes not properly tendered or any Notes the Company's acceptance of which would, in the opinion of the Company or its counsel, be unlawful. The Company also reserves the right in its sole discretion to waive any conditions of the Exchange Offer or defects or irregularities in tenders of Notes as to any ineligibility of any holder who seeks to tender Notes in the Exchange Offer. The interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Notes must be cured within such time as the Company shall determine. The Company will use reasonable efforts to give notification of defects or irregularities with respect to tenders of Notes, but shall not incur any liability for failure to give such notification. Tenders of Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. 10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend, waive, or modify specified conditions in the Exchange Offer in the case of any tendered Notes. 11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or contingent tender of Notes on transmittal of this Letter of Transmittal will be accepted. 12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose Notes have been mutilated, lost, stolen, or destroyed should contact the Exchange Agent at the address indicated above for further instruction. 13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the Prospectus may be directed to the Exchange Agent at the address specified in the Prospectus. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. 11 14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF NOTES. Subject to the terms and conditions of the Exchange Offer, the Company will accept for exchange all validly tendered Notes as soon as practicable after the Expiration Date and will issue Exchange Notes therefor as soon as practicable thereafter. For purposes of the Exchange Offer, the Company shall be deemed to have accepted tendered Notes when, as and if the Company has given written and oral notice thereof to the Exchange Agent. If any tendered Notes are not exchanged pursuant to the Exchange Offer for any reason, such unexchanged Notes will be returned, without expense, to the undersigned at the address shown above (or credited to the undersigned's account at the Book-Entry Transfer Facility designated above) or at a different address as may be indicated under 'Special Delivery Instructions.' 15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited withdrawal rights set forth in the Prospectus under the caption 'The Exchange Offer -- Withdrawal of Tenders.' 12 PAYOR'S NAME: PRECISE TECHNOLOGY, INC. Name (if joint names, list first and circle the name of the person or entity whose number you enter in Part I below. See instructions if your name has changed.) ------------------------------------------------------------------------------ Address ______________________________________________________________________ City, State and ZIP Code _____________________________________________________ List account number(s) here (optional) _______________________________________ PART 1 -- PLEASE PROVIDE YOUR TAXPAYER --------------------------- SUBSTITUTE IDENTIFICATION NUMBER ('TIN') IN THE BOX AT RIGHT Social Security Number FORM W-9 AND CERTIFY BY SIGNING AND DATING BELOW or TIN DEPARTMENT OF THE PART 2 -- Check the box if you are NOT subject to PART 3 -- TREASURY INTERNAL backup withholding under the provisions of section Awaiting TIN / / REVENUE SERVICE 3408(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that you are subject to backup withholding as a result of failure to report all interest of dividends or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. / / PAYER'S REQUEST FOR CERTIFICATION -- Under the penalties of perjury, I certify that the information TAXPAYER IDENTIFICATION provided on this form is true, correct and complete. NUMBER (TIN) SIGNATURE DATE ---------------------------- ----------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 13 EX-99.2 39 NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO PRECISE TECHNOLOGY, INC. 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007 This form must be used by a holder of 11 1/8% Senior Subordinated Notes due 2007 (the 'Notes') of Precise Technology, Inc. (the 'Company'), who wishes to tender Notes to the Exchange Agent pursuant to the guaranteed delivery procedures described in the 'The Exchange Offer -- Guaranteed Delivery Procedures' of the Prospectus, dated (the 'Prospectus'), and in Instruction 2 to the related Letter of Transmittal. Any holder who wishes to tender Notes pursuant to such guaranteed delivery procedures must ensure that the Exchange Agent receives this Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange Offer. Capitalized terms not defined herein have the meanings ascribed to them in the Prospectus or the Letter of Transmittal. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , UNLESS EXTENDED (THE 'EXPIRATION DATE'). To: Marine Midland Bank (the 'Exchange Agent') By Facsimile: (212) 658-2292 Confirmation by Telephone: (212) 658-5931 By Mail, Overnight Courier or Hand Delivery: 140 Broadway -- Level A New York, New York 10005-1180 Attn: Corporate Trust Services DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an 'Eligible Institution' under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. LADIES AND GENTLEMEN: The undersigned hereby tenders to the Company, upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal. The undersigned hereby tenders the Notes listed below:
CERTIFICATE NUMBER(S) AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL (IF KNOWN) OF NOTES AMOUNT REPRESENTED AMOUNT TENDERED OR ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY - ------------------------------ ---------------------------------- ------------------------ - ------------------------------ ---------------------------------- ------------------------ - ------------------------------ ---------------------------------- ------------------------ - ------------------------------ ---------------------------------- ------------------------ - ------------------------------ ---------------------------------- ------------------------ - ------------------------------ ---------------------------------- ------------------------ - ------------------------------ ---------------------------------- ------------------------
PLEASE SIGN AND COMPLETE Signatures of Registered Holder(s) or Date: , 1997 Authorized Signatory: __________________________________________________________ Address: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Area Code and Telephone No.: ___________________________________________________ Name of Registered Holder(s): __________________________________________________ This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as their name(s) appear on certificates for Notes or on a security position listing as the owner of Notes, or by person(s) authorized to become Holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. Please print name(s) and address(es) Name(s): _______________________________________________________________________ Capacity: ______________________________________________________________________ Address(es): ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or correspondent in the United States, or is otherwise an 'eligible guarantor institution' within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the Notes tendered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Notes into the Exchange Agent's account at Book-Entry Transfer Facility described in the Prospectus under the caption 'The Exchange Offer -- Guaranteed Delivery Procedures' and in the Letter of Transmittal) and any other required documents, all by 5:00 p.m., New York City time, on the third New York Stock Exchange trading day following the Expiration Date. Name of Firm: --------------------------------------- --------------------------------------------------------- Authorized Signature Address: ------------------------------------------- Area Code and Telephone No.: Name: ----------------------- --------------------------------------------------- Title: --------------------------------------------------- Date: , 1997 --------------------------------------------
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL. INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY 1. Delivery of this Notice of Guaranteed Delivery. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and any other required documents to the Exchange Agent is at the election and sole risk of the holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. As an alternative to delivery by mail, the holders may wish to consider using an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. For a description of the guaranteed delivery procedures, see Instruction 2 of the Letter of Transmittal. 2. Signatures on this Notice of Guaranteed Delivery. If this Notice of Guaranteed Delivery is signed by the registered holder(s) of the Notes referred to herein, the signature must correspond with the name(s) written on the face of the Notes without alteration, enlargement, or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Notes, the signature must correspond with the name shown on the security position listing as the owner of the Notes. If this Notice of Guaranteed Delivery is signed by a person other than the registered holder(s) of any Notes listed or a participant of the Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by appropriate bond powers, signed as the name of the registered holder(s) appears on the Notes or signed as the name of the participant shown on the Book-Entry Transfer Facility's security position listing. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, or other person acting in a fiduciary or representative capacity, such person should so indicate when signing and submit with the Letter of Transmittal evidence satisfactory to the Company of such person's authority to so act. 3. Requests for Assistance or Additional Copies. Questions and requests for assistance and requests for additional copies of the Prospectus may be directed to the Exchange Agent at the address specified in the Prospectus. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. EX-99.3 40 INSTRUCTIONS TO REGISTERED HOLDER INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER OF PRECISE TECHNOLOGY, INC. 11 1/8% SENIOR SUBORDINATED NOTES DUE 2007 To Registered Holder and/or Participant of the Book-Entry Transfer Facility: The undersigned hereby acknowledges receipt of the Prospectus, dated (the 'Prospectus'), of Precise Technology, Inc. (the 'Company'), and the accompanying Letter of Transmittal (the 'Letter of Transmittal'), that together constitute the Company's offer (the 'Exchange Offer'). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to the action to be taken by you relating to the Exchange Offer with respect to the 11 1/8% Senior Subordinated Notes due 2007 (the 'Notes') held by you for the account of the undersigned. The aggregate face amount of the Notes held by you for the account of the undersigned is (FILL IN AMOUNT): $ of the 11 1/8% Senior Subordinated Notes due 2007. With respect to the Exchange Offer, the undersigned hereby instructs you (CHECK APPROPRIATE BOX): / / TO TENDER the following Notes held by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY): $ . / / NOT TO TENDER any Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that (i) the undersigned's principal residence is in the state of (fill in state) , (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes, (iv) the undersigned acknowledges that any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the 'Act'), in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in no- action letters that are discussed in the section of the Prospectus entitled 'The Exchange Offer -- Resales of the New Notes,' and (v) the undersigned is not an 'affiliate,' as defined in Rule 405 under the Act, of the Company; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Notes. / / Check this box if the Beneficial Owner of the Notes is a Participating Broker-Dealer and such Participating Broker-Dealer acquired the Notes for its own account as a result of market-making activities or other trading activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THESE INSTRUCTIONS TO JOHN R. WEEKS, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY, VIA FACSIMILE: (412) 823-4110. SIGN HERE Name of beneficial owner(s): ___________________________________________________ Signature(s): __________________________________________________________________ Name (please print): ___________________________________________________________ Address: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Telephone number: ______________________________________________________________ Taxpayer Identification or Social Security Number: _____________________________ Date: __________________________________________________________________________ 2 -----END PRIVACY-ENHANCED MESSAGE-----