-----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, LElJShsCju0/NdrUxGvUWDn8OSwqIlybCdT5fL6hblZ8u+FsElZZTZvQCtvdlTu/ hesBShCrR59ayvvpUQSZ3w== 0000950131-99-002095.txt : 19990406 0000950131-99-002095.hdr.sgml : 19990406 ACCESSION NUMBER: 0000950131-99-002095 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990319 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990405 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNICATIONS INSTRUMENTS INC CENTRAL INDEX KEY: 0001053916 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 561828270 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-38209 FILM NUMBER: 99587218 BUSINESS ADDRESS: STREET 1: 1396 CHARLOTTE HIGHWAY STREET 2: P O BOX 520 CITY: FAIRVIEW STATE: NC ZIP: 28730 BUSINESS PHONE: 7046281711 MAIL ADDRESS: STREET 1: 1396 CHARLOTTE HIGHWAY STREET 2: P O BOX 520 CITY: FAIRVIEW STATE: NC ZIP: 28730 8-K 1 FORM 8-K FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 19, 1999 COMMUNICATIONS INSTRUMENTS, NORTH CAROLINA 56-182-82-70 INC. (Exact name of registrant as (State or other (I.R.S. Employer specified in its charter) jurisdiction of Identification No.) incorporation) 1396 CHARLOTTE HIGHWAY FAIRVIEW, NORTH CAROLINA 28730 (Address of principal executive (Zip Code) offices) (828)628-1711 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name or former address, if changed since last report) Item 2. ACQUISITION AND DISPOSITION OF ASSETS On March 19, 1999, Communications Instruments, Inc. (the "Company") purchased all of the outstanding equity securities of Products Unlimited Corporation ("Products"), a marketer and manufacturer of relays, transformers, and contactors for the HVAC industry. Pursuant to the Stock Purchase Agreement, the Company paid approximately $59.4 million. In addition, if Products achieves certain sales targets for the year ending December 31, 1999 and December 31, 2000, the Company will make additional payments to the former shareholders of Products not to exceed $4.0 million in the aggregate. The payment of the purchase price and related fees was financed by the issuance of $55.0 million of Tranche Term B loans in accordance with an amendment to the Senior Credit facility, the contribution of $5.0 million in additional paid in capital by the parent, and a draw on the revolving loan portion of the Company's Senior Credit facility. Products has manufacturing facilities in Sterling and Prophetstown, Illinois and Sabula and Guttenberg, Iowa and has approximately 1,000 employees. The registrant published a press release regarding the Acquisition on March 22, 1999. A copy of such press release is included herein as Exhibit 99.1. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED At the time of this report, it is not possible to provide the required financial statements for Products. Such statements will be filed as an amendment to this report on Form 8-K within 60 days after the filing of this report. (b) PRO FORMA FINANCIAL INFORMATION At the time of this report, it is not possible to provide the required pro forma financial information relating to the acquisition. Such information will be filed as an amendment to this Report on Form 8-K within 60 days after the filing of this report. (c) Exhibits 10.1 Stock Purchase Agreement dated March 19, 1999, by and among Products Unlimited Corporation, the Stockholders of Products Unlimited Corporation and the Company. 10.2 Amended and restated Credit Agreement among CII Technologies Inc., the Company, various lenders, NationsBank, N.A., as an Issuing Lender and Swingline Lender, and NationsBank, N.A., as the Administrative Agent. 10.3 Amended and restated Subsidiary Guaranty by certain subsidiaries of the Company in favor of NationsBank, N.A. 10.4 Amended and restated Security Agreement among CII Technologies Inc., the Company, certain subsidiaries of the Company and Bank of America National Trust and Savings Association, as collateral agent. 10.5 Amended and restated Pledge Agreement by CII Technologies Inc., the Company and certain subidiaries of the Company in favor of Bank of America National Trust and Savings Association, as collateral agent. 99.1 Press release dated March 22, 1999, published by the registrant. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Communications Instruments, Inc. Date: April 5, 1999 By:_________________________________ Richard L. Heggelund Chief Financial Officer EX-10.1 2 STOCK PURCHASE AGREEMENT DATED 3/19/99 EXHIBIT 10.1 - -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT BY AND AMONG PRODUCTS UNLIMITED CORPORATION, THE STOCKHOLDERS OF PRODUCTS UNLIMITED CORPORATION, AND COMMUNICATIONS INSTRUMENTS, INC. DATED AS OF MARCH 19, 1999 - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE ---- ARTICLE I -- DEFINITIONS....................................................................................... 1 Section 1.1 Definitions................................................................ 1 ----------- Section 1.2 Cross Reference. ......................................................... 7 --------------- ARTICLE II -- THE STOCK PURCHASE............................................................................... 9 Section 2.1 Pre-Closing Estimates of Certain Amounts. ................................ 9 ---------------------------------------- Section 2.2 Stock Purchase............................................................. 9 -------------- Section 2.3 Closing.................................................................... 10 ------- Section 2.4 Post-Closing Adjustments. ................................................. 10 ------------------------ Section 2.5 Earn-Out................................................................... 13 -------- ARTICLE III -- CONDITIONS TO CLOSING........................................................................... 16 Section 3.1 Conditions to the Purchaser's Obligations. ............................... 16 ----------------------------------------- Section 3.2 Conditions to the Sellers' Obligations..................................... 19 -------------------------------------- ARTICLE IV -- COVENANTS BEFORE CLOSING......................................................................... 21 Section 4.1 Affirmative Covenants of the Company....................................... 21 ------------------------------------ Section 4.2 Negative Covenants of the Company.......................................... 22 --------------------------------- Section 4.3 Covenants of Purchaser. .................................................. 23 ---------------------- ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF THE SELLERS..................................................... 24 Section 5.1 Organization and Corporate Power........................................... 24 -------------------------------- Section 5.2 Authorization of Transactions.............................................. 25 ----------------------------- Section 5.3 Absence of Conflicts. .................................................... 25 -------------------- Section 5.4 Capitalization............................................................. 25 -------------- Section 5.5 Financial Statements and Related Matters. ................................ 26 ---------------------------------------- Section 5.6 Absence of Undisclosed Liabilities. ...................................... 26 ---------------------------------- Section 5.7 Absence of Certain Developments. ......................................... 27 ------------------------------- Section 5.8 Real Property.............................................................. 28 ------------- Section 5.9 Assets. .................................................................. 29 ------ Section 5.10 Taxes. ................................................................... 30 ----- Section 5.11 Contracts and Commitments.................................................. 31 ------------------------- Section 5.12 Proprietary Rights......................................................... 33 ------------------ Section 5.13 Litigation; Proceedings.................................................... 34 ----------------------- Section 5.14 Brokerage. ............................................................... 34 --------- Section 5.15 Governmental Licenses and Permits.......................................... 34 --------------------------------- Section 5.16 Employees.................................................................. 34 --------- Section 5.17 Employee Benefit Plans. .................................................. 35 ---------------------- Section 5.18 Insurance. ............................................................... 36 --------- Section 5.19 Officers and Directors; Bank Accounts...................................... 36 -------------------------------------
Section 5.20 Affiliate Transactions. ................................................. 36 ---------------------- Section 5.21 Compliance with Laws. ................................................... 36 -------------------- Section 5.22 Environmental Matters. .................................................. 37 --------------------- Section 5.23 Disclosure................................................................ 38 ---------- Section 5.24 Closing Date. ........................................................... 38 ------------ ARTICLE VI -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................................................ 36 Section 6.1 Organization. ............................................................ 38 ------------ Section 6.2 Authorization of Transactions. .......................................... 38 ----------------------------- Section 6.3 Absence of Conflicts...................................................... 39 -------------------- Section 6.4 Litigation. ............................................................. 39 ---------- Section 6.5 Brokerage. ............................................................... 39 --------- Section 6.6 Cooperation............................................................... 39 ----------- Section 6.7 Closing Date.............................................................. 39 ------------ ARTICLE VII -- TERMINATION.................................................................................... 40 Section 7.1 Termination............................................................... 40 ----------- Section 7.2 Effect of Termination. .................................................. 40 ---------------------- ARTICLE VIII -- INDEMNIFICATION AND RELATED MATTERS........................................................... 40 Section 8.1 Survival. ............................................................... 40 -------- Section 8.2 Indemnification........................................................... 41 --------------- Section 8.3 Certain Tax Matters....................................................... 46 ------------------- ARTICLE IX -- ADDITIONAL AGREEMENTS........................................................................... 46 Section 9.1 Appointment of Representative............................................. 46 ----------------------------- Section 9.2 Press Releases and Announcements. ....................................... 48 -------------------------------- Section 9.3 Further Transfers. ...................................................... 48 ----------------- Section 9.4 Specific Performance...................................................... 48 -------------------- Section 9.5 Expenses. ............................................................... 49 -------- Section 9.6 Exclusivity............................................................... 49 ----------- Section 9.7 Noncompetition, Nonsolicitation, and Confidentiality...................... 49 ---------------------------------------------------- Section 9.8 Split Dollar Life Insurance Policies...................................... 51 ------------------------------------ ARTICLE X -- MISCELLANEOUS.................................................................................... 52 Section 10.1 Amendment and Waiver. ................................................... 52 -------------------- Section 10.2 Notices................................................................... 52 ------- Section 10.3 Binding Agreement; Assignment. .......................................... 53 ----------------------------- Section 10.4 Severability. ........................................................... 53 ------------ Section 10.5 No Strict Construction. ................................................. 54 ---------------------- Section 10.6 Captions.................................................................. 54 -------- Section 10.7 Entire Agreement. ....................................................... 54 ---------------- Section 10.8 Counterparts. ........................................................... 54 ------------ Section 10.9 Governing Law............................................................. 54 -------------
Section 10.10 Parties in Interest....................................................... 54 ------------------- Section 10.11 Schedules. .............................................................. 54 ---------
INDEX OF SCHEDULES ------------------ Affiliated Transactions Schedule Assets Schedule Benefit Plans Schedule Brokerage Schedule Conflicts Schedule Contracts Schedule Developments Schedule Employees Schedule Environmental Schedule Financial Statements Schedule Insider Transaction Schedule Insurance Schedule License Schedule Litigation Schedule Officers, Directors, and Bank Accounts Schedule Organization Schedule Payment Allocation Schedule Proprietary Rights Schedule Real Property Schedule Schedule of Stockholders Special Transfers Schedule Taxes Schedule INDEX OF EXHIBITS ----------------- Exhibit A - Form of Escrow Agreement Exhibit B - Form of Opinion of Ward, Murray, Pace & Johnson, P.C. Exhibit C - Form of Consulting Agreement Exhibit D - Form of Supply Agreement Exhibit E - Form of Opinion of Kirkland & Ellis STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT, dated as of March 19, 1999, is made by and among PRODUCTS UNLIMITED CORPORATION, an Iowa corporation (the "Company"), ------- the stockholders of the Company listed on the "Schedule of Stockholders" ------------------------ attached hereto (collectively, the "Sellers" and individually, a "Seller"), and ------- ------ COMMUNICATIONS INSTRUMENTS, INC., a North Carolina corporation (the "Purchaser"). The Company, the Sellers and the Purchaser are referred to herein --------- collectively as the "Parties" and individually as a "Party." Certain capitalized ------- ----- terms used herein are defined in Article I below. WHEREAS, the authorized capital stock of the Company consists of 50,000 shares of Class B Common Stock, par value $1.00 per share (the "Common ------ Stock"), of which 1000 shares are issued and outstanding, and 50,000 shares of - ----- Preferred Stock, having no par value per share (the "Preferred Voting Stock," ---------------------- and together with the Common Stock, the "Stock"), of which 1000 shares are ----- issued and outstanding; WHEREAS, the Sellers own beneficially and of record 100% of the issued and outstanding Stock; and WHEREAS, the Purchaser desires to acquire from each Seller, and each Seller desires to sell to the Purchaser, all of the Stock owned by such Seller (collectively, the "Acquired Stock"). -------------- NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties, and covenants which are to be made and performed by the respective Parties, the Parties hereby agree as follows: ARTICLE 1 -- DEFINITIONS SECTION 1.1 DEFINITIONS. When used in this Agreement, the following terms ----------- have the meanings set forth below: "Acquired Companies" means the Company and each of its Subsidiaries. ------------------ "Affiliate" of any particular Person means any other Person --------- controlling, controlled by, or under common control with such particular Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract, or otherwise. "Affiliated Group" means any affiliated group as defined in Code ---------------- Section 1504 that has filed a consolidated return for federal income tax purposes (or any similar group under state, local, or foreign law). "Agreement" means this Stock Purchase Agreement, including all --------- Exhibits and Schedules hereto, as it may be amended from time to time in accordance with its terms. "Baseline Net Working Capital Amount" means $6,326,000.00. ----------------------------------- "Capital Stock" means (i) in the case of a corporation, any and all ------------- shares of capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership or limited liability company, any and all partnership or membership interests (whether general or limited), (iv) in any case, 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, and (v) in any case, any right to acquire any of the foregoing. "Cash" means all cash, cash equivalents, and marketable securities. ---- "Cash Amount" means the book value of the Company's Cash as of the ----------- close of business on the day before the Closing Date, determined on a consolidated basis in accordance with GAAP. "Code" means the Internal Revenue Code of 1986, as amended, and any ---- reference to any particular Code section shall be interpreted to include any revision of or successor to that section regardless of how numbered or classified. "Environmental and Safety Requirements" means all federal, state, ------------------------------------- local and foreign statutes, regulations, ordinances and similar provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and all common law obligations concerning public health and safety, worker health and safety, and pollution or protection of the environment, including all such standards of conduct and bases of obligations relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or by- products, asbestos, polychlorinated biphenyls (or PCBs), noise or radiation. "Excluded Assets and Liabilities" means the Company's ownership ------------------------------- interest in RHDC-1 Limited Partnership, RHDC-2 Limited Partnership and Mt. Carroll Apartments Limited Partnership and any interests or rights accruing to the Company in any Chicago Bulls season tickets, together with all obligations or liabilities (whether accrued, absolute, contingent, unliquidated, or otherwise, whether or not known, whether due or to become due, and regardless of when asserted) arising out of or relating to any of such assets; provided however, that in the event the Company is unable to transfer any such interest in Chicago Bulls season tickets, the Purchaser shall cause the Company to purchase such tickets and to sell them to Gary W. Schreiner at the Purchaser's cost. "GAAP" means generally accepted accounting principles of the United ---- States, consistently applied. "Improvements" means all buildings, fixtures and other improvements ------------ located on each Owned Real Property or Leased Real Property which are (or, pursuant to the Special Real Property Transfer, will be) owned by any Acquired Company, regardless of whether (in the case of Improvements on Leased Real Property) such improvements are subject to reversion to the landlord or other third party upon the expiration or termination of the Real Property Lease for such Leased Real Property. "Indebtedness" of any Person means, without duplication: (a) ------------ indebtedness for borrowed money or for the deferred purchase price of property or services in respect of which such Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the Ordinary Course of Business), and any commitment by which such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit; (b) indebtedness guaranteed in any manner by such Person, including a guarantee in the form of an agreement to repurchase or reimburse; (c) obligations under capitalized leases in respect of which such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss; (d) indebtedness due to stockholders or for any preferred stock; and (e) obligations under deferred compensation programs or for dividends owed. "Indebtedness Amount" means the book value of the Company's ------------------- Indebtedness as of the close of business on the day before the Closing Date, determined on a consolidated basis in accordance with GAAP; provided that for purposes of such calculation all interest, prepayment penalties, premiums, fees and expenses (if any) which would be payable if such Indebtedness was paid in full at the Closing shall be treated as Indebtedness. "Insider" means, any officer, director, executive employee, ------- stockholder, partner or Affiliate, as applicable, of any Acquired Company or any spouse or descendant (whether natural or adopted) of any such individual or any entity in which any of the foregoing Persons owns a 5% or greater direct or indirect beneficial interest. "knowledge" and "aware" and terms of similar import mean, with respect --------- ----- to a Person, the actual knowledge of such Person (and if such Person is an entity, this means the actual knowledge of the officers, directors and executive employees of such Person), after making reasonable inquiry and exercising reasonable diligence with respect to the particular matter in question. "Leased Real Property" means all land, building, fixtures or other -------------------- real property in which any Acquired Company has a leasehold, subleasehold, license, concession or other real property right or interest under the Real Property Leases. "Licenses" means all permits, licenses, franchises, certificates, -------- approvals, and other authorizations of third parties or foreign, federal, state, or local governments or other similar rights. 3 "Liens" means any mortgage, pledge, security interest, encumbrance, ----- lien, or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against the Acquired Companies, any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party of property leased to any Acquired Company under a lease which is not in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another Person (other than any subordination arising in the Ordinary Course of Business). "Loss" means, with respect to any Person, any damage, liability, ---- diminution in value, demand, claim, action, cause of action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense, whether or not arising out of a third party claim, including all interest, penalties, reasonable attorneys' fees and expenses and all amounts paid or incurred in connection with any action, demand, proceeding, investigation or claim by any third party (including any governmental entity or any department, agency or political subdivision thereof) against or affecting such Person or which, if determined adversely to such Person, would give rise to, evidence the existence of, or relate to, any other Loss and the investigation, defense or settlement of any of the foregoing. "Material Adverse Effect" means any material adverse effect on the ----------------------- business, financial condition, operations, results of operations, or future prospects of the Acquired Companies, taken as a whole. "Net Sales" means, with respect to any period, the Company's net sales --------- for such period, determined on a consolidated basis in accordance with GAAP, but modified as follows (without duplication): (a) if any of the Acquired Companies sells, exchanges, or otherwise disposes of any material portion of its assets other than in the ordinary course of business consistent with past practice (a "Material -------- Disposition"), Net Sales will be adjusted to what it would have been had ----------- such Material Disposition not occurred (assuming, for purposes of such adjustment, that the assets so disposed of would have contributed to, or reduced, the Acquired Companies' consolidated net sales following the date of such Material Disposition at the same average per diem rate as such assets contributed to, or reduced, the Acquired Companies' consolidated net sales during the period between the first day of such period and the date of such Material Disposition); and (b) if any of the Acquired Companies purchases, exchanges, or otherwise acquires any material assets other than in the ordinary course of business consistent with past practice (a "Material Acquisition"), Net -------------------- Sales will be adjusted to what it would have been had such Material Acquisition not occurred. "Net Working Capital Amount" means the book value of the Company's -------------------------- current assets (excluding Cash, marketable securities, Taxes receivable (if any), related party assets, and Excluded Assets and Liabilities), with inventory calculated as set forth below, minus the book value 4 of the Company's current liabilities (including float but excluding notes payable, Taxes payable and Indebtedness, including, without limitation, related party obligations, accrued interest and dividends, and Excluded Assets and Liabilities), in each case as of the close of business on the day before the Closing Date, determined on a consolidated basis in accordance with GAAP. For purposes of this Net Working Capital Amount definition, inventory shall be calculated on a book basis plus an adjustment to account for overhead and labor that should have been capitalized, but was not, during interim months. For any interim month calculation date, the adjustment will equal (i) the material value in inventory shown on the Company's balance sheet for that date, divided by (ii) ------- -- .753, which is the ratio of the material component in inventory at August 31, 1998, per the physical inventory, to total inventory at August 31, 1998 calculated to reflect actual labor and overhead rates for the twelve months ended August 31, 1998, minus (iii) the total inventory balance recorded on the ----- Company's balance sheet for the interim calculation date. "Ordinary Course of Business" means the ordinary course of the --------------------------- Company's businesses consistent with past practice (including, without limitation, with respect to collection of accounts receivable, purchases of supplies, repairs and maintenance, payment of accounts payable and accrued expenses, terms of sale, levels of capital expenditures, and operation of cash management practices generally). "Owned Real Property" means all real property which is owned by any ------------------- Acquired Company, and all real property which is owned by any Affiliate of any Acquired Company and used by an Acquired Company in operation of its businesses. "Permitted Liens" means (a) real estate taxes, assessments and other --------------- governmental fees or other charges levied with respect to the Real Property not yet due and payable as of the Closing Date; (b) mechanics and similar statutory liens arising or incurred in the Ordinary Course of Business for amounts which are not delinquent and which would not, individually or in the aggregate, have a Material Adverse Effect; (c) zoning, entitlement, building and other land use and similar laws or regulations imposed by any governmental authority having jurisdiction over such parcel which are not violated by the current use and operation thereof; (d) easements, covenants, conditions, restrictions and other similar matters of record affecting title to such Real Property which would not materially impair the use or occupancy of such parcel in the operation of the Acquired Companies' businesses; and (e) liens or encumbrances placed by a landlord or other third party with respect to any Real Property. "Person" means and includes an individual, a partnership, a joint ------ venture, a limited liability company, a corporation or trust, an unincorporated organization, a group, a government or other department or agency thereof, or any other entity. "Proprietary Rights" means any and all (i) patents, patent ------------------ applications, patent disclosures, as well as any reissues, continuations, continuations-in-part, divisions, extensions or reexaminations thereof, (ii) trademarks, service marks, trade dress, trade names, logos, and corporate names and registrations and applications for registration thereof, together with all of the goodwill associated therewith, (iii) copyrights (registered or unregistered) and copyrightable works and 5 registrations and applications for registration thereof, (iv) mask works and registrations and applications for registration thereof, (v) computer software, data, data bases, and documentation thereof, (vi) trade secrets and other confidential information (including, without limitation, ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques (including, without limitation, the Company's Continuous Flow Manufacturing Process), research and development information, drawings, specifications, designs, plans, proposals, technical data, financial and marketing plans, and customer and supplier lists and information), (vii) other intellectual property rights, (viii) copies and tangible embodiments thereof (in whatever protectable form or medium), and (ix) license agreements related thereto. "Real Property" means the Owned Real Property, the Leased Real ------------- Property, and the Improvements. "Real Property Leases" means all leases, subleases, licenses, -------------------- concessions and other agreements (written or oral), including, without limitation, all amendments, extensions, renewals, guaranties and other agreements with respect thereto, together with all security deposits thereunder, held by the Acquired Companies for the use and occupancy of any real property. "Sale of the Company" means the sale of the Company to an ------------------- unaffiliated third party or a group of related unaffiliated third parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power under normal circumstances to elect a majority of the Company's board of directors (whether by merger, consolidation, sale or transfer of the Company's capital stock) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "Securities Act" means the Securities Act of 1933, as amended, or any -------------- similar federal law then in force. "Subsidiary" means, with respect to any Person, any corporation, ---------- limited liability company, partnership, association, or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof, or (ii) if a limited liability company, partnership, association, or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more Subsidiaries of such Person or a combination thereof. For purposes hereof, a Person shall be deemed to have a majority ownership interest in a limited liability company, partnership, association, or other business entity if such Person shall be allocated a majority of limited liability company, partnership, association, or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association, or other business entity. 6 "Tax" or "Taxes" means federal, state, county, local, foreign, or --- ----- other income, gross receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility, environmental, communications, real or personal property, capital stock, license, payroll, wage or other withholding, employment, social security, severance, stamp, occupation, alternative or add-on minimum, estimated, and other taxes of any kind whatsoever (including, without limitation, deficiencies, penalties, additions to tax, and interest attributable thereto, and also including, without limitation, any Tax or Taxes of another Person for which any Acquired Company is liable as a successor or as a transferee or by contract). "Tax Return" means returns, declarations, reports, claims for refund, ---------- information returns or other documents (including any related or supporting schedules, statements, or information) filed or required to be filed in connection with the determination, assessment, or collection of Taxes of any party or the administration of any laws, regulations, or administrative requirements relating to any Taxes. "Transaction Documents" means this Agreement, and all other --------------------- agreements, instruments, certificates, and other documents to be entered into or delivered by any Party in connection with the transactions contemplated to be consummated pursuant to this Agreement. "Treasury Regulations" means the United States Treasury Regulations -------------------- promulgated pursuant to the Code. Section 1.2 Cross Reference. The following terms are defined in the --------------- following Sections of this Agreement: Term Section ---- ------- Accelerated Earn-Out Payment 2.5(d) Accelerated Earn-Out Statement 2.5(e) Accounts Receivable 5.5(b) Acquired Stock Recitals Acquisition Proposal 9.6 Actual Cash Amount 2.4(a) Actual Earn-Out Amount 2.5(b) Actual Expected Earn-Out Amount 2.5(e) Actual Indebtedness Amount 2.4(a) Actual Net Working Capital Amount 2.4(a) Aggregate Expected Earn-Out Amount 2.5(d) Anniversary Period 2.5(a) Applicable Limitation Date 8.1 Authorized Action 9.1(d) Basket 8.2(b) Cap 8.2(b) Capital Expenditure Payment 2.2(a) Capital Stock Recitals Ceiling Amount 2.5(a) 7 CERCLA 5.22(e) Closing 2.3 Closing Date 2.3 Closing Review 2.4(a) Common Stock Recitals Company Preface Computer Systems 5.12(c) Confidential Information 9.7(c) Consulting Agreement 3.1(o) Disagreement Notice 2.5(b) Draft Balance Sheet 2.4(a) Earn-Out Amount 2.5(a) Earn-Out Auditor 2.5(b) Earn-Out Election Notice 2.5(c) Earn-Out Option 2.5(c) Earn-Out Option Period 2.5(c) Earn-Out Statement 2.5(b) ERISA 5.17(a) Escrow Account 2.2(b) Escrow Agreement 2.2(b) Estimated Cash Amount 2.1 Estimated Closing Common Value 2.1 Estimated Indebtedness Amount 2.1 Estimated Net Working Capital Amount 2.1 Expected Earn-Out Firm 2.5(e) Financial Statements 5.5(a) Fundamental Representations and Warranties 8.1 HSR Act 3.1(e) Indemnified Party 8.2(f) Indemnifying Party 8.2(f) Latest Balance Sheet 5.5(a) Noncompete Period 9.7(a) Notice of Expected Earn-Out Objection 2.5(e) Objection Notice 2.4(a) Parties Preface Party Preface Plans 5.17(a) Potential Sale Notice 2.5(c) Preferred Voting Stock Recitals Premium Satisfaction Event 9.8 Prime Rate 2.4(b) Purchase Price 2.2(a) Purchaser Preface Purchaser Parties 8.2(a) 8 Reimbursement Amount 9.8 Representative 9.1(a) Schedule Update 5.24 Seller Preface Seller Parties 8.2(c) Sellers Preface Special Real Property Transfer 3.1(i) Split Dollar Interest 9.8 Split Dollar Option 9.8 Split Dollar Policy 9.8 Split Dollar Premiums 9.8 Stock Recitals Supply Agreement 3.1(p) Surveys 3.1(k) Target Amount 2.5(a) Title Commitments 3.1(j) Title Insurer 3.1(j) Title Policies 3.1(j) Transaction Expenses 9.5 Unregistered Proprietary Rights 5.12(a) Working Capital Auditor 2.4(a) Year 2000 Compliant 5.12(c) ARTICLE II -- THE STOCK PURCHASE Section 1.3 Pre-Closing Estimates of Certain Amounts. Not later than one ---------------------------------------- business day before the Closing, the Representative, subject to the Purchaser's reasonable approval, shall provide the Purchaser with a good faith estimate of the Cash Amount (such estimate is referred to as the "Estimated Cash Amount"), --------------------- the Indebtedness Amount (such estimate is referred to as the "Estimated --------- Indebtedness Amount"), and the Net Working Capital Amount (such estimate is - ------------------- referred to as the "Estimated Net Working Capital Amount"). For purposes of ------------------------------------ Section 2.2 below, the "Estimated Closing Common Value" means an amount in cash ------------------------------ equal to (A) $58,000,000.00, (B) plus the Estimated Cash Amount, (C) less the Estimated Indebtedness Amount, and (D) plus the excess of the Estimated Net Working Capital Amount over the Baseline Net Working Capital Amount or minus the excess of the Baseline Net Working Capital Amount over the Estimated Net Working Capital Amount. Section 1.4 Stock Purchase. -------------- 9 (1) Basic Transaction. On the basis of the representations, ----------------- warranties, covenants, and agreements herein, and subject to the satisfaction or waiver of the conditions set forth herein and the terms hereof, at the Closing, the Purchaser (i) shall purchase from the Sellers, and the Sellers shall sell and transfer to the Purchaser, all of the shares of Stock owned by such Sellers as such ownership is set forth on the "Schedule of Stockholders" attached ------------------------ hereto, free and clear of any Liens, for an aggregate amount equal to the Estimated Closing Common Value (the "Purchase Price") and (ii) shall also pay to -------------- the Sellers an amount equal to the capital expenditures made by the Company since August 31, 1998 to the extent such capital expenditures were specifically pre-approved in writing by the Purchaser (the "Capital Expenditures Payment"). ---------------------------- Each of the Purchase Price and the Capital Expenditures Payment shall be paid and allocated to each Seller according to the "Payment Allocation Schedule" --------------------------- attached hereto. The Capital Expenditures Payment is currently estimated to be $628,000.00. (2) Payment by the Purchaser. At the Closing, the Purchaser shall ------------------------ pay the Purchase Price and Capital Expenditures Payments as follows: (i) the Purchaser shall deliver to the account or accounts designated by the Sellers, by wire transfer of immediately available funds, an amount in cash equal to (A) the Estimated Closing Common Value, plus (B) the Capital Expenditures Payment, minus ---- ----- (C) $2,500,000.00, and (ii) the Purchaser shall deposit $2,500,000.00 into an escrow account (the "Escrow Account") governed by an Escrow Agreement -------------- substantially in form of Exhibit A attached hereto (the "Escrow Agreement"). The --------- ---------------- Escrow Account shall be available to satisfy any amounts owing to the Purchaser pursuant to Section 2.4 and/or Section 8.2(a) below. (3) Delivery of Certificates by Sellers. At the Closing, each ----------------------------------- Seller will deliver to the Purchaser, free and clear of any Liens, one or more certificates representing the Stock being sold by such Seller hereunder, duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly executed in blank, and bearing or accompanied by all requisite stock transfer stamps. Section 1.5 Closing. The closing of the transactions contemplated by ------- this Agreement (the "Closing") shall take place at the offices of Kirkland & ------- Ellis, 200 East Randolph Drive, Chicago, Illinois 60601, commencing at 10:00 a.m. on the third business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contem-plated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself), or at such other place or on such other date as may be mutually agreeable to the Purchaser and the Representative; provided that in any event, if the Purchaser's senior lenders require that the Closing take place at the offices of their attorneys, the Parties agree that the Closing shall take place at such offices. The date and time of the Closing are herein referred to as the "Closing Date." ------------ Section 1.6 Post-Closing Adjustments. ------------------------ (1) Post-Closing Determination. Within 90 days after the Closing -------------------------- Date, the Purchaser and its auditors will conduct a review (the "Closing ------- Review") of the Cash Amount, the Indebtedness Amount and the Net Working Capital - ------ Amount and will prepare and deliver to the 10 Representative a computation of such amounts (the "Draft Balance Sheet"). The ------------------- Purchaser and its auditors will make available to the Representative and its auditors all records and work papers used in preparing the Draft Balance Sheet. If the Representative disagrees with the computation of the Cash Amount, the Indebtedness Amount or the Net Working Capital Amount reflected on the Draft Balance Sheet, the Representative may, within 30 days after receipt of the Draft Balance Sheet, deliver a notice (an "Objection Notice") to the Purchaser setting ---------------- forth the Representative's calculation of the Cash Amount, the Indebtedness Amount and the Net Working Capital Amount. The Purchaser and the Representative will use reasonable best efforts to resolve any disagreements as to the computation of the Cash Amount, the Indebtedness Amount and the Net Working Capital Amount, but if they do not obtain a final resolution within 30 days after the Purchaser has received the Objection Notice, the Purchaser and the Representative will jointly retain an independent accounting firm of recognized national standing (the "Working Capital Auditor") to resolve any remaining ----------------------- disagreements. If the Purchaser and the Representative are unable to agree on the choice of the Working Capital Auditor, then the Working Capital Auditor will be a "big-five" accounting firm (or a successor) selected by lot (after excluding one firm designated by the Purchaser and one firm designated by the Representative). The Purchaser and the Representative will direct the Working Capital Auditor to render a determination within 30 days of its retention and the Purchaser, the Representative, and their respective agents will cooperate with the Working Capital Auditor during its engagement. The Working Capital Auditor will consider only those items and amounts in the Draft Balance Sheet set forth in the Objection Notice which the Purchaser and the Representative are unable to resolve. The Purchaser and the Representative shall each submit a binder to the Working Capital Auditor promptly (and in any event within 30 days after the Working Capital Auditor's engagement), which binder shall contain such Party's computation of the Cash Amount, the Indebtedness Amount and the Net Working Capital Amount and information, arguments, and support for such Party's position. The Working Capital Auditor shall review such binders and base its determination solely on them. In resolving any disputed item, the Working Capital Auditor may not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party. The Working Capital Auditor's determination will be based on the definition of the Cash Amount, the Indebtedness Amount and the Net Working Capital Amount included herein. The determination of the Working Capital Auditor will be conclusive and binding upon the Parties. The Purchaser and the Representative shall bear the costs and expenses of the Working Capital Auditor based on the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. The Cash Amount, the Indebtedness Amount and the Net Working Capital Amount, as finally determined pursuant to this Section 2.4(a), is referred to herein as the "Actual Cash Amount," the "Actual Indebtedness Amount" and the "Actual Net ------------------ -------------------------- ---------- Working Capital Amount," respectively. - ---------------------- (2) Post-Closing Adjustment. ----------------------- (1) Payments by the Purchaser. ------------------------- (1) If the Actual Cash Amount is greater than the Estimated Cash Amount, the Purchaser will, within five (5) business days after the determination 11 thereof, pay to the Representative an amount equal to the sum of (A) the Actual Cash Amount minus the Estimated Cash Amount plus (B) interest on such difference from the Closing Date to the date of payment at an interest rate equal to the "Prime Rate" as listed in The Wall Street Journal (Midwest Edition) on the Closing Date (the "Prime ----- Rate"). Such payment will be made by wire transfer or delivery of ---- other immediately available funds. (2) If the Actual Indebtedness Amount is less than the Estimated Indebtedness Amount, the Purchaser will, within five (5) business days after the determination thereof, pay to the Representative an amount equal to the sum of (A) the Estimated Indebtedness Amount minus the Actual Indebtedness Amount plus (B) ---- interest on such difference from the Closing Date to the date of payment at an interest rate equal to the Prime Rate. Such payment will be made by wire transfer or delivery of other immediately available funds. (3) If the Actual Net Working Capital Amount is greater than the Estimated Net Working Capital Amount, the Purchaser will, within five (5) business days after the determination thereof, pay to the Representative an amount equal to the sum of (A) the Actual Net Working Capital Amount minus the Estimated Net Working Capital Amount plus (B) interest on such difference from the Closing Date to the date ---- of payment at an interest rate equal to the Prime Rate. Such payment will be made by wire transfer or delivery of other immediately available funds. (2) Payments by the Representative. ------------------------------ (1) If the Actual Cash Amount is less than the Estimated Cash Amount, the Representative will, within five (5) business days after the determination thereof, pay to the Purchaser an amount equal to the sum of (A) the Estimated Cash Amount minus the Actual Cash Amount plus (B) interest on such difference from the Closing Date to ---- the date of payment at an interest rate equal to the Prime Rate. Such payment will be made by wire transfer or delivery of other immediately available funds. (2) If the Actual Indebtedness Amount is greater than the Estimated Indebtedness Amount, the Representative will, within five (5) business days after the determination thereof, pay to the Purchaser an amount equal to the sum of (A) the Actual Indebtedness Amount minus the Estimated Indebtedness Amount plus (B) interest on ---- such difference from the Closing Date to the date of payment at an interest rate equal to the Prime Rate. Such payment will be made by wire transfer or delivery of other immediately available funds. (3) If the Actual Net Working Capital Amount is less than the Estimated Net Working Capital Amount, the Representative will, within five (5) business days after the determination thereof, pay to the Purchaser an amount equal 12 to the sum of (A) the Estimated Net Working Capital Amount minus the Actual Net Working Capital Amount minus the Estimated Working Capital plus (B) interest on such difference from the Closing Date to the date ---- of payment at an interest rate equal to the Prime Rate. Such payment will be made by wire transfer or delivery of other immediately available funds. (3) Dispute. If, pursuant to Section 2.4(a) above, there is ------- a dispute as to the final determination of the Actual Cash Amount, the Actual Indebtedness Amount or the Actual Net Working Capital Amount, the Purchaser and the Representative shall promptly pay to the other, as appropriate, such amounts as are not in dispute, pending final determination of such dispute pursuant to Section 2.4(a). Section 1.7 Earn-Out. -------- (1) In accordance with this Section 2.5, the Purchaser will pay the Earn-Out Amount (as defined below), achieved in both of the 12-month periods ending on December 31, 1999 and on December 31, 2000 (each such 12-month period, an "Anniversary Period") to the Sellers. The "Earn-Out Amount" for each ------------------ --------------- Anniversary Period means an amount equal to the product of (A) the amount of Net Sales in excess (if any) of the Target Amount (as defined below) for such Anniversary Period, multiplied by (B) 50%, but not to exceed in any event the Ceiling Amount (as defined below) for such Anniversary Period. The "Target ------ Amount" for (x) the Anniversary Period ending on December 31, 1999, is - ------ $62,000,000, and (y) the Anniversary Period ending on December 31, 2000, is $66,000,000. The "Ceiling Amount" for (x) the Anniversary Period ending on -------------- December 31, 1999, is $4,000,000, and (y) the Anniversary Period ending on December 31, 2000, is $4,000,000 minus the Earn-Out Amount paid (if any) for the Anniversary Period ending on December 31, 1999. For the purpose of this Section 2.5(a), the Purchaser agrees that it will not take any action for the primary purpose of reducing the Earn-Out Amount for either Anniversary Period. (2) Within 45 days after each Anniversary Period ends, the Purchaser and its auditors will prepare and deliver to the Representative a calculation of the Net Sales together with a calculation of the Earn-Out Amount for such Anniversary Period (the "Earn-Out Statement"). Upon delivery of the Earn-Out ------------------ Statement, the Purchaser and its auditors will make available to the Representative and its auditors all records and work papers used in preparing the Earn-Out Statement for the purpose of reviewing such calculations. If the Representative disagrees with the calculation of the Net Sales or Earn-Out Amount, the Representative shall, within 30 days after receipt of the Earn-Out Statement, deliver a written notice (a "Disagreement Notice") to the Purchaser ------------------- setting forth the Representative's calculations of the Net Sales and Earn-Out Amount. The Purchaser and the Representative will use reasonable best efforts to resolve any disagreements as to the calculation of the Net Sales and Earn-Out Amount, but if they do not obtain a final resolution within 30 days after the Purchaser received the Disagreement Notice, the Purchaser and the Representative will jointly retain an independent accounting firm of recognized national standing (the "Earn-Out Auditor") to resolve any remaining disagreements. If the ---------------- Purchaser and the Representative are unable to agree on the choice of the Earn- Out Auditor, then the Earn-Out Auditor will be a "big-five" accounting firm (or a successor) selected by lot (after excluding one firm designated by the Purchaser and one 13 firm designated by the Representative). The Purchaser and the Representative will direct the Earn-Out Auditor to render a determination within 30 days of its retention and the Purchaser, the Representative, and their respective agents will cooperate with the Earn-Out Auditor during its engagement. The Earn-Out Auditor will consider only those items and amounts in the Earn-Out Statement set forth in the Disagreement Notice which the Purchaser and the Representative are unable to resolve. The Purchaser and the Representative shall each submit a binder to the Earn-Out Auditor promptly (and in any event within 30 days after the Earn-Out Auditor's retention), which binder shall contain such Party's calculations of the Company's Net Sales, the Earn-Out Amount, and information, arguments, and support for such Party's position. The Earn-Out Auditor shall review such binders and base its determination solely on them. In resolving any disputed item, the Earn-Out Auditor may not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party. The Earn-Out Auditor's determination will be based on the definition of Net Sales and Earn-Out Amount included herein. The determination of the Earn-Out Auditor will be conclusive and binding upon the Parties. The Purchaser and the Representative shall bear the costs and expenses of the Earn-Out Auditor based on the percentage of which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. The Earn-Out Amount, as finally determined pursuant to this Section 2.5(b), is referred to herein as the "Actual ------ Earn-Out Amount." The Purchaser will, within five (5) business days after the - --------------- determination thereof, pay to the Representative an amount equal to the Actual Earn-Out Amount. (3) In the event that the Purchaser becomes aware that a Sale of the Company is reasonably likely to occur prior to December 31, 2000, the Purchaser shall deliver a written notice (a "Potential Sale Notice") to the Representative --------------------- disclosing such proposed Sale of the Company together with the identity of the proposed buyer. Upon delivery of a Potential Sale Notice to the Representative and continuing until the close of business on the fifth day following such delivery (the "Earn-Out Option Period"), the Representative shall have the ---------------------- option (the "Earn-Out Option") of having Sections 2.5(a) and 2.5(b) of this --------------- Agreement continue to apply to and govern the calculation and payment of any Earn-Out Amounts to the Sellers pursuant to this Agreement; it being understood that the Representative must deliver a written notice (an "Earn-Out Election ----------------- Notice") to the Purchaser within the Earn-Out Option Period for such election to - ------ be valid in which case such election will be irrevocable. If the Representative fails to exercise such Earn-Out Option within the Earn-Out Option Period, Sections 2.5(d), 2.5(e) and 2.5(f) below will apply to and govern the calculation and payment of any Earn-Out Amounts to the Sellers pursuant to this Agreement. (4) Notwithstanding anything in this Section 2.5 to the contrary, in the event that (i) a Sale of the Company occurs prior to December 31, 2000 and (ii) the Representative does not deliver the Earn-Out Election Notice within the Earn-Out Option Period, then Sections 2.5(a) and 2.5(b) of this Agreement shall terminate in connection with the consummation of such Sale of the Company, and Purchaser shall make a one-time lump sum payment to the Representative (the "Accelerated Earn-Out Payment") equal in amount to the Aggregate Expected Earn- ---------------------------- Out Amount. "Aggregate Expected Earn-Out Amount" means an amount, as determined ---------------------------------- by the Purchaser reasonably and in good faith, equal to the net present value of all Earn-Out Amounts then expected to become payable (if any) with respect to each Anniversary Period that will have not yet fully 14 passed at the time of such Sale of the Company, based upon the Company's then projected Net Sales for such Anniversary Period(s). A discount rate equal to the Purchaser's weighted average cost of capital as of the date of calculation of the Aggregate Expected Earn-Out Amount, as determined by the Purchaser reasonably and in good faith, shall be utilized in determining the net present value of such Earn-Out Amounts. (5) Within 15 days after the Purchaser determines the Aggregate Expected Earn-Out Amount, the Purchaser will prepare and deliver to the Representative a calculation of the Aggregate Expected Earn-Out Amount (the "Accelerated Earn-Out Statement"). If the Representative reasonably and in good ------------------------------ faith disagrees with the Purchaser's determination of the Aggregate Expected Earn-Out Amount, then the Representative shall, within 30 days after receipt of the Accelerated Earn-Out Statement, deliver a written notice (a "Notice of --------- Expected Earn-Out Objection") to the Purchaser setting forth the - --------------------------- Representative's calculation of the Aggregate Expected Earn-Out Amount; it being understood and agreed that if such Notice of Expected Earn-Out Objection is not delivered to the Purchaser within the above specified period, then it is acknowledged that the Representative agrees with the Purchaser's determination of the Aggregate Expected Earn-Out Amount and waives any objection to such determination. The Purchaser and the Representative will use reasonable best efforts to resolve any disagreements as to the calculation of the Aggregate Expected Earn-Out Amount, but if they do not obtain a final resolution within 30 days after the Purchaser received the Notice of Expected Earn-Out Objection, the Purchaser and the Representative will jointly retain a reputable valuation group within an independent accounting firm of recognized national standing (the "Expected Earn-Out Firm") to resolve any remaining disagreements. The Purchaser ---------------------- and the Representative will direct the Expected Earn-Out Firm to render a determination within 30 days of its retention and the Purchaser, the Representative, and their respective agents will cooperate with the Expected Earn-Out Firm during its engagement. The Expected Earn-Out Firm will consider only those items and amounts in the Accelerated Earn-Out Statement set forth in the Notice of Expected Earn-Out Objection which the Purchaser and the Representative are unable to resolve. The Purchaser and the Representative shall each submit a binder to the Expected Earn-Out Firm promptly (and in any event within 30 days after the Expected Earn-Out Firm's retention), which binder shall contain such Party's calculations of the Company's projected Net Sales, the Aggregate Expected Earn-Out Amount, and information, arguments, and support for such Party's position. The Expected Earn-Out Firm shall review such binders and base its determination solely on them. In resolving any disputed item, the Expected Earn-Out Firm may not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party. The Expected Earn-Out Firm's determination will be based on the definitions of Net Sales and Aggregate Expected Earn-Out Amount included herein. The determination of the Expected Earn-Out Firm will be conclusive and binding upon the Parties. The Purchaser and the Representative shall bear the costs and expenses of the Expected Earn-Out Firm based on the percentage of which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. The Aggregate Expected Earn-Out Amount, as finally determined pursuant to this Section 2.5(e), is referred to herein as the "Actual Expected Earn-Out Amount." ------------------------------- The Purchaser will, within five (5) business days after the determination thereof, pay to the Representative an amount equal to the Actual Expected Earn- Out Amount. 15 (6) If the Representative agrees with the Purchaser's determination of the Aggregate Expected Earn-Out Amount, then the Purchaser shall make the Accelerated Earn-Out Payment at the time of the consummation of such Sale of the Company or within five business days after the date of such agreement, whichever is later. (7) All payments made pursuant to this Section 2.5 shall be treated as an adjustment to the Purchase Price for Tax purposes. ARTICLE 2 -- CONDITIONS TO CLOSING Section 2.1 Conditions to the Purchaser's Obligations. The obligation of ----------------------------------------- the Purchaser to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions as of the Closing Date: (1) The representations and warranties set forth in Article V hereof shall be true and correct in all material respects (except that the representations and warranties which are qualified as to "materiality" or "Material Adverse Effect" shall be true and correct in all respects) at and as of the Closing Date as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties, without giving effect to any Schedule Updates thereto, except as permitted or contemplated in this Agreement; (2) The Company and each Seller shall have performed and complied in all material respects with all of the covenants and agreements required to be performed by each of them under this Agreement on or before the Closing; (3) All consents by third parties that are required for the transfer of the Acquired Stock to the Purchaser, and the consummation of the other transactions contemplated hereby or that are required in order to prevent a breach of, a default under, a termination or modification of, or any acceleration of, any obligations under any material contract to which any Acquired Company is a party shall have been obtained, and payoff letters with respect to all of the Acquired Companies' Indebtedness outstanding as of the Closing and releases of any and all Liens held by third parties against property of the Acquired Companies shall have been obtained, all on terms reasonably satisfactory to the Purchaser; (4) All (i) consents to leasehold mortgages, collateral assignments of leases, and/or waivers of landlord liens from the landlords thereof or any other parties whose consent is required under the Real Property Leases, (ii) estoppel certificates from the landlords, sublandlords or any other parties granting rights to Acquired Companies under the Real Property Leases, and (iii) non-disturbance agreements from the lenders encumbering the parcels of real property underlying the Real Property Leases, shall have been obtained, all on terms reasonably satisfactory to the Purchaser; 16 (5) All governmental filings, authorizations, and approvals that are required for the consummation of the transactions contemplated hereby shall have been duly made and obtained on terms reasonably satisfactory to the Purchaser (without limiting the generality of the foregoing, all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or ------- otherwise been terminated); (6) No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable judgment, decree, injunction, order, or ruling would prevent the performance of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement, cause such transactions to be rescinded, or materially and adversely affect the right of the Purchaser to own, operate, or control any Acquired Company, and no judgment, decree, injunction, order, or ruling shall have been entered which has any of the foregoing effects; (7) Since the date hereof, there shall have been no Material Adverse Effect; (8) Except as otherwise specified in writing by the Purchaser to the Representative prior to the Closing Date, all of the directors of the Acquired Companies shall have resigned and such resignations shall be effective as of the Closing Date; (9) Except as indicated on the "Special Transfers Schedule," all -------------------------- parcels of Owned Real Property which are not owned by an Acquired Company as of the date hereof will have been conveyed or sold to the Company pursuant to a warranty deed and all other instruments of conveyance which are necessary or desirable to effect transfer of good and marketable title to such parcel to the Company (the "Special Real Property Transfer"); ------------------------------ (10) The Sellers shall have obtained, at the Sellers' own cost and expense, a commitment for an ALTA Owner's or Leasehold Policy of Title Insurance, as the case may be, Form B-1970, for each of the parcels of Real Property (hereafter defined), or other form or type of Commitment commonly used in the jurisdiction in which the Real Property (hereafter defined) is located (the "Title Commitments"), issued by a title insurer or attorney, as the case ----------------- may be, satisfactory to the Purchaser and the Purchaser's lender (the "Title ----- Insurer"), in such amount as the Purchaser reasonably determines to be the fair - ------- market value (including all improvements thereon), insuring the Purchaser's interest in such parcel as of Closing, subject only to the Permitted Liens. The Sellers shall deliver at the time of delivery of the Title Commitments, copies of all documents of record referred to therein. The Sellers will have provided the Purchaser with title insurance policies or attorney issued title opinions, as the case may be, (collectively, the "Title Policies") on or before the -------------- Closing, from the Title Insurer based upon the Title Commitments. Each such Title Policy will be dated as of the date of closing and (a) insure title to the applicable parcels of real estate and all recorded easements benefitting such parcels, subject only to Permitted Liens, (b) contain an "extended coverage endorsement" insuring over the general exceptions contained customarily in such policies, (c) contain an ALTA Zoning Endorsement 3.1, with parking (or 17 equivalent), (d) contain an endorsement insuring that the parcel described in such Title Policy is the parcel shown on the survey delivered with respect to such parcel, (e) contain an endorsement insuring that each street adjacent to such parcel is a public street and that there is direct and unencumbered pedestrian and vehicular access to such street from such parcel, (f) if the real estate covered by such policy consists of more than one record parcel, contain a "contiguity" endorsement insuring that all of the record parcels are contiguous to one another, (g) contain a non-imputation endorsement, (h) contain a tax number endorsement and (i) contain such other endorsements as the Purchaser and the Purchaser's lender may reasonably request; (11) The Sellers shall have obtained and delivered to the Purchaser, at the Sellers' own cost and expense, current surveys of each parcel of the Real Property, prepared by a licensed surveyor, satisfactory to the Purchaser, and conforming to 1992 ALTA/ACSM Minimum Detail Requirements for Urban Land Title Surveys ("Surveys"), and such standards as the Title Insurer may require as a -------- condition to the removal of any survey exceptions from the Title Policy, and certified to the Purchaser, the Purchaser's lender and the Title Insurer, within 30 days of the Closing Date, in a form satisfactory to such parties. The Survey shall disclose the location of all improvements, easements, party walls, sidewalks, roadways, utility lines and such matters shown customarily on such surveys, show access affirmatively to public streets and roads, and include Table A Item Nos. 1-4 and 6-14. No Survey shall disclose any survey defect or encroachment from or onto any of the Real Property which has not been cured or insured over by the Sellers prior to the Closing; (12) The Company shall have distributed the Excluded Assets and Liabilities to the Sellers, and the Sellers shall have accepted and assumed the Excluded Assets and Liabilities, all on terms and pursuant to documents reasonably satisfactory to the Purchaser; (13) The Purchaser shall have received an opinion, dated the Closing Date, of Ward, Murray, Pace & Johnson, P.C., counsel to the Company and the Sellers, with respect to the matters set forth on Exhibit B attached hereto, and --------- the lenders providing debt financing in connection with the transactions contemplated by this Agreement shall be entitled to rely thereon; (14) On or before the Closing Date, the Sellers shall have delivered to Purchaser all of the following: (1) a certificate from an officer of the Company in a form reasonably satisfactory to the Purchaser, dated the Closing Date, stating that the preconditions specified in Sections 3.1(a) through (m) have been satisfied; (2) a copy of the resolutions of the board of directors of the Company approving the transactions contemplated by this Agreement, certified by an officer of the Company; (3) a copy of the certificate of incorporation or equivalent document for each Acquired Company, certified by the appropriate authority in the jurisdiction in which such entity was incorporated or organized; 18 (4) a copy of the bylaws or equivalent document for each Acquired Company, certified by an officer of such Acquired Company; (5) certificates from appropriate authorities, dated as of or about the Closing Date, as to the good standing and qualification to do business of each Acquired Company in each jurisdiction where they are so qualified; (6) all stock certificates and other instruments evidencing ownership of each of the Company's Subsidiaries; (7) all minute books, stock books, ledgers and registers, corporate seals and other corporate records relating to the organization, ownership and maintenance of each Acquired Company; (8) copies of the consents, filings, authorizations, approvals, estoppel certificates and non-disturbance agreements described in Sections 3.1(c), (d), (e) and (f) to the extent applicable to the Company or the Sellers; (9) copies of the resignations described in Section 3.1(h); and (10) such other documents or instruments as the Purchaser may reasonably request to effect the transactions contemplated hereby; (15) The Company and Mr. Gary Schreiner shall have entered into a Consulting Agreement in form and substance as set forth in Exhibit C attached --------- hereto (the "Consulting Agreement"), and the Consulting Agreement shall be in -------------------- full force and effect as of the Closing; (16) The Company and Motors & Armatures shall have entered into a Supply Agreement in form and substance as set forth in Exhibit D attached hereto --------- (the "Supply Agreement"), and the Supply Agreement shall be in full force and ---------------- effect as of the Closing; (17) The Purchaser shall have obtained on terms and conditions reasonably satisfactory to it all of the debt and equity financing required in order to consummate the transactions contemplated hereby, and to fund the working capital requirements of the Company and its Subsidiaries after the Closing; and (18) All proceedings to be taken by the Company or the Sellers in connection with the consummation of the transactions contemplated by this Agreement and all certificates, opinions, instruments, and other documents required to be delivered by the Company and the Sellers to effect the transactions contemplated hereby reasonably requested by the Purchaser shall be reasonably satisfactory in form and substance to the Purchaser. 19 Any condition specified in this Section 3.1 may be waived by the Purchaser in its sole discretion; provided that no such waiver shall be effective unless it is set forth in a writing executed by the Purchaser. Section 2.2 Conditions to the Sellers' Obligations. The obligation of -------------------------------------- the Company and the Sellers to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions as of the Closing Date: (1) The representations and warranties set forth in Article VI hereof shall be true and correct in all material respects (except that the representations and warranties which are qualified as to "materiality" or "Material Adverse Effect" shall be true and correct in all respects) at and as of the Closing Date as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties, without giving effect to any Schedule Updates thereto, except as permitted or contemplated in this Agreement; (2) The Purchaser shall have performed and complied in all material respects with all of the covenants and agreements required to be performed by it under this Agreement on or before the Closing; (3) All governmental filings, authorizations, and approvals that are required for the consummation of the transactions contemplated hereby shall have been duly made and obtained on terms reasonably satisfactory to the Sellers (without limiting the generality of the foregoing, all applicable waiting periods (and any extensions thereof) under the HSR Act shall have expired or otherwise been terminated); (4) No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable judgment, decree, injunction, order, or ruling would prevent the performance of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement, cause such transactions to be rescinded, or materially and adversely affect the right of the Purchaser to own, operate, or control any Acquired Company, and no judgment, decree, injunction, order, or ruling shall have been entered which has any of the foregoing effects; (5) The Seller shall have received an opinion, dated the Closing Date, of Kirkland & Ellis, counsel to the Purchaser, with respect to the matters set forth on Exhibit E attached hereto, and the lenders providing debt financing in connection with the transactions contemplated by this Agreement shall be entitled to rely thereon; (6) On or before the Closing Date, the Purchaser shall have delivered to the Sellers all of the following: 20 (1) a certificate from an officer of the Purchaser in a form reasonably satisfactory to the Sellers, dated the Closing Date, stating that the preconditions specified in Sections 3.2(a) through (d) have been satisfied; (2) a copy of the resolutions of the board of directors of the Purchaser approving the transactions contemplated by this Agreement, certified by an officer of the Purchaser; (3) a copy of the certificate of incorporation for the Purchaser, certified by the Secretary of State of the State of North Carolina; (4) a copy of the bylaws for the Purchaser, certified by an officer of the Purchaser; (5) copies of the consents, filings, authorizations and approvals described in Sections 3.2(c) and (d) to the extent applicable to the Purchaser; and (6) such other documents or instruments as the Representative may reasonably request to effect the transactions contemplated hereby; (7) The Company and Mr. Gary Schreiner shall have entered into the Consulting Agreement, and the Consulting Agreement shall be in full force and effect as of the Closing; (8) The Company and Motors & Armatures shall have entered into the Supply Agreement, and the Supply Agreement shall be in full force and effect as of the Closing; (9) All proceedings to be taken by the Purchaser in connection with the consummation of the transactions contemplated by this Agreement and all certificates, opinions, instruments, and other documents required to be delivered by the Purchaser to effect the transactions contemplated hereby reasonably requested by the Representative shall be reasonably satisfactory in form and substance to the Sellers. Any condition specified in this Section 3.2 may be waived by the Sellers in their sole discretion; provided that no such waiver shall be effective unless it is set forth in a writing executed by the Sellers. ARTICLE 3 -- COVENANTS BEFORE CLOSING Section 3.1 Affirmative Covenants of the Company. Except as otherwise ------------------------------------ contemplated by this Agreement, between the date hereof and the Closing, unless the Purchaser otherwise agrees in writing, the Sellers shall cause each Acquired Company to: (1) conduct each Acquired Company's businesses and operations only in the Ordinary Course of Business; 21 (2) keep in full force and effect each Acquired Company's corporate existence and all material contracts, rights, franchises, and intellectual property relating or pertaining to its business and use its reasonable best efforts to cause its current insurance (or reinsurance) policies not to be canceled or terminated or any of the coverage thereunder to lapse; (3) use their reasonable best efforts to carry on the business of each Acquired Company in the same manner as presently conducted and to keep each Acquired Company's business organization and properties intact, including its present business operations, physical facilities, working conditions, and employees and including each Acquired Company's present relationships with lessors, licensors, suppliers, customers, and others having business relations with each such Acquired Company, respectively; (4) make capital expenditures at levels at least equal to those set forth in the board approved budget; (5) maintain the Real Property and other material assets of each Acquired Company in good repair, order, and condition (normal wear and tear excepted) consistent with current needs, replace in accordance with prudent practices each Acquired Company's inoperable, worn out, or obsolete assets with assets of good quality consistent with prudent practices and current needs and, in the event of a casualty, loss, or damage to any of such assets or properties before the Closing Date, whether or not such Acquired Company is insured, either repair or replace such damaged property or use the proceeds of such insurance in such other manner as mutually agreed upon by the Representative and the Purchaser; (6) maintain the books, accounts, and records of each Acquired Company in accordance with GAAP, consistent with past custom and practice used in the preparation of the Financial Statements; (7) encourage each Acquired Company's employees to continue their employment with such Acquired Company after the Closing; (8) promptly (once the Company obtains knowledge thereof) inform the Purchaser in writing of any material variances from the representations and warranties contained in Article V or any material breach of any covenant hereunder by the Company or the Sellers; (9) cooperate with the Purchaser and use reasonable best efforts to cause the conditions to the Purchaser's obligation to close to be satisfied (including, without limitation, the execution and delivery of all agreements contemplated hereunder to be so executed and delivered and the making and obtaining of all third party and governmental notices, filings, authorizations, approvals, consents, releases, and terminations); and (10) cooperate with the Purchaser and its representatives in the Purchaser's investigation of the business and properties of the Acquired Companies, to permit the Purchaser and 22 its employees, agents, accounting, legal, and other authorized representatives to (i) have full access to the premises, books, and records of each Acquired Company at reasonable hours, (ii) visit and inspect any of the properties of each Acquired Company, and (iii) discuss the affairs, finances, and accounts of each Acquired Company with the directors, officers, partners, key employees, key customers, key sales representatives, key suppliers, and independent accountants of such Acquired Company, respectively. Section 3.2 Negative Covenants of the Company. Except as expressly --------------------------------- contemplated by this Agreement, between the date hereof and the Closing, unless Purchaser otherwise agrees in writing, the Sellers shall cause each Acquired Company to not: (a) take any action that would require disclosure under Section 5.7; (2) except as described on the "Insider Transaction Schedule" attached hereto, make any loans, enter into any transaction with any Insider, or make or grant any increase in any employee's or officer's compensation or make or grant any increase in any employee benefit plan, incentive arrangement, or other benefit covering any of the employees of any Acquired Company, except in the Ordinary Course of Business; (3) establish, amend or contribute to any pension, retirement, profit sharing, or stock bonus plan or multiemployer plan covering any of the employees of any Acquired Company, except as required by law or in accordance with past practice; (4) except as specifically contemplated by this Agreement, enter into any contract, agreement, or transaction, other than in the Ordinary Course of Business and at arm's length, with unaffiliated Persons; (5) declare, pay, make, or otherwise effectuate any dividends or distributions (other than in Cash), redemptions, equity repurchases, or other transactions involving the Company's Capital Stock or equity securities; (6) sell, transfer, contribute, distribute, or otherwise dispose of any securities or assets (or interests in any securities or assets) of any Acquired Company, or agree to do any of the foregoing, solicit any Person, or negotiate or have any discussions with any Person with respect to any of the foregoing, other than in the Ordinary Course of Business; (7) enter into any amendments, extensions, renewals or other modifications with respect to any of the Real Property Leases, or enter into any new lease, sublease, license, concession or other agreement for the use or occupancy of real property requiring rental and other payments in excess of $25,000 annually as averaged over the term of such lease, sublease, license, concession or other agreement; or (8) commit, or enter into any agreement to do, any of the foregoing. 23 Section 3.3 Covenants of Purchaser. Between the date hereof and the ---------------------- Closing, the Purchaser shall: (1) promptly (once it obtains knowledge thereof) inform the Sellers in writing of any variances from the representations and warranties contained in Article VI or any breach of any covenant hereunder by Purchaser; (2) cooperate with the Sellers and use its best efforts to cause the conditions to the Sellers' obligation to close to be satisfied (including, without limitation, the execution and delivery of all agreements contemplated hereunder to be so executed and delivered and the making and obtaining of all third party and governmental filings, authorizations, approvals, consents, releases, and terminations); and (3) use its reasonable best efforts to obtain the financing necessary to consummate the transactions contemplated hereby to the extent such financing is available on terms at least as favorable to the Purchaser as those proposed by the Purchaser's senior lenders in the term sheet dated as of February, 1999, a copy of which has been provided to the Sellers. (4) refrain from disclosing to any third parties any confidential information received regarding the Company, except to the extent required by law or in response to a court order or administrative request or to the extent any such information becomes public. ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF THE SELLERS As a material inducement to Purchaser to enter into this Agreement, the Sellers hereby represent and warrant that: Section 4.1 Organization and Corporate Power. -------------------------------- (1) The "Organization Schedule" attached hereto contains a -------------------------- complete and accurate list for each Acquired Company of its name, its jurisdiction of incorporation or organization, other jurisdictions in which it is authorized to do business, and its capitalization (including the identity of each stockholder or equity holder and the number of shares or other equity interests held by each), determined as of the date hereof. Except as set forth on the Organization Schedule, no Acquired Company owns or holds the right to --------------------- acquire any Capital Stock in any other Person. (2) Each Acquired Company is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, with full organizational power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under the contracts to which it is party. Each Acquired Company is duly qualified to do business as a foreign organization and is in good standing under the laws of each state or other jurisdiction in which either the ownership 24 or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the failure to be so duly qualified or licensed and in good standing would not individually or in the aggregate have a Material Adverse Effect. (3) The Sellers have delivered to the Purchaser correct and complete copies of the certificate of incorporation and by-laws (or equivalent governing documents) for each Acquired Company, which documents reflect all amendments made thereto at any time before the date hereof. Correct and complete copies of the minute books containing the records of meetings of the stockholders and board of directors (or equivalent parties), the stock certificate books, and the stock record books of the Acquired Companies have been furnished to the Purchaser. No Acquired Company is in default under or in violation of any provision of its certificate of incorporation or by-laws (or equivalent governing documents). Section 4.2 Authorization of Transactions. The Company and each Seller has ----------------------------- all requisite corporate power and authority to execute and deliver the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The board of directors of the Company has duly approved the Transaction Documents to which it is a party and has duly authorized the execution and delivery of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby. No other corporate proceedings on the part of the Company or the Sellers are necessary to approve and authorize the execution and delivery of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby. All Transaction Documents to which the Company or any Seller is a party have been duly executed and delivered by the Company or such Seller and constitute the valid and binding agreements of the Company or such Seller, enforceable against the Company or such Seller in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights; and as limited by general principles of equity that restrict the availability of equitable remedies. Section 4.3 Absence of Conflicts. Except as set forth on the "Conflicts -------------------- Schedule" attached hereto, the execution, delivery, and performance of the Transaction Documents and the consummation of the transactions contemplated thereby by the Company and the Sellers do not and shall not (a) conflict with or result in any breach of any of the terms, conditions, or provisions of, (b) constitute a material default under, (c) result in a material violation of, (d) require any authorization, consent, approval, exemption, or other action by or notice or declaration to, or filing with, any court or administrative or other governmental body or agency (except in connection with the HSR Act), (e) result in the creation of any Lien upon the Capital Stock or assets of any of the Acquired Companies, or (f) give any third party the right to modify, terminate, or accelerate any obligation under, the provisions of the articles of incorporation, by-laws or similar organizational document of the Sellers or any Acquired Company or any material indenture, mortgage, lease, loan agreement, or other material agreement or instrument to which the Sellers or any Acquired Company is bound or affected, or to the best of Sellers' knowledge, any material law, statute, rule, or regulation to which the Sellers or any Acquired Company is subject (except in connection with the HSR Act) or any material judgment, order, or decree to which the Sellers or any Acquired Company is subject. 25 Section 4.4 Capitalization. The authorized Capital Stock of the Company -------------- consists of 50,000 shares of Common Stock, par value $1.00 per share, of which 1000 shares are issued and outstanding, and 50,000 shares of Preferred Voting Stock, having no par value per share, of which 1000 shares are issued and outstanding, and all of which are owned by the Sellers. All of the issued and outstanding Capital Stock of the Acquired Companies have been duly authorized, are validly issued, fully paid, and nonassessable, and are held of record and owned beneficially by the Persons and in the manner described on the Organization Schedule, free and clear of all Liens, and are not subject to, nor - --------------------- were they issued in violation of, any preemptive rights or rights of first refusal. Except as set forth on the Organization Schedule, there are no --------------------- outstanding or authorized options, warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights, or other agreements or commitments to which any Acquired Company is a party or which are binding upon any Acquired Company providing for the issuance, disposition, or acquisition of any Acquired Company's Capital Stock (other than this Agreement). Other than as set forth on the Organization Schedule, there are no outstanding or authorized stock --------------------- appreciation, phantom stock, or similar rights with respect to any Acquired Company. There are no voting trusts, proxies, or any other agreements or understandings with respect to the voting of the Stock of any Acquired Company. No Acquired Company is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of any Acquired Company's Capital Stock. Section 4.5 Financial Statements and Related Matters. ---------------------------------------- (1) Financial Statements. Attached hereto as the "Financial -------------------- --------- Statements Schedule" are the following financial statements: (i) the audited - ------------------- consolidated balance sheets of the Acquired Companies as of August 31, 1996, 1997 and 1998, and the related statements of income and cash flows (or the equivalent) for the respective twelve-month periods then ended; and (ii) the unaudited consolidated balance sheet of the Acquired Companies as of November 30, 1998 (the "Latest Balance Sheet"), and the related statements of income and -------------------- cash flows (or the equivalent) for the three-month period then ended. Each of the foregoing financial statements (the "Financial Statements") presents fairly -------------------- the Acquired Companies' consolidated financial condition and results of operations as of the times and for the periods referred to therein, and has been prepared in accordance with GAAP, subject in the case of unaudited consolidated financial statements to the absence of footnote disclosure and normal and customary year-end adjustments. (2) Receivables. All accounts receivable of the Acquired ----------- Companies that are taken into account in determining the Net Working Capital Amount (collectively, the "Accounts Receivable") represent or will represent ------------------- valid obligations arising from the sale of goods or services actually sold or performed in the Ordinary Course of Business and are not subject to any valid counterclaims or setoffs. Unless paid prior to the Closing Date, the Accounts Receivable are or will be as of the Closing Date current and collectible net of the respective reserves taken into account in determining the Net Working Capital Amount. Subject to such reserves, each of the Accounts Receivable either has been or will be collected in full, without any set-off, within 90 days after the day on which it first becomes due and payable. 26 Section 4.6 Absence of Undisclosed Liabilities. To the best of Sellers' ---------------------------------- knowledge, no Acquired Company has any material obligations or liabilities (whether accrued, absolute, contingent, unliquidated, or otherwise, whether or not known, whether due or to become due, and regardless of when asserted) arising out of or relating to the operation of the Acquired Companies at or before the Closing, except (i) obligations under contracts or commitments described on the Contracts Schedule attached hereto or under contracts and commitments which are not required to be disclosed thereon (but not liabilities for breaches thereof), (ii) liabilities reflected on the liabilities side of the Latest Balance Sheet, (iii) liabilities which have arisen after the date of the Latest Balance Sheet in the Ordinary Course of Business or otherwise in accordance with the terms and conditions of this Agreement (none of which is a liability for breach of contract, breach of warranty, tort, or infringement or a claim or lawsuit or an environmental liability), and (iv) liabilities disclosed elsewhere in this Agreement or the Schedules hereto. Section 5.7 Absence of Certain Developments. Except as set forth on the ------------------------------- attached "Developments Schedule" and except as expressly contemplated by this --------------------- Agreement, since December 31, 1997, the Acquired Companies, individually or collectively, have not: (1) suffered any change that has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or suffered any theft, damage, destruction, or casualty loss in excess of $25,000, to its assets, whether or not covered by insurance, or suffered any substantial destruction of books and records; (2) subjected any portion of its properties or assets to any material Lien (other than Permitted Liens); (3) sold, leased, assigned, or transferred (including, without limitation, transfers to any Seller or any Insider) a portion of its tangible assets, or canceled without fair consideration any material debts or claims owing to or held by it; (4) sold, assigned, licensed, or transferred (including, without limitation, transfers to any Seller or any Insider) any material Proprietary Rights owned by, issued to, or licensed to any Acquired Company or disclosed any material confidential information (other than pursuant to agreements requiring the disclosure to maintain the confidentiality of and preserving all rights of any Acquired Company in such confidential information) or received any material confidential information of any third party in violation of any obligation of confidentiality; (5) suffered any extraordinary losses or waived any rights of material value; (6) entered into, amended, or terminated any material lease, contract, agreement, or commitment, or taken any other action or entered into any other transaction other than in the Ordinary Course of Business; (7) entered into any other material transaction, or materially changed any business practice; 27 (8) paid or increased any bonuses, salaries, or other compensation to any stockholder, director, officer, or (except in the Ordinary Course of Business) employee or entered into any employment, severance, or similar contract or agreement with any director, officer, or employee; (9) adopted, or materially increased the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of any Acquired Company; (10) conducted its cash management customs and practices other than in the Ordinary Course of Business (including, without limitation, with respect to collection of accounts receivable, purchases of supplies, repairs and maintenance, payment of accounts payable and accrued expenses, levels of capital expenditures and operation of cash management practices generally); (11) made any capital expenditures or commitments for capital expenditures except in the Ordinary Course of Business or failed to make capital expenditures at levels at least equal to those set forth in the board approved budget; (13) made a material change in its accounting methods; or (14) made or committed to make any payments or other transfers in connection with, or in contemplation of, the transactions contemplated by this Agreement or the other Transaction Documents. Section 4.8 Real Property. ------------- (1) The "Real Property Schedule" attached hereto sets forth a ---------------------- legal description of each Owned Real Property. With respect to each such parcel of Owned Real Property: (i) such parcel is free and clear of all Liens, except Permitted Liens; (ii) there are no leases, subleases, licenses, concessions, or other agreements, written or oral, granting to any person (other than an Acquired Company) the right of use or occupancy of any portion of such parcel; (iii) there are no outstanding actions or rights of first refusal to purchase such parcel, or any portion thereof or interest therein; and (iv) at or prior to the Closing, such parcel will be conveyed to the Company pursuant to the Special Real Property Transfer. (2) The "Real Property Schedule" attached hereto sets forth the ---------------------- address of each Leased Real Property and a list of all Real Property Leases (including, without limitation, all amendments, extensions, renewals, guaranties and other agreements with respect thereto) for each Leased Real Property. The Sellers have delivered to Purchaser a true and complete copy of each written Real Property Lease, and in the case of any oral Real Property Leases, a written summary of the basic terms thereof. Except as set forth on the Real Property ------------- Schedule, with respect to each of the Real Property Leases: (i) the Real - -------- Property Lease is legal, valid, binding, enforceable and in full force and effect; (ii) the acquisition of stock and change in control of the Acquired Companies (as the case may be) as contemplated under this Agreement will not result in a breach of or default 28 under the Real Property Lease or otherwise cause the Real Property Lease to cease to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing; (iii) to the best of Sellers' knowledge, no Acquired Company nor any other party to the Real Property Lease is in material breach or default under the Real Property Lease, and no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute such a material breach or default or permit the termination, modification or acceleration of rent under the Real Property Lease; (iv) no party to the Real Property Lease has repudiated any term thereof, and there are no material disputes, oral agreements or forbearance programs in effect with respect to the Real Property Lease; and (v) no Acquired Company has assigned, subleased, mortgaged, deeded in trust or otherwise transferred or encumbered the Real Property Lease or any interest therein. (3) The Acquired Companies have good title to the Improvements, which shall be free and clear of all Liens as of the Closing Date, except Permitted Liens. (4) All Improvements, including, without limitation, the roofs and structural elements thereof and the heating, ventilation, air conditioning, air pollution emission capture and abatement, plumbing, electrical, mechanical, sewer, waste water and paving and parking equipment systems and facilities included therein, are in good condition and repair and adequate to operate such facilities as currently used and there are no facts or conditions affecting any of the Improvements which would, individually or in the aggregate, interfere in any material respect with the use, occupancy or operation thereof as currently used, occupied or operated or intended to be used, occupied or operated. To the best of Sellers' knowledge, there are no structural deficiencies or latent defects affecting any Improvements and all water, gas, electrical, steam, compressed air, telecommunication, sanitary and storm sewage lines and systems and other similar systems serving the Real Property are installed and operating and are sufficient to enable the Real Property to continue to be used and operated in the manner currently being used and operated, and any so-called hook-up fees or other associated charges have been fully paid. Each such utility or other service is provided by a public or private utility or service company and enters the Real Property from an adjacent public street or valid private easement owned by the supplier of such utility or other service. To the best of Sellers' knowledge, each Improvement has direct access to a public street adjoining the Real Property on which such Improvement is situated over the driveways and accessways currently being used in connection with the use and operation of such Improvement and no existing accessway crosses or encroaches upon any property or property interest not owned by an Acquired Company. No Improvement or portion thereof is dependent for its access, operation or utility on any land, building or other improvement not included in the Real Property. (5) The Real Property includes all of the real property used by the Acquired Companies in the operation of their businesses. Section 4.9 Assets. ------ (1) Except as set forth on the "Assets Schedule" attached hereto, --------------- each Acquired Company owns good and marketable title to, or a valid leasehold interest in, free and clear of all 29 Liens other than Permitted Liens, all of the properties and assets (whether real, personal, or mixed and whether tangible or intangible) which are shown on the Latest Balance Sheet, or which are acquired thereafter, or which are located on the Real Property, or which are used by any Acquired Company, except for personal property and assets sold since the date of the Latest Balance Sheet in the Ordinary Course of Business. Except as set forth on the Assets Schedule, no Seller owns any properties or assets (whether real, personal, or mixed and whether tangible or intangible) which are used in the business of any of the Acquired Companies. (2) The buildings, machinery, equipment, personal properties, vehicles, and other tangible assets of the Acquired Companies located upon or used in connection with the Real Property are operated in conformity in all material respects with all applicable laws and regulations, are in good condition and repair, reasonable wear and tear excepted, and are usable in the Ordinary Course of Business. The Acquired Companies own or lease under valid leases all buildings, machinery, equipment, and other tangible assets necessary for the conduct of their business as currently conducted. Section 4.10 Taxes. Except as set forth on the "Taxes Schedule" attached ----- -------------- hereto: (1) Each of the Acquired Companies has timely filed all Tax Returns required to be filed by it, and each such Tax Return has been prepared in compliance with all applicable laws and regulations and is true and correct in all material respects. (2) All Taxes payable by the Acquired Companies (whether or not shown on any Tax Return) have been paid, and each of the Acquired Companies has properly withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any shareholder, employee, creditor, independent contractor, or other third party. (3) No action, suit, proceeding or audit or any notice of inquiry of any of the foregoing is pending against or with respect to the Acquired Companies regarding Taxes, and no action, suit, proceeding or audit has, to the Acquired Companies' knowledge, been threatened against or with respect to the Acquired Companies regarding Taxes. (4) None of the Acquired Companies is a party to or bound by any Tax allocation or Tax sharing agreement with any Person other than the Acquired Companies, and none of the Acquired Companies has any contractual obligation to indemnify any other Person with respect to Taxes. (5) None of the Acquired Companies (A) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or (B) has any liability for the Taxes of any Person (other than any of the Acquired Companies) under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. 30 (6) No material claim has ever been made by a taxing authority in a jurisdiction where any of the Acquired Companies does not file Tax Returns that such Person is or may be subject to taxation by such jurisdiction. (7) Each of the Acquired Companies has provided to the Purchaser true, correct and complete copies of all Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by any of the Acquired Companies for the past three (3) years. (8) None of the Acquired Companies has consented to extend the time, or is the beneficiary of any extension of time, in which any Tax may be assessed or collected by any taxing authority. (9) None of the Acquired Companies will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under Code Section 481(c) (or any corresponding or similar provision of state, local or foreign income Tax law); (ii) "closing agreement" as described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign income Tax law); or (iii) installment sale made prior to the Closing Date. (10) None of the Acquired Companies has been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). (11) None of the Acquired Companies has filed a consent under Code Section 341(f). (12) None of the Acquired Companies is a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in the payment of any "excess parachute payment" within the meaning of Code Section 280G (or any corresponding provision of state, local or foreign income Tax law). Section 4.11 Contracts and Commitments. ------------------------- (1) Except as expressly contemplated by this Agreement or as set forth on the attached "Contracts Schedule," no Acquired Company is a party to or ------------------ bound by any written or oral: (1) pension, profit sharing, stock option, employee stock purchase or other plan or arrangement providing for deferred or other compensation to employees or any other employee benefit plan or arrangement, or any collective bargaining agreement or any other contract with any labor union, or severance agreements, programs, policies or arrangements; 31 (2) contract for the employment of any officer, individual employee or other Person on a full-time, part-time, consulting or other basis providing annual compensation in excess of $25,000 or contract relating to loans to officers, directors or Affiliates; (3) contract under which the Acquired Companies have advanced or loaned any other Person amounts in the aggregate exceeding $25,000, other than trade credit extended in the Ordinary Course of Business; (4) agreement or indenture relating to borrowed money or other Indebtedness or the mortgaging, pledging or otherwise placing a Lien on any asset or group of assets of the Acquired Companies; (5) guaranty of any obligation; (6) lease or agreement under which any Acquired Company is the lessee of or holds or operates any property, real or personal, owned by any other party, except for any lease or agreement for real or personal property under which the aggregate annual payments do not exceed $25,000; (7) lease or agreement under which any Acquired Company is the lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by any Acquired Company; (8) contract or group of related contracts (excluding purchase orders issued or received in the Ordinary Course of Business) with the same party or group of affiliated parties the performance of which involves consideration in excess of $25,000; (9) assignment, license, indemnification or agreement with respect to any intangible property (including, without limitation, any Proprietary Rights); (10) distribution or franchise agreement; (11) agreement with a term of more than six months, which is not terminable by the Acquired Companies upon less than 90 days notice without penalty or which involves more than $25,000 annually; (12) contract or agreement prohibiting it from freely engaging in any business or competing anywhere in the world; or (13) any other agreement, other than in the Ordinary Course of Business, which is material to its operations and business prospects or involves a consideration in excess of $25,000 annually. 32 (2) To the best of Sellers' knowledge, all of the contracts, agreements and instruments set forth on the Contracts Schedule are valid, ------------------ binding and enforceable in accordance with their respective terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights; and as limited by general principles of equity that restrict the availability of equitable remedies. Each Acquired Company has performed all material obligations required to be performed by it and is not in material default under or in breach of nor in receipt of any claim of default or breach under any such contract, agreement or instrument. No event has occurred which with the passage of time or the giving of notice or both would result in a material default, breach or event of noncompliance by the Company or, to the Company's knowledge, any other party under any such contract, agreement or instrument. Except as set forth on the Contracts Schedule, (x) no Acquired Company has received written notice of the - ------------------ intention of any Party to cancel or terminate any contract, agreement or instrument required to be set forth on the Contracts Schedule and (y) to the ------------------ Company's knowledge, there has not been any breach or anticipated breach by the other parties to any such contract, agreement or instrument. (3) The Sellers have provided the Purchaser with, or have provided the Purchaser with access to, a true and correct copy of all written contracts which are required to be disclosed on the Contracts Schedule, in each case ------------------ together with all amendments, waivers, or other changes thereto (all of which are disclosed on the Contracts Schedule). The Contracts Schedule contains an ------------------ ------------------ accurate and complete description of all material terms of all oral contracts referred to therein. Section 4.12 Proprietary Rights. ------------------ (1) The "Proprietary Rights Schedule" attached hereto contains a --------------------------- complete and accurate list of all patented and registered Proprietary Rights and all pending patent applications and applications for the registration of other Proprietary Rights filed by the Acquired Companies. The Proprietary Rights ------------------ Schedule also contains a complete and accurate list of all material (i) trade - -------- names, unregistered trademarks, service marks, copyrights, proprietary information systems and proprietary databases owned by the Acquired Companies (collectively, the "Unregistered Proprietary Rights"); (ii) computer software ------------------------------- owned and/or used by the Acquired Companies other than commercially available "off-the-shelf" software with a license fee of less than $10,000 in the aggregate for all copies of a particular software application; and (iii) licenses granted by the Acquired Companies to any third party and all licenses granted by any third party to the Acquired Companies, in each case identifying the subject Proprietary Rights. The Company has made available to the Purchaser correct and complete copies of all documents embodying such licenses. (2) Except as set forth on the Proprietary Rights Schedule, (i) each --------------------------- Acquired Company owns and possesses free and clear of all Liens (except Permitted Liens), all right, title, and interest in and to, or has the right to use pursuant to a valid and enforceable license, the Proprietary Rights necessary for the operation of such Acquired Company's business as currently conducted; (ii) no Acquired Company has received any notice of invalidity, infringement, or misappropriation from any third party with respect to any such Proprietary Rights; (iii) to the best of Sellers' knowledge, no Acquired Company has interfered with, infringed upon, misappropriated, or otherwise come into 33 conflict with any Proprietary Rights of any third parties; and (iv) to the knowledge of the Acquired Companies, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Proprietary Rights of any Acquired Company. (3) To the best of Sellers' knowledge, each of the Acquired Companies has conducted a commercially reasonable inventory and review of the hardware, software and embedded microcontrollers in non-computer equipment (the "Computer -------- Systems") used by such Acquired Company in its business, in order to determine - ------- if any parts of the Computer Systems are not Year 2000 Compliant (as defined below). Except as described on the Proprietary Rights Schedule, the Computer --------------------------- Systems are Year 2000 Compliant. For purposes of this Agreement, "Year 2000 --------- Compliant" means that all of the hardware, software and embedded - --------- microcontrollers in non-computer equipment comprising Computer Systems will correctly differentiate between years in different centuries that end in the same two digits, and will accurately process date/time data (including, but not limited to, calculating, comparing and sequencing) from, into and between the twentieth and twenty-first centuries, including leap year calculations. Section 4.13 Litigation; Proceedings. Except as set forth on the ----------------------- "Litigation Schedule" attached hereto, there are no actions, suits, proceedings, ------------------- orders, judgments, decrees, or investigations pending or, to the Acquired Companies' knowledge, threatened against any Acquired Company (or against any of their respective officers, directors, agents, or employees (in each case, in their capacity as such)) at law or in equity, or before or by any federal, state, municipal, or other governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, and to the knowledge of any Acquired Company, there is no reasonable basis known for any of the foregoing. No Acquired Company is subject to any outstanding order, judgment, or decree issued by any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or any arbitrator. There is no claim, action, suit, proceeding or governmental investigation pending or, to the knowledge of the Sellers, threatened against the Sellers, by or before any court, governmental or regulatory authority or by any third party which challenges the validity of this Agreement or which would be reasonably likely to adversely affect or restrict the Sellers' ability to consummate the transactions contemplated hereby. Section 4.14 Brokerage. Except as set forth on the "Brokerage Schedule" --------- ------------------ attached hereto, there are no claims for brokerage commissions, finders' fees, or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of any Acquired Company or any Seller. Section 4.15 Governmental Licenses and Permits. The "License Schedule" --------------------------------- ---------------- attached hereto contains a complete listing and summary description of all material Licenses owned or possessed by any Acquired Company or used by any Acquired Company in the conduct of its business. Except as indicated on the License Schedule, each Acquired Company owns or possesses such right in and to - ---------------- all Licenses which are necessary to conduct such Acquired Company's business as presently conducted and as proposed to be conducted and shall use its reasonable efforts to maintain all such Licenses. No loss or expiration of any License is pending or, to the Acquired Companies' 34 knowledge, threatened or reasonably foreseeable (including, without limitation, as a result of the transactions contemplated hereby) other than expiration in accordance with the terms thereof. Section 4.16 Employees. Except as set forth on the "Employees Schedule" ---------- ------------------ attached hereto: (a) to the knowledge of any Acquired Company, no key executive employee and no group of employees or independent contractors of any Acquired Company has any plans to terminate his, her, or their employment or relationship with any Acquired Company; (b) each Acquired Company has complied in all material respects with all applicable laws relating to the employment of personnel and labor; (c) no Acquired Company is a party to or bound by any collective bargaining agreement, nor has any Acquired Company experienced any material strikes, grievances, unfair labor practices claims, or other material employee or labor disputes in the last five years; (d) no Acquired Company has engaged in any unfair labor practice; and (e) no Acquired Company has any knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of any Acquired Company. Section 4.17 Employee Benefit Plans. ---------------------- (1) The "Benefit Plans Schedule" attached hereto identifies all ---------------------- bonus, deferred or incentive compensation, profit sharing, retirement, vacation, sick leave, hospitalization or severance plans, "employee benefit plans" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and material fringe benefit plans sponsored, maintained or ----- contributed to by any Acquired Company or with respect to which any Acquired Company has any liability (the "Plans"). ----- (2) Except as set forth on the Benefit Plans Schedule attached ---------------------- hereto: (1) None of the Plans are subject to Title IV of ERISA nor provide for medical or life insurance benefits to retired or former employees of any Acquired Company (other than as required under Code Section 4980B, or similar state law). Each Acquired Company is not a participating or contributing employer in any "multiemployer plan" (as defined in Section 3(37) of ERISA) with respect to employees of the Acquired Companies nor has any Acquired Company incurred any withdrawal liability with respect to any multiemployer plan or any liability in connection with the termination or reorganization of any multiemployer plan. (2) To the best of Sellers' knowledge, each such Plan is in all material respects in compliance, and has been administered in all material respects in accordance, with the applicable provisions of ERISA and the Code and all other applicable laws, rules and regulations, including, but not limited to, medical continuation under Code Section 4980B. No Acquired Company has (i) engaged in any transaction prohibited by ERISA or the Code; (ii) breached any fiduciary duty owed by it with respect to the Plans described above; or (iii) failed to file and distribute timely and properly all reports and information required to be filed or distributed in accordance with ERISA or the Code. 35 (3) All contributions, premiums or payments under or with respect to each Plan which are due on or before the Closing Date have been paid or will be paid prior to the Closing. (4) Each Plan which is intended to be qualified under section 401(a) of the Code (i) has been amended to reflect all requirements of the Tax Reform Act of 1986 and all subsequent legislation which was required to be adopted on or prior to the date hereof and (ii) has received from the Internal Revenue Service a favorable determination letter which considers the terms of the Plan as amended for such changes in law. (5) Each Acquired Company has not incurred and has no reason to expect that it will incur, any liability to the Pension Benefit Guaranty Corporation (other than premium payments) or otherwise under Title IV of ERISA (including any withdrawal liability) or under the Code with respect to any employee pension benefit plan that any Acquired Company or any other entity, that together with any Acquired Company is treated as a single employer under section 414 of the Code, maintains or ever has maintained or to which any of them contributes, ever has contributed, or ever has been required to contribute. (6) Each individual who has received compensation for the performance of services on behalf of any Acquired Company has been properly classified as an employee or independent contractor in accordance with applicable laws. Section 4.18 Insurance. The "Insurance Schedule" attached hereto lists --------- ------------------ and briefly describes each insurance policy maintained by each Acquired Company with respect to such Acquired Company's properties, assets, and business, together with a claims history for the past five years. All of such insurance policies are in full force and effect, and no Acquired Company is in default with respect to its obligations under any such insurance policies and no Acquired Company has been denied insurance coverage. Except as set forth on the Insurance Schedule, no Acquired Company has any self-insurance or co-insurance - ------------------ programs, and the reserves set forth on the Latest Balance Sheet are adequate to cover all anticipated liabilities with respect to self-insurance or coinsurance programs. Section 4.19 Officers and Directors; Bank Accounts. The "Officers, ------------------------------------- -------- Directors, and Bank Accounts Schedule" attached hereto lists all officers and - ------------------------------------- directors of each Acquired Company, and all bank accounts, safety deposit boxes, and lock boxes (designating each authorized signatory with respect thereto) for each Acquired Company. Section 4.20 Affiliate Transactions. Except as disclosed on the ---------------------- "Affiliated Transactions Schedule" attached hereto, no Insider is a party to any -------------------------------- material agreement, contract, commitment, or transaction with any Acquired Company or which is pertaining to the business of any Acquired Company or has any interest in any property, real or personal or mixed, tangible or intangible, used in or pertaining to the business of any Acquired Company. 36 Section 4.21 Compliance with Laws. Except as set forth on the Schedules -------------------- to this Agreement, to the best of Sellers' knowledge, each Acquired Company and their respective officers, directors, agents (in their capacity as such), and employees have complied in all material respects with and are in material compliance with all applicable laws, regulations, and ordinances of foreign, federal, state, and local governments and all agencies thereof which are applicable to the business, business practices, or any owned or leased properties of any Acquired Company and to which any Acquired Company may be subject, and no material claims have been filed against any Acquired Company alleging a violation of any such laws or regulations, and neither any Acquired Company nor any Seller has received notice of any such violations. Section 4.22 Environmental Matters. Except as set forth on the --------------------- "Environmental Schedule" attached hereto: ---------------------- (1) To the best of Sellers' knowledge, each Acquired Company has complied in all material respects with and is currently in compliance in all material respects with all Environmental and Safety Requirements, and neither any Acquired Company nor any Seller has received any oral or written notice, report, or information regarding any liabilities (whether accrued, absolute, contingent, unliquidated, or otherwise) or any corrective, investigatory, or remedial obligations arising under Environmental and Safety Requirements which relate to any Acquired Company or any of their respective properties or facilities. (2) Without limiting the generality of the foregoing, each Acquired Company has obtained and complied in all material respects with, and is currently in compliance in all material respects with, all permits, licenses, and other authorizations that are required pursuant to any Environmental and Safety Requirements for the occupancy of such Acquired Company's respective properties or facilities or the operation of such Acquired Company's respective businesses. A list of all such permits, licenses, and other authorizations which are material to any Acquired Company is set forth on the Environmental Schedule. ---------------------- (3) Neither this Agreement, nor the other Transaction Documents, nor the consummation of the transactions contemplated hereby and thereby shall impose any obligations on any Acquired Company or otherwise for site investigation or cleanup, or notification to or consent of any government agencies or third parties under any Environmental and Safety Requirements (including, without limitation, any so called "transaction-triggered" or "responsible property transfer" laws and regulations). (4) To the best of Sellers' knowledge, none of the following exists at any property or facility owned, occupied, or operated by any Acquired Company: (i) underground storage tanks or surface impoundments; (ii) asbestos- containing material in any form or condition; (iii) materials or equipment containing polychlorinated biphenyls; or (iv) landfills. (5) No Acquired Company has at any time on or prior to the Closing treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or Released (as defined in CERCLA as of the date hereof) any substance (including, without limitation, any 37 hazardous substance) or owned, occupied, or operated any facility or property, so as to give rise to liabilities of any Acquired Company for response costs, natural resource damages, or attorneys' fees pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA") or any other Environmental and Safety Requirements, except to the ------ extent in compliance with Environmental and Safety Requirements. (6) Without limiting the generality of the foregoing, to the best of Sellers' knowledge, no facts, events, or conditions relating to the past or present properties, facilities, or operations of any Acquired Company shall give rise to any material corrective, investigatory, or remedial obligations pursuant to Environmental and Safety Requirements now in effect, or give rise to any other material liabilities (whether accrued, absolute, contingent, unliquidated, or otherwise) pursuant to Environmental and Safety Requirements, including, without limitation, those liabilities relating to onsite or offsite Releases or threatened Releases of hazardous materials, substances or wastes, personal injury, property damage, or natural resources damage. (7) To the best of Sellers' knowledge, no Acquired Company has, either expressly or by operation of law, assumed or undertaken any liability or corrective investigatory or remedial obligation of any other Person relating to any Environmental and Safety Requirements. Section 4.23 Disclosure. To the best of Seller's knowledge, neither this ---------- Agreement, the other Transaction Documents, nor any of the schedules, attachments or exhibits hereto, contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein, not misleading. Section 4.24 Closing Date. All of the representations and warranties ------------ contained in this Article V and elsewhere in this Agreement and all information delivered in any schedule, attachment, or Exhibit hereto or in any writing delivered to the Purchaser are true and correct on the date of this Agreement and shall be true and correct on the Closing Date, except to the extent that the Sellers have advised the Purchaser otherwise in writing before the Closing (each, a "Schedule Update"). Each Schedule Update delivered to the Purchaser --------------- shall be taken into account in determining whether or not a representation or warranty has been breached for purposes of any claims for indemnification pursuant to Section 8.2(a)(i) below, as long as such Schedule Update discloses facts, events or circumstances which occurred after the date hereof or such Schedule Update discloses facts, events or circumstances which occurred prior to the date hereof as to which the Acquired Companies had no knowledge as of the date hereof. No Schedule Update shall be taken into account in determining whether or not the conditions to Closing set forth in Article III above have been satisfied. ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER As a material inducement to the Company and the Sellers to enter into this Agreement, the Purchaser hereby represents and warrants to the Sellers that: 38 Section 5.1 Organization. The Purchaser is a corporation duly organized, ------------ validly existing, and in good standing under the laws of the State of North Carolina. Section 5.2 Authorization of Transactions. The Purchaser has all ----------------------------- requisite organizational power and authority to execute and deliver the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The board of directors of the Purchaser has duly approved the Transaction Documents to which it is a party and has duly authorized the execution and delivery of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby. No other corporate proceedings on the part of the Purchaser are necessary to approve and authorize the execution and delivery of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby. All Transaction Documents to which the Purchaser is a party have been duly executed and delivered by the Purchaser and constitute the valid and binding agreements of the Purchaser, enforceable against the Purchaser in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights; and as limited by general principles of equity that restrict the availability of equitable remedies. Section 5.3 Absence of Conflicts. The execution, delivery, and -------------------- performance of the Transaction Documents and the consummation of the transactions contemplated thereby by the Purchaser do not and shall not (a) conflict with or result in any breach of any of the terms, conditions, or provisions of, (b) constitute a material default under, (c) result in a material violation of, (d) give any third party the right to modify, terminate, or accelerate any obligation under, or (e) require any authorization, consent, approval, exemption, or other action by or notice or declaration to, or filing with, any court or administrative or other governmental body or agency (except in connection with the HSR Act), under the provisions of the charter or bylaws of the Purchaser or any material indenture, mortgage, lease, loan agreement, or other material agreement or instrument to which the Purchaser is bound or affected, or any material law, statute, rule, or regulation to which the Purchaser is subject (except in connection with the HSR Act) or any material judgment, order, or decree to which the Purchaser is subject. Section 5.4 Litigation. There is no claim, action, suit, proceeding or ---------- governmental investigation pending or, to the knowledge of the Purchaser, threatened against the Purchaser, by or before any court, governmental or regulatory authority or by any third party which challenges the validity of this Agreement or which would be reasonably likely to adversely affect or restrict the Purchaser's ability to consummate the transactions contemplated hereby. Section 5.5 Brokerage. There are no claims for brokerage commissions, --------- finders' fees, or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of the Purchaser. Section 5.6 Cooperation. Purchaser confirms that Sellers have made ----------- available to Purchaser and its representative and agents the opportunity to ask questions of the officers and management employees of the Company and that the Sellers have represented that they have 39 delivered to Purchaser all such additional information about the business and financial condition of the Company that Purchaser has requested. Section 5.7 Closing Date. All of the representations and warranties ------------ contained in this Article VI and elsewhere in this Agreement and all information delivered in any schedule, attachment, or Exhibit hereto or in any writing delivered to the Sellers are true and correct on the date of this Agreement and shall be true and correct on the Closing Date, except to the extent that the Purchaser has advised the Sellers otherwise in writing before the Closing (each, a "Schedule Update"). Each Schedule Update delivered to the Representative shall be taken into account in determining whether or not a representation or warranty has been breached for purposes of any claims for indemnification pursuant to Section 8.2(c)(i) below, as long as such Schedule Update discloses facts, events or circumstances which occurred after the date hereof or such Schedule Update discloses facts, events or circumstances which occurred prior to the date hereof as to which the Purchaser had no knowledge as of the date hereof. No Schedule Update shall be taken into account in determining whether or not the conditions to Closing set forth in Article III above have been satisfied. ARTICLE 6 -- TERMINATION Section 6.1 Termination. This Agreement may be terminated at any time ----------- before the Closing: (1) by mutual written consent of the Sellers and the Purchaser; (2) by the Sellers or the Purchaser if there has been a material misrepresentation or breach on the part of the other Party of the representations, warranties, or covenants set forth in this Agreement or if events have occurred which have made it impossible to satisfy a condition precedent to the terminating Party's obligations to consummate the transactions contemplated hereby unless such terminating Party's willful or knowing breach of this Agreement has caused the condition to be unsatisfied; (3) by the Sellers or the Purchaser if the Closing has not occurred on or before the date which is 90 days after the date hereof; provided, however, that neither the Purchaser nor the Sellers shall be entitled to terminate this Agreement pursuant to this Section 7.1(c) if such Party's willful or knowing breach of this Agreement has prevented the consummation of the transactions contemplated hereby at or before such time; (4) by the Purchaser at any time on or before the 30th day following the date of this Agreement if the Purchaser is not reasonably satisfied with the results of its continuing legal due diligence regarding the stock records, minutes or material contracts of the Acquired Companies; or (5) by the Purchaser pursuant to Section 10.11(b) below. 40 Section 6.2 Effect of Termination. In the event of termination of this --------------------- Agreement by either the Sellers or the Purchaser as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability on the part of any Party to any other Party under this Agreement, except that nothing herein shall relieve any Party from the obligations set forth in Section 4.3(d), 9.7(c) or any liability for any breach of this Agreement before such termination. ARTICLE VIII -- INDEMNIFICATION AND RELATED MATTERS Section 6.3 Survival. All representations, warranties, covenants, and -------- agreements set forth in this Agreement or in any writing or certificate delivered in connection with this Agreement shall survive the Closing Date and the consummation of the transactions contemplated hereby and shall not be affected by any examination made for or on behalf of any Party, the knowledge of any of such Party's officers, directors, stockholders, employees, or agents, or the acceptance of any certificate or opinion. Notwithstanding the foregoing, no Party shall be entitled to recover for any Loss pursuant to Section 8.2(a)(i) or Section 8.2(c)(i) unless written notice of a claim thereof is delivered to the other Party before the Applicable Limitation Date. For purposes of this Agreement, the term "Applicable Limitation Date" shall mean the date which is -------------------------- the second anniversary of the Closing Date; provided that the Applicable Limitation Date with respect to the following Losses shall be as follows: (i) with respect to any Loss arising from or related to a breach of the representations and warranties of the Sellers set forth in Section 5.10 (Taxes) and Section 5.17 (Employee Benefits Matters), the Applicable Limitation Date shall be the date of expiration of the statute of limitations applicable to the statute, regulation or other authority which gave rise to such Loss; (ii) with respect to any Loss arising from or related to a breach of the representations and warranties of the Sellers set forth in Section 5.22 (Environmental Matters), the Applicable Limitation Date shall be the fifth anniversary of the Closing Date; and (iii) with respect to any Loss arising from or related to a breach of the representations and warranties of the Sellers set forth in Section 5.1 (Organization and Corporate Power), Section 5.2 (Authorization of Transactions), Section 5.3 (Absence of Conflicts), Section 5.4 (Capitalization), Section 5.9(a) (Title to Assets) or Section 5.14 (Brokerage) and with respect to any Loss arising from or related to a breach of the representations and warranties of the Purchaser set forth in Section 6.1 (Organization), Section 6.2 (Authorization of Transactions), Section 6.3 (Absence of Conflicts) or Section 6.5 (Brokerage), there shall be no Applicable Limitation Date (i.e., such representations and warranties shall survive forever). The representations and warranties described in clause (iii) of the preceding sentence are referred to as the "Fundamental ----------- Representations and Warranties." - ------------------------------ Section 6.4 Indemnification. --------------- (1) Indemnification by the Sellers. The Sellers shall jointly ------------------------------ and severally indemnify the Purchaser and the Company, and each of the Purchaser's and the Company's respective officers, directors, stockholders, employees, agents, representatives, affiliates, successors and assigns (collectively, the "Purchaser Parties") and hold each of them harmless from and ----------------- against and pay on behalf of or reimburse such Purchaser Parties in respect of any Loss which any such Purchaser Party may suffer, sustain, or become subject to, as a result of or relating to: 41 (1) the breach of any representation or warranty made by the Company or any Seller contained in this Agreement or in any certificate delivered by the Company or any Seller with respect thereto in connection with the Closing (in each case, determined without regard to any qualifications therein referencing the terms "materiality," "Material Adverse Effect," "knowledge" or other terms of similar import or effect); (2) the breach of any covenant or agreement made by the Company contained in this Agreement to be performed by the Company prior to or at the Closing; (3) the breach of any covenant or agreement made by any Seller contained in this Agreement; (4) any matter referenced on the Environmental Schedule; ---------------------- (5) any matter referenced on the Litigation Schedule; ------------------- (6) any matter referenced on the Benefit Plans Schedule with ---------------------- respect to Section 5.17(b); and (7) any Excluded Asset and Liability. The Sellers hereby acknowledge that they and their Affiliates will have no claims or rights to contribution or indemnity from the Company with respect to any amounts paid by any of them pursuant to this Section 8.2(a). (2) Limitations on Indemnification by the Sellers. The --------------------------------------------- indemnification provided for in Section 8.2(a) above is subject to the following limitations: (1) The Sellers will be liable to the Purchaser Parties with respect to claims referred to in Section 8.2(a)(i) only if a Purchaser Party gives the Representative written notice thereof within the Applicable Limitation Date. (2) The aggregate amount of all payments made by Sellers in satisfaction of claims for indemnification pursuant to Section 8.2(a)(i) shall not exceed $7,500,000 (the "Cap"); provided, however, that the Cap --- -------- ------- shall not apply with respect to any Losses resulting from or relating to breaches of any Fundamental Representations and Warranties and such Losses shall not count towards satisfaction of the Cap. Notwithstanding the foregoing, the aggregate amount of all payments made by Sellers in satisfaction of claims for indemnification pursuant to Section 8.2(a)(i) for any Losses resulting from or relating to breaches of any Fundamental Representations and Warranties shall not exceed the Purchase Price. (3) The Sellers shall not be liable to indemnify any Purchaser Parties pursuant to Section 8.2(a)(i) unless and until the Purchaser Parties have collectively suffered 42 Loss by such breaches or pursuant to such Sections in excess of a $250,000 aggregate basket ("Basket") (at which point, subject to the other ------ limitations herein, the Sellers will be liable to the Purchaser Parties for all Losses in excess of such Basket); provided, however, that the Basket shall not apply with respect to any Losses resulting from or relating to breaches of any Fundamental Representations and Warranties and such Losses shall not count towards satisfaction of the Basket. (4) If the Sellers' indemnification obligation under this Section 8.2 arises in respect of any indemnifiable event (A) for which a Purchaser Party receives indemnification from the Sellers and (B) which results in any Tax benefit to such Purchaser Party for any taxable period (or portion thereof) which would not, but for such indemnifiable event, be available, such Purchaser Party shall pay, or shall cause to be paid, to the Sellers an amount equal to the actual Tax saving produced by such Tax benefit reduced by the amount of any Tax detriment to such Purchaser Party as a result of the receipt of such indemnification. Tax benefits and detriments shall be taken into account as and when actually realized. The amount of any such Tax saving for any taxable period shall be the amount of the reduction in Taxes payable to a Tax authority by such Purchaser Party with respect to such Tax period (net of any Tax detriment resulting from the receipt of the indemnity payment) as compared to the Taxes that would have been payable to a Tax authority by such Purchaser Party with respect to such Tax period in the absence of such Tax benefit. (5) Any payment made by a Seller to a Purchaser Party pursuant to this Section 8.2 in respect of any indemnifiable event shall be net of any insurance proceeds realized by and paid to such Purchaser Party in respect of such claim. Such Purchaser Party shall use its reasonable efforts to make insurance claims relating to any indemnifiable event for which it is seeking indemnification pursuant to this Section 8.2; provided that such Purchaser Party shall not be obligated to make such an insurance claim if the cost of pursuing such an insurance claim together with any corresponding increase in insurance premiums or other chargebacks to such Purchaser Party, as the case may be, would exceed the value of the claim for which such Purchaser Party is seeking indemnification. (6) The indemnification rights provided hereunder shall be the exclusive remedy of the Purchaser Parties with respect to any dispute arising out of or related to this Agreement, except for (A) the right to seek specific performance of any of the agreements contained herein, and (B) except in the case where the Company, the Sellers have defrauded the Purchaser Parties. Notwithstanding any implication to the contrary contained in this Agreement, so long as the Purchaser delivers written notice of a good-faith claim to the Representative no later than the Applicable Limitation Date, the Sellers shall be required to indemnify the Purchaser Parties for all Losses (subject to the Basket and Cap limitations) which the Purchaser Parties may incur in respect of the matters which are the subject of such claim, regardless of when incurred. Notwithstanding any implication to the contrary contained in this Agreement, the limits on indemnification set forth 43 in this Agreement shall not apply to claims for damages arising from fraud if such fraud occurred prior to the Closing. (3) Indemnification by the Purchaser. The Purchaser shall indemnify -------------------------------- the Sellers and hold the Sellers and the Sellers' respective officers, directors, stockholders, employees, agents, representatives, affiliates, successors, and assigns (collectively, the "Seller Parties") harmless from and -------------- against and pay on behalf of or reimburse such Seller Parties in respect of any Loss which such Seller Party may suffer, sustain, or become subject to, as a result of or relating to: (1) the breach of any representation or warranty made by the Purchaser contained in this Agreement or in any certificate delivered by the Purchaser with respect thereto in connection with the Closing (in each case, determined without regard to any qualifications therein referencing the terms "materiality," "Material Adverse Effect," "knowledge" or other terms of similar import or effect); or (2) the breach of any covenant or agreement made by the Purchaser contained in this Agreement. (4) Limitations on Indemnification by the Purchaser. The ----------------------------------------------- indemnification provided for in Section 8.2(c) above is subject to the following limitations: (1) The Purchaser will be liable to the Seller Parties with respect to claims referred to in Section 8.2(c) only if a Seller gives the Purchaser written notice thereof within the Applicable Limitation Date; (2) Any payment made by the Purchaser to a Seller Party pursuant to this Section 8.2 in respect of any indemnifiable event shall be net of any insurance proceeds realized by and paid to such Seller Party in respect of such claim. Such Seller Party shall use its reasonable efforts to make insurance claims relating to any indemnifiable event for which it is seeking indemnification pursuant to this Section 8.2; provided that such Seller Party shall not be obligated to make such an insurance claim if such Seller Party in its reasonable judgment believes the cost of pursuing such an insurance claim together with any corresponding increase in insurance premiums or other chargebacks to such Seller Party, as the case may be, would exceed the value of the claim for which such Seller Party is seeking indemnification. (3) The indemnification rights provided hereunder shall be the exclusive remedy of the Seller Parties with respect to any dispute arising out of or related to this Agreement, except for (A) the right to seek specific performance of any of the agreements contained herein, and (B) except in the case where the Purchaser has defrauded the Seller Parties. Notwithstanding any implication to the contrary contained in this Agreement, so long as a Seller delivers written notice of a good-faith claim to the Purchaser no later than the Applicable Limitation 44 Date, the Purchaser shall be required to indemnify the Seller Parties for all Losses which the Seller Parties may incur in respect of the matters which are the subject of such claim, regardless of when incurred. Notwithstanding any implication to the contrary contained in this Agreement, the limits on indemnification set forth in this Agreement shall not apply to claims for damages arising from fraud. (5) Procedures. If a party hereto seeks indemnification under this ---------- Article VIII, such party (the "Indemnified Party") shall promptly give written ----------------- notice to the other party (the "Indemnifying Party") after receiving written ------------------ notice of any action, lawsuit, proceeding, investigation, or other claim against it (if by a third party) or discovering the liability, obligation, or facts giving rise to such claim for indemnification, describing the claim, the amount thereof (if known and quantifiable), and the basis thereof; provided that the failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent such failure shall have prejudiced the Indemnifying Party. In that regard, if any action, lawsuit, proceeding, investigation, or other claim shall be brought or asserted by any third party which, if adversely determined, would entitle the Indemnified Party to indemnity pursuant to this Article VIII, the Indemnified Party shall promptly notify the Indemnifying Party of the same in writing, specifying in detail the basis of such claim and the facts pertaining thereto and the Indemnifying Party shall be entitled to participate in the defense of such action, lawsuit, proceeding, investigation, or other claim giving rise to the Indemnified Party's claim for indemnification at its expense, and at its option (subject to the limitations set forth below) shall be entitled to control and appoint lead counsel of such defense with reputable counsel reasonably acceptable to the Indemnified Party; provided that, as a condition precedent to the Indemnifying Party's right to assume control of such defense, it must first agree in writing to be fully responsible for all Losses relating to such claims and to provide full indemnification to the Indemnified Party for all Losses relating to such claim; and provided further that the Indemnifying Party shall not have the right to assume control of such defense and shall pay the fees and expenses of counsel retained by the Indemnified Party, if the claim which the Indemnifying Party seeks to assume control (i) seeks non-monetary relief (except where non-monetary relief is merely incidental to a primary claim or claims for monetary damages), (ii) involves criminal allegations against an Indemnified Party, (iii) is one in which the Indemnifying Party is also a party and joint representation would be inappropriate or there may be legal defenses available to the Indemnified Party which are different from or additional to those available to the Indemnifying Party; or (iv) involves a claim which, upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend. If the Indemnifying Party is permitted to assume and control the defense and elects to do so, the Indemnified Party shall have the right to employ counsel separate from counsel employed by the Indemnifying Party in any such action and to participate in (but not control) the defense thereof, but the fees and expenses of such counsel employed by the Indemnified Party shall be at the expense of the Indemnified Party unless the employment thereof has been specifically authorized by the Indemnifying Party in writing. 45 If the Indemnifying Party shall control the defense of any such claim, the Indemnifying Party shall obtain the prior written consent of the Indemnified Party (which shall not be unreasonably withheld) before entering into any settlement of a claim or ceasing to defend such claim, if pursuant to or as a result of such settlement or cessation, injunction, or other equitable relief will be imposed against the Indemnified Party or if such settlement does not expressly unconditionally release the Indemnified Party from all liabilities and obligations with respect to such claim. (6) Tax Treatment. Amounts paid to or on behalf of the Sellers ------------- or the Company as indemnification shall be treated as adjustments to the Purchase Price for Tax purposes. Section 8.3 CERTAIN TAX MATTERS. ------------------- (7) All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest thereon) incurred in connection with this Agreement shall be paid by the Sellers when due, and each Seller shall, at his or its own expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees, and if required by applicable law, the Purchaser shall, and shall cause its affiliates to, join in the execution of any such Tax Returns and other documentation. (8) The Sellers shall reimburse the Purchaser for all Taxes of the Acquired Companies with respect to any period (or portion thereof) ending on or before the Closing Date within ten days of payment by the Purchaser or an Acquired Company of such Taxes. For purposes of this Section 8.3(b), in the case of any Taxes that are imposed on a periodic basis and are payable for a Taxable period that includes (but does not end on) the Closing Date, the portion of such Tax which is respect to the portion of such Taxable period ending on the Closing Date shall (x) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of such Tax for the entire Taxable period multiplied by a fraction the numerator of which is the number of days in the Taxable period ending on the Closing Date and the denominator of which is the number of days in the entire Taxable period, and (y) in the case of any Tax based upon or related to income or receipts, be deemed equal to the amount which would be payable if the relevant Taxable period ended on the Closing Date. (9) Each Seller and the Purchaser (at their own cost) shall assist each other (including making records available) in the preparation of their respective Tax Returns and the filing and execution of Tax elections, if required, as well as any audits or litigation that ensue as a result of the filing thereof, to the extent that such assistance is reasonably requested. 46 ARTICLE 7 -- ADDITIONAL AGREEMENTS Section 7.1 Appointment of Representative. ----------------------------- (1) Powers of Attorney. Each Seller irrevocably constitutes and ------------------ appoints Gary Schreiner (the "Representative") as each Seller's true and lawful -------------- agent, proxy and attorney-in-fact and agent and authorizes the Representative acting for each Seller and in each Seller's name, place and stead, in any and all capacities to do and perform every act and thing required or permitted to be done in connection with the transactions contemplated by this Agreement, as fully to all intents and purposes as such Person might or could do in person, including, without limitation: (1) determine the presence (or absence) of claims for indemnification against the Purchaser pursuant to Section 8.2 above; (2) deliver all notices required to be delivered by each Seller under this Agreement, including, without limitation, any notice of a claim for which indemnification is sought under Section 8.2 above; (3) take any and all action on behalf of each Seller from time to time as the Representative may deem necessary or desirable to defend, pursue, resolve and/or settle claims under this Agreement, including, without limitation, indemnification under Section 8.2 above; and (4) to engage and employ agents and representatives (including accountants, legal counsel and other professionals) and to incur such other reasonable expenses as he deems necessary or prudent in connection with the administration of the foregoing. Each Seller grants unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary or desirable to be done in connection with the transactions contemplated by this Agreement, as fully to all intents and purposes as the undersigned might or could do in person. Each Seller acknowledges and agrees that upon execution of this Agreement, any delivery by the Representative of any waiver, amendment, agreement, opinion, certificate or other documents executed by the Representative or any decisions made by the Representative pursuant to this Section 9.1, such Seller shall be bound by such documents or decision as fully as if such Seller had executed and delivered such documents or made such decisions. Notwithstanding anything in this Section 9.1 to the contrary, however, Representative shall not have the authority to take the following actions on behalf of Edward Chernoff: (a) receive any notice or service of process required to be delivered to Edward Chernoff under this Agreement; (b) agree to amend any portion of this Agreement; (c) waive any obligation or condition as set forth in Section 3.2 of this Agreement; or (d) receive any payment belonging to Edward Chernoff pursuant to Section 2.2(b) of this Agreement. Each Seller will, by executing this Agreement agree that such agency, proxy and power of attorney are coupled with an interest, and are therefore irrevocable without the consent of the Representative and shall survive the death, incapacity, or bankruptcy of such Seller. 47 (2) The Representative shall not have by reason of this Agreement a fiduciary relationship in respect of any Seller, except in respect of amounts received on behalf of such Seller. The Representative shall not be liable to any Seller for any action taken or omitted by him or any agent employed by him hereunder or under any other Transaction Document, or in connection therewith, except that the Representative shall not be relieved of any liability imposed by law for negligence or willful misconduct. The Representative shall not be liable to Sellers for any apportionment or distribution of payments made by him in good faith, and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Seller to whom payment was due, but not made, shall be to recover from Representative any payment in excess of the amount to which they are determined to have been entitled. The Representative shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement. (3) Replacement of the Representative. Upon the death, --------------------------------- disability, incapacity or resignation of the initial Representative appointed pursuant to Section 9.1(a) above, each Seller acknowledges and agrees that Edward Chernoff shall be appointed as the successor Representative; upon the death, disability, incapacity or resignation of the successor Representative appointed pursuant to this Section 9.1(c), each Seller acknowledges and agrees that the initial Representative or his executor, guardian or legal representative, as the case may be, shall (in consultation with Sellers) appoint a replacement reasonably believed by such person as capable of carrying out the duties and performing the obligations of the Representative hereunder within thirty (30) days. Any substituted representative shall be deemed the Representative for all purposes of this Agreement and the other Transaction Documents. (4) Actions of the Representative; Liability of the ----------------------------------------------- Representative. Each Seller agrees that Purchaser shall be entitled to rely on - -------------- any action taken by the Representative, on behalf of Sellers, pursuant to Section 9.1(a) above (each, an "Authorized Action"), and that each Authorized ----------------- Action shall be binding on each Seller as fully as if such Seller had taken such Authorized Action. The Purchaser agrees that the Representative shall have no liability to the Purchaser for any Authorized Action, except to the extent that such Authorized Action is found by a final order of a court of competent jurisdiction to have constituted fraud or willful misconduct. Sellers jointly and severally agree to pay, and to indemnify and hold harmless the Purchaser from and against any losses which they may suffer, sustain, or become subject to, as the result of any claim by any Person that an Authorized Action is not binding on, or enforceable against, Sellers. In addition, Sellers hereby release and discharge Purchaser from and against any liability arising out of or in connection with the Representative's failure to distribute any amounts received by the Representative on Sellers' behalf to Sellers. Section 7.2 Press Releases and Announcements. Before the Closing Date, -------------------------------- no press releases related to this Agreement and the transactions contemplated herein, or other announcements to the employees, customers, or suppliers of any Acquired Company shall be issued by any Party without the mutual approval of all Parties, except for any public disclosure which any Party in good faith believes is required by law or regulation (in which case the disclosure shall be prepared jointly 48 by the Representative and the Purchaser). After the Closing Date, no press releases related to this Agreement and the transactions contemplated herein, or other announcements to the employees, customers, or suppliers of any Acquired Company shall be issued by the Sellers without the prior approval of the Purchaser, except for any public disclosure which the Sellers in good faith believe is required by law or regulation (in which case the disclosure shall be prepared jointly by the Representative and the Purchaser). Section 7.3 Further Transfers. Each Party shall execute and deliver such ----------------- further instruments of conveyance and transfer and take such additional action as any other Party may reasonably request to effect, consummate, confirm, or evidence the consummation of the transactions contemplated hereby. Section 7.4 Specific Performance. The Sellers acknowledge that the -------------------- Acquired Companies' businesses are unique and recognize and affirm that in the event of a breach of this Agreement by the Sellers, money damages may be inadequate and the Purchaser may have no adequate remedy at law. Accordingly, the Sellers agree that the Purchaser shall have the right, in addition to any other rights and remedies, to enforce its rights and the Sellers' obligations by an action or actions for specific performance, injunctive, and/or other equitable relief. Section 7.5 Expenses. The Parties shall pay all of their own fees, -------- costs, and expenses (including, without limitation, fees, costs and expenses of legal counsel, investment bankers, brokers, or other representatives and consultants and appraisal fees, filing fees, costs, and expenses) incurred in connection with the negotiation of this Agreement and the other agreements contemplated hereby, the performance of its obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby (collectively, the "Transaction Expenses"); it being understood that it -------------------- shall be the responsibility of the Purchaser to pay for the filing fee required under the HSR Act; it being further understood that if the transactions contemplated hereby are consummated, the Company shall reimburse the Purchaser and its investors for all of their Transaction Expenses. At the request of the Sellers, the Transaction Expenses for which the Sellers are liable pursuant to this Section 9.5 may be deducted from the Purchase Price and paid directly to the Sellers' legal counsel, investment bankers and other agents and representatives. To the extent that any Acquired Company pays or becomes liable with respect to any Transaction Expenses of the Sellers or any Acquired Party and such Transaction Expenses are not otherwise taken into account as deductions in determining the Net Working Capital Amount, the Purchase Price shall be reduced dollar-for-dollar. Section 7.6 Exclusivity. Until this Agreement is terminated by its ----------- terms, no Seller Party shall (and no Seller Party shall cause or permit any Insider or agent or any other Person acting on its behalf to), discuss or negotiate with any other Person a possible sale of all or part of any Acquired Company's securities or assets (except for dispositions of assets in the Ordinary Course of Business), whether such transaction takes the form of a sale of stock, merger, liquidation, dissolution, reorganization, recapitalization, consolidation, sale of assets or otherwise (an "Acquisition Proposal"), or -------------------- provide any information to any other Person concerning any Acquired Company (other than information which the Acquired Companies provide to other Persons in the Ordinary 49 Course of Business). The Seller Parties and their agents and other Persons acting on their behalf (a) do not have any agreement, arrangement or understanding with respect to any Acquisition Proposal (except this Agreement), (b) shall cease and cause to be terminated any and all discussions with third parties regarding any Acquisition Proposal, and (c) shall promptly notify the Purchaser if any Acquisition Proposal, or any inquiry or contact with any person or entity with respect thereto, is made. Section 7.7 Noncompetition, Nonsolicitation, and Confidentiality. From ---------------------------------------------------- and after the Closing: (1) Noncompetition. In consideration of the mutual covenants -------------- provided for herein to Gary Schreiner at the Closing, during the period beginning on the Closing Date and ending on the fifth anniversary of the Closing Date (the "Schreiner Noncompete Period"), neither Gary Schreiner nor any of his --------------------------- Affiliates shall engage (whether as an owner, operator, manager, employee, officer, director, consultant, advisor, representative, or otherwise) directly or indirectly in any business that manufactures or provides electro-mechanical products within the United States; provided that ownership of less than 5% of the outstanding stock of any publicly traded corporation shall not be deemed to be engaging solely by reason thereof in any of its businesses. In consideration of the mutual covenants provided for herein to Edward Chernoff at the Closing, during the period beginning on the Closing Date and ending on the fourth anniversary of the Closing Date (the "Chernoff Noncompete Period"), neither -------------------------- Edward Chernoff nor any of his Affiliates shall engage (whether as an owner, operator, manager, employee, officer, director, consultant, advisor, representative, or otherwise) directly or indirectly in any business within the United States that manufactures Class II transformers, defined purpose transformers, switching relays similar to the Company's type 9100 or type 9400 switching relays or relays similar to the types of relays manufactured or sold by Purchaser's Midtex division; provided that ownership of less than 5% of the outstanding stock of any publicly traded corporation shall not be deemed to be engaging solely by reason thereof in any of its businesses. The Parties hereto agree that the respective covenants set forth in this Section 9.7 are reasonable with respect to their duration, geographical area, and scope. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 9.7 is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of such term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. (2) Nonsolicitation. Each Seller agrees that, during his --------------- respective Noncompete Period, he will not (and he will cause his Affiliates to not) (A) except for any employee terminated by the Company, directly or indirectly contact, approach, or solicit for the purpose of offering employment to or hiring or actually hire (whether as an employee, consultant, agent, independent contractor, or otherwise) any Person employed by any Acquired Company at any time before the Closing Date or during his respective Noncompete Period, without the prior written consent of the 50 Company and (B) induce or attempt to induce any customer or other business relation of any Acquired Company into any business relationship which might materially harm such Acquired Company. Each Seller shall not in any manner take any action which is designed, intended, or might be reasonably anticipated to have the effect of discouraging customers, suppliers, lessors, licensors and other business associates from maintaining the same business relationships with the Company after the date of this Agreement as were maintained with the Company prior to the date of this Agreement. (3) Confidentiality. Each of the Sellers shall treat and hold as --------------- confidential any information concerning the business and affairs of the Acquired Companies (including, without limitation, all Proprietary Rights) that is not already generally available to the public (the "Confidential Information"), ------------------------ refrain from using any of the Confidential Information except in connection with this Agreement, and at any time upon the request of the Purchaser deliver promptly to the Purchaser or destroy, at the request and option of the Purchaser, all tangible embodiments (and all copies) of the Confidential Information which are in its possession or under its control. In the event that any Seller is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, such Seller shall notify the Purchaser promptly of the request or requirement so that the Purchaser may seek an appropriate protective order or waive compliance with the provisions of this Section 9.7(c). If, in the absence of a protective order or the receipt of a waiver hereunder, a Seller is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, such Seller may disclose the Confidential Information to the tribunal; provided that such Seller shall use its best efforts to obtain, at the request and expense of the Purchaser, an order or other assurance that confidential treatment shall be accorded to such portion of the Confidential Information required to be disclosed as the Purchaser shall designate. (4) Trade Names. The Sellers shall not use or permit any of its ----------- Affiliates to use the "Products Unlimited" name (or any other trademarks, service marks, trade dress, trade names, logos or corporate names used by any Acquired Company) or any names or symbols confusingly similar thereto in any manner anywhere in the world after Closing. (5) Remedy for Breach. The Sellers acknowledge and agree that ----------------- in the event of a breach of any of the provisions of this Section 9.7, monetary damages shall not constitute a sufficient remedy. Consequently, in the event of any such breach, the Company, the Purchaser, and/or their respective successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, in each case without the requirement of posting a bond or proving actual damages. Section 9.8 Split Dollar Life Insurance Policies. From the date hereof ------------------------------------ and continuing throughout the business day immediately preceding the Closing Date, each Seller shall have a "Split Dollar Option" of requiring the Company to ------------------- continue to pay the premiums on such Seller's Split Dollar Life Insurance Policy (the "Split Dollar Policy") from and after the date of the Closing until ------------------- 51 the earlier occurrence of (i) full satisfaction of the premium payments on such Seller's Split Dollar Policy or (ii) the death of such Seller (the earlier to occur of clause (i) and (ii) is referred to herein as the "Premium Satisfaction -------------------- Event"); provided that, as part of the Split Dollar Option, it is agreed that - ----- -------- ---- within 30 days of the occurrence of the Premium Satisfaction Event, such Seller or such Seller's estate shall pay to the Company an amount equal to the sum of (A) the aggregate amount of premium payments on such Seller's Split Dollar Policy made by the Company since the Closing Date (the "Split Dollar Premiums"), ----- ------ -------- plus (B) interest on each Split Dollar Premium at a rate of 15% per annum - ---- compounded monthly commencing with the date on which such Split Dollar Premium was paid (the "Split Dollar Interest", and together with the Split Dollar --------------------- Premiums, the "Reimbursement Amount"); provided, further, that as a condition -------------------- -------- ------- precedent to such Seller's election of his Split Dollar Option, the Seller must execute and deliver a Collateral Assignment Agreement to the Purchaser granting the Company a security interest for the Reimbursement Amount in such Split Dollar Policy. Notwithstanding anything in this Stock Purchase Agreement to the contrary, in the event that either Seller elects not to exercise his Split Dollar Option in accordance with this Section 9.8, then the Company's current security interest in such Seller's Split Dollar Policy shall be included in the definition of Excluded Assets and Liabilities as set forth in Section 1.1. ARTICLE 8 -- MISCELLANEOUS Section 8.1 Amendment and Waiver. This Agreement may be amended and any -------------------- provision of this Agreement may be waived, provided that any such amendment or waiver shall be binding upon a Party only if such amendment or waiver is set forth in a writing executed by the Purchaser and the Representative. No course of dealing between or among any Persons having any interest in this Agreement shall be deemed effective to modify, amend, or discharge any part of this Agreement or any rights or obligations of any Party under or by reason of this Agreement. Section 8.2 Notices. All notices, demands, and other communications ------- given or delivered under this Agreement shall be in writing and shall be deemed to have been given, (i) when received if given in person, (ii) on the date of electronic confirmation of receipt if sent by telex, facsimile or other wire transmission, (iii) three days after being deposited in the U.S. mail, certified or registered mail, postage prepaid, or (iv) one day after being deposited with a reputable overnight courier. Notices, demands, and communications to the Parties shall, unless another address is specified in writing, be sent to the address or telecopy number indicated below: Notices to the Representative or the Sellers -------------------------------------------- or, before the Closing, notices to the Company: ---------------------------------------------- Products Unlimited Corporation 1801 Westwood Drive Sterling, Illinois 61081 Attention: Gary Schreiner Edward Chernoff Fax No.: (815) 626-8637 52 with a copy to: -------------- Ward, Murray, Pace & Johnson, P.C. 202 East Fifth Street Sterling, Illinois 61081 Attention: Robert E. Branson, Esq. Fax No.: (815) 625-8363 Dunetz, Marcus, Brady & Weinsteir, L.L.C. Plaza II, Suite 1500 354 Eisenhower Parkway Livingston, New Jersey 07039-1-23 Attention: Ira Marcus Fax No.: (973) 994-2767 Notices to the Purchaser or, after the Closing, ---------------------------------------------- notices to the Company: ---------------------- Communications Instruments, Inc. 1396 Charlotte Hwy. Fairview, NC 28730 Attention: President Fax No. (828) 628-4713 with a copy to: -------------- Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Sanford E. Perl, Esq. Fax No. (312) 861-2200 Section 8.3 Binding Agreement; Assignment. This Agreement and all of the ----------------------------- provisions hereof shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided that neither this Agreement nor any of the rights, interests, or obligations hereunder may be assigned by any Party without the prior written consent of the other Parties; provided that (1) the Purchaser may at any time before the Closing, assign, in whole or in part, its rights and obligations pursuant to this Agreement to one or more of its Affiliates; provided that the Purchaser will nonetheless remain liable for all of its obligations hereunder; (2) the Purchaser and the Company may each assign its rights under this Agreement for collateral security purposes to any lender providing financing to the Purchaser, the 53 Company, or any of their Affiliates and any such lender may exercise all of the rights and remedies of the Purchaser and the Company hereunder; and (3) the Purchaser and the Company may assign its rights under this Agreement, in whole or in part, to any subsequent purchaser of the Purchaser or any Acquired Company or any material portion of its assets (whether such sale is structured as a sale of stock, a sales of assets, a merger, or otherwise); provided that the Purchaser and the Company will nonetheless remain liable for all of its obligations hereunder. Section 8.4 Severability. Whenever possible, each provision of this ------------ Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement. Section 8.5 No Strict Construction. The language used in this Agreement ---------------------- shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Person. The Parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event of an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Section 8.6 Captions. The captions used in this Agreement are for -------- convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize, or in any way affect any provision of this Agreement, and all provisions of this Agreement shall be enforced and construed as if no caption had been used in this Agreement. Section 8.7 Entire Agreement. This Agreement and the documents referred ---------------- to herein contain the entire agreement between the Parties and supersede any prior understandings, agreements, or representations by or between the Parties, written or oral, which may have related to the subject matter hereof in any way. Section 8.8 Counterparts. This Agreement may be executed in multiple ------------ counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument. Section 8.9 Governing Law. All questions concerning the construction, ------------- validity, and interpretation of this Agreement shall be governed by and construed in accordance with the domestic laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. 54 Section 8.10 Parties in Interest. Nothing in this Agreement, express or ------------------- implied, is intended to confer on any person, other than the Parties and their respective successors and assigns, any rights or remedies under or by virtue of this Agreement. Section 8.11 Schedules. Information disclosed on any Schedule hereto --------- shall be deemed to be disclosed on each other Schedule hereto to the extent that such information is reasonably apparent on its face as being applicable to such other Schedule. * * * * 55 IN WITNESS WHEREOF, the Parties have executed this Stock Purchase Agreement as of the date first written above. Company: PRODUCTS UNLIMITED CORPORATION By: _____________________________________________ Name: ____________________________________________ Its: _____________________________________________ Purchaser: COMMUNICATIONS INSTRUMENTS, INC. By: _____________________________________________ Name:_____________________________________________ Its: _____________________________________________ Sellers: __________________________________________________ Gary W. Schreiner __________________________________________________ The Gary W. Schreiner Charitable Remainder Trust dated January 4, 1999, by Gary W. Schreiner, its Trustee __________________________________________________ Edward A. Chernoff __________________________________________________ The Edward A. Chernoff 1999 Charitable Remainder Unitrust u/a/t dated February 11, 1999, by Brian Shore, its Trustee SIGNATURE PAID TO THE STOCK PURCHASE AGREEMENT EX-10.2 3 AMENDED AND RESTATEDCREDIT AGREEMENT EXHIBIT 10.2 ================================================================================ AMENDED AND RESTATED CREDIT AGREEMENT among CII TECHNOLOGIES, INC., COMMUNICATIONS INSTRUMENTS, INC., VARIOUS LENDERS, NATIONSBANK, N.A., as an Issuing Lender and the Swingline Lender, and NATIONSBANK, N.A., as the Administrative Agent Syndication Agent and Arranger: NATIONSBANC MONTGOMERY SECURITIES LLC ---------------------------------- Dated as of June 19, 1998 and Amended and Restated as of March 19, 1999 ---------------------------------- ================================================================================ TABLE OF CONTENTS -----------------
Page ---- ARTICLE I DEFINITIONS................................................................................................ 1 1.01 Defined Terms..................................................................................... 1 1.02 Other Definitional Provisions..................................................................... 31 1.03 Accounting Principles............................................................................. 32 ARTICLE II THE CREDIT FACILITIES...................................................................................... 32 2.01 Amounts and Terms of Commitments.................................................................. 32 2.02 Loan Accounts and Register; Notes................................................................. 34 2.03 Procedure for Borrowing........................................................................... 35 2.04 Conversion and Continuation Elections for Revolving and Term Borrowings........................... 37 2.05 Reduction and Termination of Commitments.......................................................... 38 2.06 Voluntary Prepayments............................................................................. 41 2.07 Mandatory Prepayments............................................................................. 41 2.08 Repayment of Principal............................................................................ 45 2.09 Interest.......................................................................................... 46 2.10 Fees.............................................................................................. 48 2.11 Computation of Fees and Interest.................................................................. 49 2.12 Payments by the Borrower.......................................................................... 50 2.13 Payments by the Lenders to the Administrative Agent............................................... 50 2.14 Sharing of Payments, etc.......................................................................... 51 2.15 Security and Guaranties........................................................................... 52 ARTICLE III THE LETTERS OF CREDIT...................................................................................... 52 3.01 The Letter of Credit Subfacility.................................................................. 52 3.02 Issuance, Amendment and Renewal of Letters of Credit.............................................. 53 3.03 Participations, Drawings and Reimbursements....................................................... 55 3.04 Repayment of Participations....................................................................... 56 3.05 Role of the Issuing Lenders....................................................................... 57 3.06 Obligations Absolute.............................................................................. 58 3.07 Cash Collateral Pledge............................................................................ 59 3.08 Letter of Credit Fees............................................................................. 59 3.09 Uniform Customs and Practice...................................................................... 60 ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY..................................................................... 60
-i- 4.01 Taxes........................................................................................... 60 4.02 Illegality...................................................................................... 64 4.03 Increased Costs and Reduction of Return......................................................... 64 4.04 Funding Losses.................................................................................. 65 4.05 Inability to Determine Rates.................................................................... 66 4.06 Increased Costs on Eurodollar Loans............................................................. 66 4.07 Certificates of Lenders......................................................................... 66 4.08 Change of Lending Office, Replacement Lender, etc............................................... 66 4.09 Survival........................................................................................ 67 ARTICLE V CONDITIONS PRECEDENT..................................................................................... 68 5.01 Conditions to Loans and Letters of Credit on the Restatement Effective Date..................... 68 5.02 Conditions to all Borrowings and the Issuance of any Letters of Credit.......................... 74 ARTICLE VI REPRESENTATIONS AND WARRANTIES........................................................................... 74 6.01 Corporate Existence and Power................................................................... 75 6.02 Corporate Authorization; No Contravention....................................................... 75 6.03 Governmental Authorization...................................................................... 75 6.04 Binding Effect.................................................................................. 76 6.05 Litigation...................................................................................... 76 6.06 No Default...................................................................................... 76 6.07 ERISA Compliance................................................................................ 76 6.08 Use of Proceeds; Margin Regulations............................................................. 77 6.09 Title to Properties............................................................................. 77 6.10 Taxes........................................................................................... 77 6.11 Financial Statements............................................................................ 78 6.12 Securities Law, etc.; Compliance................................................................ 78 6.13 Governmental Regulation......................................................................... 78 6.14 Labor Controversies............................................................................. 78 6.15 Subsidiaries.................................................................................... 78 6.16 Patents, Trademarks, etc........................................................................ 78 6.17 Accuracy of Information......................................................................... 79 6.18 Hazardous Materials............................................................................. 79 6.19 Collateral Documents............................................................................ 79 6.20 Solvency........................................................................................ 80 6.21 Representations and Warranties in the other Documents........................................... 80 6.22 Capitalization.................................................................................. 81 6.23 Special Purpose Corporation..................................................................... 81 6.24 Insurance....................................................................................... 82 6.25 Borrower Senior Subordinated Note; etc.......................................................... 82 6.26 The Transaction................................................................................. 82 6.27 Year 2000 Compliance............................................................................ 83
-ii- ARTICLE VII AFFIRMATIVE COVENANTS.................................................................................... 83 7.01 Financial Statements............................................................................ 83 7.02 Certificates; Other Information................................................................. 84 7.03 Notices......................................................................................... 85 7.04 Books, Records and Inspections.................................................................. 87 7.05 Maintenance of Property; Insurance.............................................................. 87 7.06 Corporate Franchises............................................................................ 88 7.07 Compliance with Law............................................................................. 88 7.08 Payment of Taxes................................................................................ 88 7.09 Contributions................................................................................... 89 7.10 End of Fiscal Years; Fiscal Quarters............................................................ 89 7.11 Cash Management System.......................................................................... 89 7.12 Foreign Subsidiaries Security................................................................... 89 7.13 Holdings Preferred Stock........................................................................ 90 7.14 Use of Proceeds; Margin Regulations............................................................. 90 7.15 Liens on Real Property.......................................................................... 91 ARTICLE VIII NEGATIVE COVENANTS....................................................................................... 92 8.01 Liens........................................................................................... 93 8.02 Consolidation, Merger, Purchase or Sale of Assets, etc.......................................... 95 8.03 Dividends....................................................................................... 98 8.04 Indebtedness.................................................................................... 100 8.05 Advances, Investments and Loans................................................................. 102 8.06 Transactions with Affiliates.................................................................... 104 8.07 Capital Expenditures............................................................................ 105 8.08 Consolidated Coverage Ratios.................................................................... 107 8.09 Maximum Leverage Ratio.......................................................................... 108 8.10 Minimum Consolidated EBITDA..................................................................... 109 8.11 Limitation on Voluntary Payments and Modification of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc......................... 109 8.12 Limitation on Certain Restrictions on Subsidiaries.............................................. 111 8.13 Limitation on Issuance of Capital Stock......................................................... 112 8.14 Business........................................................................................ 112 8.15 Limitation on Creation of Subsidiaries.......................................................... 113 ARTICLE IX EVENTS OF DEFAULT........................................................................................ 113 9.01 Event of Default................................................................................ 113 9.02 Remedies........................................................................................ 116 9.03 Rights Not Exclusive............................................................................ 117
-iii- ARTICLE X THE GUARANTY........................................................................................... 117 10.01 Guaranty from Holdings........................................................................ 117 ARTICLE XI THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT, THE ISSUING LENDERS AND THE ARRANGER................................................................... 121 11.01 Appointment and Authorization................................................................. 121 11.02 Delegation of Duties.......................................................................... 121 11.03 Liability of Agent............................................................................ 121 11.04 Reliance by Agent............................................................................. 122 11.05 Notice of Default............................................................................. 122 11.06 Credit Decision............................................................................... 123 11.07 Indemnification............................................................................... 123 11.08 Agent in Individual Capacity.................................................................. 124 11.09 Successor Agent............................................................................... 124 11.10 The Arranger and the Syndication Agent........................................................ 124 ARTICLE XII MISCELLANEOUS.......................................................................................... 125 12.01 Amendments and Waivers........................................................................ 125 12.02 Notices....................................................................................... 126 12.03 No Waiver; Cumulative Remedies................................................................ 127 12.04 Costs and Expenses............................................................................ 127 12.05 Indemnity..................................................................................... 128 12.06 Successors and Assigns........................................................................ 129 12.07 Assignments, Participations, etc.............................................................. 129 12.08 Confidentiality............................................................................... 130 12.09 Set-off....................................................................................... 131 12.10 Notification of Addresses, Lending Offices, etc............................................... 132 12.11 Counterparts.................................................................................. 132 12.12 Severability.................................................................................. 132 12.13 No Third Parties Benefited.................................................................... 132 12.14 Governing Law and Jurisdiction................................................................ 132 12.15 Waiver of Jury Trial.......................................................................... 133 12.16 Domicile of Loans............................................................................. 133
-iv- SCHEDULE 1.01(a) -- Lending Offices SCHEDULE 1.01(b) -- Commitments and Outstanding Tranche A Term Loans SCHEDULE 1.01(c) -- Subsidiary Guarantors SCHEDULE 1.01(d) -- Pre-Closing EBITDA Adjustments SCHEDULE 6.09 -- Real Property SCHEDULE 6.15 -- Subsidiaries SCHEDULE 6.24 -- Insurance SCHEDULE 8.01 -- Existing Liens SCHEDULE 8.04 -- Existing Indebtedness SCHEDULE 8.05 -- Existing Investments EXHIBIT A -- Form of Revolving Note EXHIBIT B-1 -- Form of Tranche A Term Note EXHIBIT B-2 Form of Tranche B Term Note EXHIBIT C -- Form of Notice of Borrowing EXHIBIT D -- Form of Notice of Conversion/Continuation EXHIBIT E -- Form of Pledge Agreement EXHIBIT F -- Form of Subsidiary Guaranty EXHIBIT G -- Form of Security Agreement EXHIBIT H -- Form of Guarantor Supplement EXHIBIT I -- Form of Leverage Ratio Certificate EXHIBIT J-1 -- Form of Kirkland & Ellis Opinion EXHIBIT J-2 -- Form of McGuire, Wood & Bissette, P.A. Opinion EXHIBIT K -- Form of Solvency Certificate EXHIBIT L -- Form of Assignment and Acceptance EXHIBIT M -- Form of Compliance Certificate EXHIBIT N -- Form of Intercompany Note EXHIBIT O -- Form of Holdings Shareholder Subordinated Note EXHIBIT P -- Form of Contribution and Indemnification Agreement EXHIBIT Q -- Form of Borrowing Base Certificate EXHIBIT R -- Form of Section 4.01(f) Certificate -v- AMENDED AND RESTATED CREDIT AGREEMENT AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 19, 1998, and amended and restated as of March 19, 1999, among CII TECHNOLOGIES, INC., a Delaware corporation ("Holdings"), COMMUNICATIONS INSTRUMENTS, INC., a North -------- Carolina corporation (the "Borrower"), the several financial institutions from -------- time to time party to this Agreement (the "Lenders"), NATIONSBANK, N.A., as an ------- Issuing Lender and the Swingline Lender, and NATIONSBANK, N.A., as the Administrative Agent. W I T N E S S E T H : -------------------- WHEREAS, Holdings, the Borrower, the Existing Lenders and Bank of America National Trust and Savings Association, as the administrative agent, are parties to a Credit Agreement, dated as of June 19, 1998 (as amended, modified or supplemented to, but not including, the Restatement Effective Date, the "Original Credit Agreement"); and WHEREAS, in connection with the Acquisition, the Borrower has requested that the Original Credit Agreement be amended and restated in its entirety, and the Lenders and the Administrative Agent are willing to amend and restate the same, upon the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree that, on the Restatement Effective Date, the Original Credit Agreement shall be and is hereby amended and restated in its entirety as follows: ARTICLE I DEFINITIONS 1.01 Defined Terms. As used in this Agreement, the capitalized -------------- terms in the preamble and the recitals hereto shall have the meanings therein given them, and the following words and terms shall have the meanings specified below: "Acquired Entity or Business" has the meaning specified in the --------------------------- definition of "Consolidated Net Income". ----------------------- "Acquisition" means the acquisition by the Borrower of all of the ----------- outstanding capital stock of Products Unlimited pursuant to the terms and conditions of the Acquisition Agreement. "Acquisition Agreement" means that certain Stock Purchase Agreement, --------------------- dated as of March 19, 1999, among the Borrower, Products Unlimited and the shareholders of Products Unlimited. "Acquisition Documents" means the Acquisition Agreement and the other --------------------- agreements and documents related to the Acquisition. "Adjusted Consolidated Working Capital" means, at any time, ------------------------------------- Consolidated Current Assets (but excluding therefrom all cash and Cash Equivalents) less Consolidated Current Liabilities at such time. "Adjustment Date" means (A) the earlier of (x) the date which is 45 --------------- days after Holdings' fiscal quarter ending March 31, 1999 and (y) the date which is two Business Days after Holdings has delivered a Leverage Ratio Certificate to the Agent in accordance with Section 12.02 as of the end of such fiscal ------------- quarter (the "First Adjustment Date") and (B) after the First Adjustment Date, --------------------- the earlier of (x) each date which is 45 days after the end of a fiscal quarter of Holdings (or, in the case of the fourth fiscal quarter of Holdings, 90 days) and (y) the date which is two Business Days after Holdings has delivered a Leverage Ratio Certificate to the Administrative Agent in accordance with Section 12.02 as of the end of a fiscal quarter. - ------------- "Administrative Agent" means NationsBank in its capacity as -------------------- representative for the Lenders hereunder, and any successor administrative agent. "Administrative Agent's Payment Office" means the address for payments ------------------------------------- set forth on the signature page hereto in relation to the Administrative Agent or such other address as the Administrative Agent may from time to time specify in accordance with Section 12.02. ------------- "Affiliate" means, with respect to any Person, any other Person (i) --------- directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person or (ii) that directly or indirectly owns more than 5% of any class of the capital stock, of or equity interests in, such Person. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means, collectively, NationsBank, in its capacity as ----- Administrative Agent, and Bank of America, in its capacity as Collateral Agent, in each case for the Lenders and certain other beneficiaries hereunder and under the Collateral Documents, and shall include any successor to the Agent appointed pursuant to Article XI. ---------- "Agent-Related Persons" has the meaning specified in Section 11.03. --------------------- ------------- "Aggregate Commitment" means, collectively, the Aggregate Revolving -------------------- Commitment, the Aggregate Tranche A Term Commitment and the Aggregate Tranche B Term Commitment; provided that after the incurrence of the Original Tranche A Term Loans under the Original Credit Agreement and the Tranche B Term Loans under this Agreement and the termination of such Term Commitments, the Aggregate Tranche A Term Commitment and the Aggregate Tranche B Term Commitment shall instead refer to the aggregate outstanding principal amount of all Tranche A Term Loans and Tranche B Term Loans at any time. "Aggregate Revolving Commitment" means the combined Revolving ------------------------------ Commitments of the Lenders in the initial principal amount of $25,000,000 as such amount may be reduced from time to time pursuant to this Agreement. -2- "Aggregate Tranche A Term Commitment" means the combined Original ----------------------------------- Tranche A Term Commitments of the Lenders under the Original Credit Agreement in the original principal amount of $35,000,000, which commitments were terminated at the time of the incurrence of the Original Tranche A Term Loans under the Original Credit Agreement. "Aggregate Tranche B Term Commitment" means the combined Tranche B ----------------------------------- Term Commitments of the Lenders in the initial principal amount of $55,000,000, as such amount may be reduced from time to time pursuant to this Agreement. "Agreement" means this Amended and Restated Credit Agreement as from --------- time to time amended, modified or supplemented. "Applicable Margin" means the margin to be added to the Base Rate or ----------------- LIBOR, as the case may be, in accordance with Section 2.09(a). --------------- "Arranger" means NMS. -------- "Asset Sale" means the direct or indirect sale, lease (other than ---------- operating leases entered into in the ordinary course of business), transfer, conveyance or other disposition (including, without limitation, dispositions pursuant to sale and leaseback transactions), in a single transaction or a series of transactions, by Holdings or any of its Subsidiaries to any Person (other than to Holdings or any of its Wholly-Owned Subsidiaries) of any property or assets of Holdings or any of its Subsidiaries, other than sales of assets pursuant to Sections 8.02(ii), (iii), (iv), (viii), (ix), (xii), (xiii), (xiv), ----------------- ----- ---- ------ ----- ----- ------ ----- (xv), (xvi), (xvii) and (xviii). - ---- ----- ------ ------- "Assignee" has the meaning specified in Section 12.07(a). -------- ---------------- "Assignment and Acceptance" has the meaning specified in Section ------------------------- ------- 12.07(a). - -------- "Attorney Costs" means and includes all reasonable fees and -------------- disbursements of any law firm or other external counsel and, without duplication, the allocated cost of internal legal services and all reasonable disbursements of internal counsel. "B Lender" means each Lender that has outstanding Tranche B Term Loans -------- hereunder. "Bank of America" means Bank of America National Trust and Savings --------------- Association, a national banking association. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 --------------- U.S.C. (S) 101, et seq.). -- ---- "Base Rate" means, for any day, the higher of (a) the Reference Rate --------- or (b) the Federal Funds Rate plus 1/2%, in each case as in effect for such day. "Base Rate Loan" means each Swingline Loan and each other Loan that -------------- bears interest based on the Base Rate. -3- "Borrower" has the meaning specified in the preamble hereto. -------- "Borrower Senior Subordinated Note Documents" means the Borrower ------------------------------------------- Senior Subordinated Note Indenture, the Borrower Senior Subordinated Notes and all other documents and agreements executed and delivered pursuant to the Borrower Senior Subordinated Note Indenture, including any guaranty given by Holdings thereunder as permitted by Section 8.04(vii). ----------------- "Borrower Senior Subordinated Note Indenture" means the Indenture, ------------------------------------------- dated as September 18, 1997, among the Borrower, the Subsidiary Guarantors and Norwest Bank Minnesota National Association, as trustee, as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof, including (i) that certain Supplemental Indenture thereto dated June 19, 1998 and (ii) that certain Supplemental Indenture thereto dated March 19, 1999 pursuant to which Products Unlimited and its Domestic Subsidiaries will become a guarantor of the Borrower Senior Subordinated Notes. "Borrower Senior Subordinated Notes" means the Borrower's 10% senior ---------------------------------- subordinated notes due 2004. "Borrowing" means a borrowing hereunder consisting of one or more --------- Loans made to the Borrower on the same Borrowing Date by the Lenders having Commitments of the respective Tranche of Loans or the Swingline Lender, as the case may be, in each case pursuant to Section 2.01, and may be a Swingline ------------ Borrowing, a Revolving Borrowing, a Tranche A Term Borrowing or a Tranche B Term Borrowing. "Borrowing Base" means, at any time, the sum of (a) eighty-five -------------- percent (85%) of the Net Amount of Eligible Receivables at such time plus (b) ---- sixty percent (60%) of the value (determined on a first-in-first-out basis and valued at the lower of cost or market value) of Eligible Inventory at such time. "Borrowing Base Certificate" means a certificate in substantially the -------------------------- form of Exhibit Q, to be executed by a Responsible Officer of Holdings and --------- delivered pursuant to Section 7.01(e). --------------- "Borrowing Date" means, in relation to any Loan, the date of the -------------- borrowing of such Loan as specified in the relevant Notice of Borrowing for a Borrowing. "Business Day" means any day other than a Saturday, Sunday or other ------------ day on which commercial banks in New York or Charlotte are authorized or required by law to close and, if such term is used in relation to any Eurodollar Loan or the Interest Period therefor, any such day on which dealings are carried on by and between banks in Dollar deposits in the London interbank market. "Capital Adequacy Regulation" means any guideline, request or --------------------------- directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or -4- not having the force of law (but with which a Lender customarily complies) regarding capital adequacy of any bank or of any corporation controlling a bank. "Capital Expenditures" means, for any period and with respect to any -------------------- Person, the aggregate of all expenditures by such Person and its Subsidiaries for the acquisition or leasing of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which is capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries. "Capital Lease" has the meaning specified in the definition of ------------- "Capital Lease Obligations". - -------------------------- "Capital Lease Obligations" means all monetary obligations of Holdings ------------------------- or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, is classified as a capital lease ("Capital Lease"). ------------- "Cash Collateralize" means to pledge and deposit with or deliver to ------------------ the Administrative Agent, for the benefit of the Administrative Agent, the Issuing Lenders and the Lenders, as collateral for the Letter of Credit Obligations, cash or deposit account balances pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the Issuing Lenders (which documents are hereby consented to by the Lenders). Derivatives of such term shall have corresponding meanings. Cash collateral shall be invested in Cash Equivalents of a tenor reasonably satisfactory to the Administrative Agent and as instructed by the Borrower, which Cash Equivalents shall be held in the name of the Borrower and under the control of the Administrative Agent in a manner reasonably satisfactory to the Collateral Agent. "Cash Equivalents" means any or all of the following: (i) obligations ---------------- of, or guaranteed as to interest and principal by, the United States Government maturing within one year after the date on which such obligations are purchased; (ii) open market commercial paper of any corporation (other than Holdings, the Borrower or any of its Subsidiaries) incorporated under the laws of the United States or any State thereof or the District of Columbia rated P-1 or its equivalent by Moody's or A-1 or its equivalent or higher by S&P; (iii) time deposits or certificates of deposit maturing within one year after the issuance thereof issued by commercial banks organized under the laws of any country which is a member of the OECD and having a combined capital and surplus in excess of $250,000,000 or which is a Lender; (iv) repurchase agreements with a term of not more than seven days with respect to securities described in clause (i) above entered into with an office of a bank or trust company meeting the criteria specified in clause (iii) above; (v) bankers' acceptances with maturities not ------------ exceeding one year and overnight bank deposits in each case with an office of a bank or trust company meeting the criteria specified in clause (iii) above; and ------------ (vi) money market, mutual or similar funds substantially all of whose investments are comprised of the investments described in clauses (i) through ----------- (v) above. - --- "CERCLA" means the Comprehensive Environmental Response, Compensation, ------ and Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C. (S) 9601 et seq. ------- -5- "Change of Control" means (a) (i) prior to a Qualified Public Equity ----------------- Offering, the Permitted Holders shall cease to own on a fully diluted basis in the aggregate at least 51% of the economic and voting interest in Holdings' capital stock and (ii) on and after the consummation of a Qualified Public Equity Offering, (x) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as such term is defined in Section 13(d)(3) of the Exchange Act) or group of related persons, together with any Affiliates thereof (other than the Permitted Holders), becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the Voting Stock of Holdings (as determined on a fully diluted basis and measured by voting power rather than number of shares) provided that the Permitted Holders "beneficially own" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the Voting Stock of Holdings than such other "person" or group of related persons and the Permitted Holders do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of Holdings or (y) the first day on which a majority of the members of the Board of Directors of Holdings are not Continuing Directors or (b) the Borrower shall cease to be a direct Wholly-Owned Subsidiary of Holdings or (c) a "change of control" or similar event shall occur under the Borrower Senior Subordinated Note Documents or any Refinancing Subordinated Indebtedness. "CHS" means Code, Hennessy & Simmons, III, L.P., a Delaware limited --- partnership. "CHS Management" means CHS Management III, L.P., a Delaware limited -------------- partnership. "CHS Management Agreement" means the Management Agreement, dated as of ------------------------ September 18, 1997, between the Borrower and CHS Management, as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Code" means the Internal Revenue Code of 1986, as amended from time ---- to time, and any regulations and rulings promulgated thereunder. "Collateral" means all property with respect to which any security ---------- interest has been granted (or purported to be granted) pursuant to any Collateral Document, as well as all Obligations which have been Cash Collateralized. "Collateral Agent" means Bank of America acting as collateral ---------------- representative for the Lenders and certain other beneficiaries pursuant to the Collateral Documents, and its successors and assigns in such capacity. "Collateral Documents" means the Pledge Agreement, the Subsidiary -------------------- Guaranty, the Security Agreement, each Mortgage, each Guarantor Supplement and each Security Instrument. -6- "Commitment" means any of the commitments of any Lender under this ---------- Agreement, specifically the Tranche A Term Commitment, the Tranche B Term Commitment or the Revolving Commitment. "Commitment Percentage" means, as to any Lender, such Lender's Tranche --------------------- A Term Commitment Percentage, Tranche B Term Commitment Percentage or Revolving Commitment Percentage, as applicable. "Compliance Certificate" means the compliance certificate in ---------------------- substantially the form of Exhibit M, to be executed by a Responsible Officer of --------- Holdings and delivered pursuant to Section 7.02(a). --------------- "Consolidated Current Assets" means, at any time, the consolidated --------------------------- current assets of Holdings and its Subsidiaries at such time. "Consolidated Current Liabilities" means, at any time, the -------------------------------- consolidated current liabilities of Holdings and its Subsidiaries at such time, but excluding the current portion of any Indebtedness under this Agreement and the current portion of any other long-term Indebtedness which would otherwise be included therein. "Consolidated EBIT" means, for any period, Consolidated Net Income for ----------------- such period before Consolidated Interest Expense (calculated without regard to the proviso contained in the definition thereof) and provision for taxes for such period and without giving effect to, without duplication, (u) any extraordinary gains or losses, (v) any gains or losses from sales of assets other than from sales of inventory sold in the ordinary course of business and any income or loss from discontinuing operations, (w) up to $821,000 of charges associated with the Borrower's closing of its Waynesboro, Virginia facility, (x) up to $500,000 of charges incurred in fiscal year 1999 relating to the relocation of certain product lines of Products Unlimited to Mexico, (y) any premiums, fees or expenses incurred in connection with any Permitted Acquisition and any related financings, and (z) the amortization or depreciation of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 (including non-cash write-ups and non-cash charges relating to inventory and fixed assets, in each case arising in connection with any Permitted Acquisition) and 17 (including non-cash charges relating to intangibles and goodwill arising in connection with any Permitted Acquisition). "Consolidated EBITDA" means, for any period, Consolidated EBIT for ------------------- such period, adjusted by (x) adding thereto, without duplication, the sum of (i) the amount of all amortization of goodwill and other intangibles (including debt issuance and other deferred financing, legal and accounting costs (including those associated with the Transaction, the Initial Transaction and any Permitted Acquisition consummated after the Original Effective Date)) and depreciation, (ii) all fees and expenses incurred in connection with the Transaction and the Initial Transaction, (iii) all management fees paid during such period to CHS Management or its Affiliates to the extent permitted under Section 8.06 (iv), ----------------- and (iv) other non-cash charges and expenses (including non-cash charges or expenses included in costs of goods sold), in each case to the extent that same were deducted in arriving at Consolidated EBIT for such period and (y) subtracting therefrom, without duplication, the sum of (i) the amount of all non-cash credits to -7- the extent that same were included in arriving at Consolidated EBIT for such period (but which will be added back to Consolidated EBITDA in any subsequent period to the extent cash is received in respect of any such non-cash credits in such subsequent period) and (ii) the amount of all (but which will be added back to Consolidated EBITDA in any subsequent period to the extent cash is received in respect of any such non-cash credits in such subsequent period) cash payments made in such period to the extent that same relate to a non-cash charge incurred in a previous period. Notwithstanding anything in this Agreement to the contrary, solely for purposes of determining the Borrower's compliance with Sections 8.09 and 8.10, and for purposes of calculating the Consolidated - -------- ---- ---- Senior Leverage Ratio, the following shall apply: (w) in the case of the Measurement Period ending on March 31, 1999, Consolidated EBITDA for such Measurement period shall be equal to the sum of (I) the actual Consolidated EBITDA of Holdings and its Subsidiaries (other than the portion thereof attributable to Products Unlimited and the its Subsidiaries) for the period from July 1, 1998 through and including March 31, 1999 multiplied by a fraction the numerator of which is 4 and the denominator of which is 3, (II) $7,350,000 (which amount represents "EBITDA" of Products Unlimited and its Subsidiaries for the period from April 1, 1998 through and including December 31, 1998), (III) the Pre- Closing EBITDA of Products Unlimited and (IV) the Post-Closing EBITDA of Products Unlimited for such period; (x) in the case of the Measurement Period ending on June 30, 1999, Consolidated EBITDA for such Measurement Period shall be equal to the sum of (I) the actual Consolidated EBITDA of Holdings and its Subsidiaries (other than the portion thereof attributable to Products Unlimited and its Subsidiaries) for the period from July 1, 1998 through and including June 30, 1999, (II) $4,900,000 (which amount represents "EBITDA" of Products Unlimited and its Subsidiaries for the period from July 1, 1998 through and including December 31, 1998), (III) the Pre-Closing EBITDA of Products Unlimited and (IV) the Post-Closing EBITDA of Products Unlimited for such period; (y) in the case of the Measurement Period ending on September 30, 1999, Consolidated EBITDA for such Measurement Period shall be equal to the sum of (I) the actual Consolidated EBITDA of Holdings and its Subsidiaries (other than the portion thereof attributable to Products Unlimited and its Subsidiaries) for the period from October 1, 1998 through and including September 30, 1999, (II) $2,450,000 (which amount represents "EBITDA" of Products Unlimited and its Subsidiaries for the period from October 1, 1998 through and including December 31, 1998), (III) the Pre-Closing EBITDA of Products Unlimited and (IV) the Post-Closing EBITDA of Products Unlimited for such period; and (z) in the case of the Measurement Period ending on December 31, 1999, Consolidated EBITDA for such Measurement Period shall be equal to the sum of (I) the actual Consolidated EBITDA of Holdings and its Subsidiaries (other than the portion thereof attributable to Products Unlimited and its Subsidiaries), (II) the Pre-Closing -8- EBITDA of Products Unlimited and (III) the Post-Closing EBITDA of Products Unlimited for such period. "Consolidated Fixed Charge Coverage Ratio" means, for any period, the ---------------------------------------- ratio of (x) Consolidated EBITDA for such period minus Capital Expenditures made or incurred during such period (other than Capital Expenditures to the extent financed with equity proceeds, Asset Sale proceeds, insurance proceeds or Indebtedness) to (y) the sum of regularly scheduled installments of principal with respect to Consolidated Indebtedness which are scheduled to become due and payable during such period plus Consolidated Interest Expense that is paid or would be payable in cash for such period (it being understood that, in any event, the interest payment to be made on the Holdings Junior Subordinated Notes pursuant to Section 8.11(iii)(y) in any year shall be treated as if such payment -------------------- was made on December 31 of the immediately preceding fiscal year of Holdings). "Consolidated Indebtedness" means, at any time, the principal amount ------------------------- of all Indebtedness of Holdings and its Subsidiaries at such time determined on a consolidated basis to the extent that such Indebtedness would be accounted for as debt on the liability side of a balance sheet in accordance with GAAP plus, without duplication, (i) the maximum amount available to be drawn under all letters of credit (including any Letters of Credit), bankers acceptances and similar obligations issued for the account of Holdings and its Subsidiaries and all unpaid drawings or reimbursement obligations in respect thereof, (ii) the principal amount of all bonds issued by the Borrower and its Subsidiaries in connection with workers' compensation obligations, lease obligations, surety and similar obligations, and (iii) the amount of all Contingent Obligations of Holdings and its Subsidiaries determined on a consolidated basis in respect of Indebtedness of other Persons of the type described above in this definition, provided that Consolidated Indebtedness shall exclude Indebtedness in respect of any Holdings Junior Subordinated Notes and Holdings Shareholder Subordinated Notes. "Consolidated Interest Coverage Ratio" means, for any period, the ------------------------------------ ratio of (x) Consolidated EBITDA for such period to (y) Consolidated Interest Expense that is paid or would be payable in cash for such period (it being understood that, in any event, the interest payment to be made on the Holdings Junior Subordinated Notes pursuant to Section 8.11(iii)(y) in any year shall be -------------------- treated as if such payment was made on December 31 of the immediately preceding fiscal year of Holdings). "Consolidated Interest Expense" means, for any period, the total ----------------------------- consolidated interest expense of Holdings and its Subsidiaries for such period (calculated without regard to any limitations on the payment thereof) (net of interest income of Holdings and its Subsidiaries for such period) plus, without duplication, that portion of Capital Lease Obligations of Holdings and its Subsidiaries representing the interest factor for such period provided that (w) -------- the amortization of debt issuance and deferred financing, legal and accounting costs with respect to this Agreement, the Original Credit Agreement, the Borrower Senior Subordinated Notes and any Refinancing Subordinated Indebtedness, (x) all fees and expenses incurred in connection with (i) the Transaction and payable as of the Restatement Effective Date and (ii) the Initial Transaction and payable as of the Original Effective Date, (y) all interest on the Holdings Junior -9- Subordinated Notes to the extent paid in kind and (z) all interest on any Holdings Shareholder Subordinated Notes, in each case shall be excluded from Consolidated Interest Expense to the extent same would otherwise have been included therein. Any cash payments (other than in respect of principal) made under or on account of the Holdings Junior Subordinated Notes (whether or not characterized as interest) to the holders thereof shall be included as interest expense for purposes of this Agreement. "Consolidated Leverage Ratio" means, at any time, the ratio of (i) --------------------------- Consolidated Indebtedness at such time to (ii) Consolidated EBITDA for the Measurement Period then most recently ended, provided that in determining the Consolidated Leverage Ratio at any time, there shall be subtracted from Consolidated Indebtedness at such time an amount equal to the amount of unrestricted cash and/or Cash Equivalents of Holdings and its Subsidiaries as would be reflected on the consolidated balance sheet of Holdings at such time. "Consolidated Net Income" means, for any period, the net income (or ----------------------- loss) of Holdings and its Subsidiaries for such period, determined on a consolidated basis (after any deduction for minority interests), provided that (i) in determining Consolidated Net Income, the net income of any other Person which is not a Subsidiary of Holdings or is accounted for by Holdings by the equity method of accounting shall be included only to the extent of the payment of cash dividends or distributions by such other Person to Holdings or a Subsidiary thereof during such period, (ii) the net income of any Subsidiary of Holdings (other than the Borrower) shall be excluded to the extent that the declaration or payment of cash dividends or similar distributions by that Subsidiary of that net income is not at the date of determination permitted by operation of its charter or any agreement, instrument or law applicable to such Subsidiary, (iii) the net income (or loss) of any other Person acquired by such specified Person or a Subsidiary of such Person in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (iv) solely for purposes of calculating the Consolidated Leverage Ratio and the Consolidated Senior Leverage Ratio at any time, there shall be included (to the extent not already included) in determining Consolidated Net Income for any period the net income (or loss) of any Person, business, property or asset acquired during such period pursuant to a Permitted Acquisition and not subsequently sold or otherwise disposed of by Holdings or one of its Subsidiaries during such period (each such Person, business, property or asset acquired and not subsequently disposed of during such period, an "Acquired -------- Entity or Business"), in each case based on the actual net income (or loss) of - ------------------ such Acquired Entity or Business for the entire period (including the portion thereof occurring prior to such acquisition) and (v) in determining Consolidated Net Income for any period, there shall be excluded any interest income for such period to the extent otherwise included therein. "Consolidated Senior Indebtedness" means, at any time, the outstanding -------------------------------- principal balance of the Loans and other Obligations at such time plus the undrawn amount of all Letters of Credit then outstanding. "Consolidated Senior Leverage Ratio" means, at any time, the ratio of ---------------------------------- (i) Consolidated Senior Indebtedness at such time to (ii) Consolidated EBITDA for the Measurement Period then most recently ended, provided that in determining the Consolidated -10- Senior Leverage Ratio at any time, there shall be subtracted from Consolidated Senior Indebtedness at such time an amount equal to the amount of unrestricted cash and/or Cash Equivalents of Holdings and its Subsidiaries as would be reflected on the consolidated balance sheet of Holdings at such time. "Contingent Obligation" means, as applied to any Person, any direct or --------------------- indirect liability of that Person with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of ------------------- another Person (the "primary obligor"), including any obligation of that Person, --------------- whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor; (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor; (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or (d) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof; in each case, including arrangements wherein the rights and remedies of the holder of the primary obligation are limited to repossession or sale of certain property of such Person. The amount of any Contingent Obligation shall be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or if less, the stated or determinable amount of such Contingent Obligation) or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof. "Continuation Date" means any date on which the Borrower elects to ----------------- continue a Eurodollar Loan as a Eurodollar Loan for a further Interest Period in accordance with the provisions of Section 2.04. ------------ "Continuing Director" means, as of any date of determination, any ------------------- member of the Board of Directors of Holdings who (i) was a member of such Board of Directors on the Original Effective Date or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election. "Contractual Obligations" means, as to any Person, any provision of ----------------------- any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "Contribution Agreement" means the amended and restated Contribution ---------------------- and Indemnity Agreement in the form of Exhibit P, as amended, modified or --------- supplemented from time to time. "Conversion Date" means any date on which the Borrower elects to --------------- convert a Base Rate Loan to a Eurodollar Loan, or a Eurodollar Loan to a Base Rate Loan, in each case in accordance with the provisions of Section 2.04. ------------ -11- "Corcom" means Corcom, Inc., an Illinois corporation. ------ "Credit Party" means each of Holdings, the Borrower and each ------------ Subsidiary Guarantor. "Default" means any event or circumstance which, with the giving of ------- notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Disbursement Date" has the meaning specified in Section 3.03(b). ----------------- --------------- "Dividend" with respect to any Person means that such Person has -------- declared or paid a dividend or returned any equity capital to its stockholders as such or made any other distribution, payment or delivery of property or cash to its stockholders as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for a consideration any shares of any class of its capital stock outstanding on or after the Restatement Effective Date (or any options or warrants issued by such Person with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of such Person outstanding on or after the Restatement Effective Date (or any options or warrants issued by such Person with respect to its capital stock). "Dollars" and "$" each mean lawful money of the United States. ------- - "Domestic Lending Office" has the meaning provided in the definition ----------------------- of "Lending Office". -------------- "Domestic Subsidiary" means each Subsidiary of Holdings that is ------------------- incorporated under the laws of the United States or any State or territory thereof. "Eligible Assignee" means (a) a commercial bank, commercial finance ----------------- company or other financial institution (including an insurance company) organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank, commercial finance company or other financial institution (including an insurance company) organized under the laws of any other country which is a member of the OECD, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank, commercial finance company or other financial institution is acting through a branch or agency located in the United States; (c) a Person that is primarily engaged in the business of commercial banking or commercial finance and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary; (d) any fund that invests in commercial loans; and (e) any other entity approved by the Borrower and Administrative Agent. "Eligible Inventory" means (a) all Inventory owned by the Borrower or ------------------ any of its Domestic Subsidiaries which is subject to a first priority, perfected security interest in favor of -12- the Collateral Agent and (b) all Inventory owned by any the Borrower's Mexican Subsidiaries to the extent that the value of such Inventory (determined on a first-in-first-out basis and valued at the lower of cost or market value) does not exceed $2,000,000 in the aggregate at any time and that such Inventory is located in Mexico at one or more premises which are leased or owned by the Borrower or any of its Subsidiaries. "Eligible Receivables" means (a) all Receivables of the Borrower or -------------------- any of its Domestic Subsidiaries which are subject to a first priority, perfected security interest in favor of the Collateral Agent and (b) all Receivables of the Borrower or any of its Domestic Subsidiaries (other than those described in clause (a) of this definition) which arise out of a sale to ---------- an account debtor located outside of the United States to the extent that the Net Amount of Eligible Receivables with respect to such Receivables does not exceed $5,000,000 in the aggregate at any time. "Environmental Claims" means all actions, suits, proceedings or claims -------------------- by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spills, leaks, discharges, emissions or releases) of any Hazardous Material at, in, or from property, whether or not owned by Holdings or any of its Subsidiaries, or (b) any other circumstances forming the reasonable basis of any violation, or alleged violation, of any Environmental Law. "Environmental Law" has the meaning specified in the definition of ----------------- "Hazardous Material". ------------------ "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time, and the regulations and rulings promulgated thereunder. "ERISA Affiliate" means each person (as defined in Section 3(9) of --------------- ERISA) which together with Holdings or a Subsidiary of Holdings would be deemed to be a "single employer" (i) within the meaning of Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of Holdings or a Subsidiary of Holdings being a general partner of such person. "Eurodollar Lending Office" has the meaning provided in the definition ------------------------- of "Lending Office". -------------- "Eurodollar Loan" means a Revolving Loan or a Term Loan that bears --------------- interest based on LIBOR. "Event of Default" means any of the events or circumstances specified ---------------- in Section 9.01. ------------ -13- "Excess Cash Flow" means, for any period, the remainder of (a) the sum ---------------- of, without duplication, (i) Consolidated Net Income for such period, (ii) the amount of all non-cash charges included in determining Consolidated Net Income for such period and (iii) the decrease, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period, minus (b) the sum of, without duplication, (i) the amount of all Capital Expenditures made by Holdings and its Subsidiaries during such period (other than Capital Expenditures to the extent financed with equity proceeds, Asset Sale proceeds, insurance proceeds or Indebtedness), (ii) the amount of all Permitted Acquisitions made by Holdings and its Subsidiaries during such period (other than Permitted Acquisitions to the extent financed with equity proceeds, Asset Sale proceeds, insurance proceeds or Indebtedness), (iii) the aggregate amount of permanent principal payments of Indebtedness of Holdings and its Subsidiaries during such period (other than (A) repayments to the extent made with equity proceeds, Asset Sale Proceeds, insurance proceeds or Indebtedness and (B) repayments of Loans, provided that repayments of Loans shall be deducted in determining Excess Cash - -------- Flow if such repayments were (x) required as a result of a Scheduled Repayment under Section 2.08(c)(i) or (c)(ii) or (y) made as a voluntary prepayment with ----------------------------- internally generated funds (but in the case of a voluntary prepayment of Revolving Loans or Swingline Loans only to the extent accompanied by a voluntary reduction to the Aggregate Revolving Commitment)), (iv) any non-cash credits (including from sales of assets and insurance recoveries) included in determining Consolidated Net Income for such period, (v) non-cash charges added back in a previous period pursuant to clause (a)(ii) above to the extent any such charge has become a cash item in the current period, (vi) the increase, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period, and (vii) the amount of all cash payments made by the Borrower pursuant to Section 2.5 of the Acquisition Agreement during such period. Notwithstanding anything to the contrary contained in clauses (a)(iii) and (b)(vi) of this definition, for purposes of determining any decrease or increase in Adjusted Consolidated Working Capital for the Excess Cash Payment Period ending on December 31, 1999, such amounts shall equal the sum of the changes in Adjusted Consolidated Working Capital for Holdings and its Subsidiaries (other than Products Unlimited and its Subsidiaries) and Products Unlimited and its Subsidiaries for such Excess Cash Payment Period. "Excess Cash Payment Date" means the date occurring 90 days after the ------------------------ last day of each fiscal year of Holdings (beginning with its fiscal year ending on December 31, 1999). "Excess Cash Payment Period" means, with respect to the repayment -------------------------- required on each Excess Cash Payment Date, the immediately preceding fiscal year of Holdings (or, in the case of the first Excess Cash Payment Date after the Restatement Effective Date, the period from the Restatement Effective Date through and including December 31, 1999). "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "Existing Lenders" means the lenders party to the Original Credit ---------------- Agreement. "Federal Funds Rate" means, for any day, the rate set forth in the ------------------ weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption --------- -14- "Federal Funds (Effective)". If on any relevant day the appropriate rate for such previous day is not yet published in H.15(519), the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent. "Federal Reserve Board" means the Board of Governors of the Federal --------------------- Reserve System or any successor thereto. "First Adjustment Date" has the meaning specified in the definition of --------------------- the term "Adjustment Date". --------------- "Foreign Subsidiary" means each Subsidiary of Holdings which is not a ------------------ Domestic Subsidiary. "Form 4224" has the meaning specified in Section 4.01(f). --------- --------------- "Form 1001" has the meaning specified in Section 4.01(f). --------- --------------- "Form W-8" has the meaning specified in Section 4.01(f). -------- ---------------- "GAAP" means generally accepted accounting principles set forth from ---- time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such other entity as may be in general use by significant segments of the U.S. accounting profession, which are applicable to the circumstances as of the date of determination. "Governmental Authority" means any nation or government, any state or ---------------------- other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranteed Creditors" means and includes each of the Administrative -------------------- Agent, the Collateral Agent, the Issuing Lenders, the Lenders and, in the case of any Interest Rate Protection Agreements or Other Hedging Agreements, also any Affiliate of a Lender which has entered into an Interest Rate Protection Agreement or Other Hedging Agreement (even if such Lender subsequently ceases to be a Lender under this Agreement for any reason). "Guaranteed Obligations" means (i) the full and prompt payment when ---------------------- due (whether at the stated maturity, by acceleration or otherwise) of the principal and interest on each note issued by, and Loans made to, the Borrower under this Agreement and all reimbursement obligations and unpaid drawings with respect to Letters of Credit, together with all the other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities (including, without limitation, indemnities, -15- fees, interest and other Obligations) of the Borrower to the Lenders, the Administrative Agent, the Issuing Lenders and the Collateral Agent now existing or hereafter incurred under, arising out of or in connection with this Agreement or any other Loan Document and the due performance and compliance by the Borrower with all the terms, conditions and agreements contained in the Loan Documents and (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) of the Borrower owing under any Interest Rate Protection Agreement or Other Hedging Agreement entered into by the Borrower with any Lender or any other Guaranteed Creditor so long as such Lender or other Guaranteed Creditor participates in such Interest Rate Protection Agreement or Other Hedging Agreement, and their subsequent assigns, if any, whether now in existence or hereafter arising, and the due performance and compliance with all terms, conditions and agreements contained therein. "Guarantor" means Holdings and each Subsidiary Guarantor. --------- "Guarantor Supplement" means a supplement to the Subsidiary Guaranty, -------------------- the Pledge Agreement, the Security Agreement and the Contribution Agreement substantially in the form of Exhibit H, whereby a Subsidiary of the Borrower --------- becomes a party to each such Loan Document. "Guaranty" means the guaranty of Holdings pursuant to Article X and -------- --------- the Subsidiary Guaranty. "Hazardous Material" means and includes (a) any asbestos, urea- ------------------ formaldehyde, PCBs or dioxins or other material composed of or containing asbestos, PCBs or dioxins, (b) crude oil, any fraction thereof, and any petroleum product, (c) any natural gas, natural gas liquids, liquefied natural gas or other natural gas product or synthetic gas, and (d) any hazardous or toxic waste, substance or material or pollutant or contaminant defined as such in (or for purposes of) or that may result in the imposition of liability under any "Environmental Law", defined as the Comprehensive Environmental Response, ----------------- Compensation and Liability Act, any so-called "Superfund", or any other applicable Federal, state, local or other statute, law, ordinance, code, rule, regulation, order or decree, as now or at any time hereafter in effect, regulating, relating to, or imposing liability concerning the environment, the impact of the environment on human health, or any hazardous or toxic waste, substance or material or pollutant or contaminant. "Holdings" has the meaning specified in the preamble hereto. -------- "Holdings Bridge Junior Subordinated Notes" means $1,429,382 of ----------------------------------------- Holdings Junior Subordinated Notes which are issued to CHS on the Restatement Effective Date as part of CHS' agreement to fund, on a bridge basis, a portion of the financing contemplated by Section 5.01(l)(ii) on behalf of certain ------------------- shareholders and potential shareholders of Holdings, which Holdings Bridge Junior Subordinated Notes only may be repaid with (i) $571,752.80 of new cash common equity provided to Holdings as contemplated by Sections 8.11 and 9.01(l) ------------------------- and (ii) $857,629.20 of cash proceeds from the issuance of additional Holdings Junior Subordinated Notes as contemplated by Sections 8.11 and 9.01(l); it being ------------- ------- understood and agreed, however, -16- that if the proviso to Section 9.01(l) is applicable, all remaining outstanding --------------- Holdings Bridge Junior Subordinated Notes shall cease to constitute "Holdings Bridge Junior Subordinated Notes" but instead (x) a portion thereof shall convert into shares of Holdings Common Stock and (y) the remaining portion shall convert into a "Holdings Junior Subordinated Note" having the same terms and conditions as all other Holdings Junior Subordinated Notes referred to in this Agreement, in each case in accordance with the terms of the Holdings Bridge Junior Subordinated Notes and such that following the conversion described in clauses (x) and (y) above in this definition the initial investment in Holdings made as part of the Transaction equals $2,000,000 in Holdings Common Stock and $3,000,000 in Holdings Junior Subordinated Notes. "Holdings Common Stock" has the meaning specified in Section 6.22. --------------------- ------------ "Holdings Junior Subordinated Notes" means, collectively, the ---------------------------------- unsecured junior subordinated promissory notes issued by Holdings under, or as permitted by, the Original Credit Agreement and this Agreement, which notes (x) have an aggregate outstanding principal balance of $16,691,676 as of the Restatement Effective Date (and after giving effect to the Transaction) and (y) are not guaranteed in any way (whether directly, by way of security, the issuance of a letter of credit or otherwise) by any Subsidiary of Holdings. "Holdings Preferred Stock" has the meaning specified in Section 6.22. ------------------------ ------------ "Holdings Shareholder Subordinated Note" means an unsecured junior -------------------------------------- subordinated note issued by Holdings (and not guaranteed in any way (whether directly, by way of security, the issuance of a letter of credit or otherwise) by any Subsidiary of Holdings) in the form of Exhibit O (appropriately --------- completed), as amended, modified or supplemented from time to time in accordance with the terms of this Agreement. "Holdings Tax Sharing Agreement" means the amended and restated Tax ------------------------------ Sharing Agreement of even date herewith, among Holdings, the Borrower and certain other Subsidiaries of Holdings, as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Indebtedness" of any Person means, without duplication, (a) all ------------ indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than (i) trade payables entered into in the ordinary course of business pursuant to ordinary terms and (ii) ordinary course purchase price adjustments); (c) all reimbursement or payment obligations with respect to letters of credit or non- contingent reimbursement or payment obligations with respect to bankers' acceptances and similar documents; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement or sales of accounts receivable, in any such case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all Capital Lease Obligations; (g) all net obligations with respect to Interest Rate Protection Agreements and Other Hedging Agreements; (h) all indebtedness referred to in clauses (a) ----------- -17- through (g) above and clause (i) below secured by (or for which the holder of --- ---------- such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, valued, in the case of Indebtedness not assumed, at the lesser of the amount of such obligation and the fair market value of the encumbered property or asset; and (i) all Contingent Obligations. Notwithstanding the foregoing, Indebtedness shall not include trade payables and accrued expenses incurred by any Person in accordance with customary practices and in the ordinary course of business of such Person. "Indebtedness to be Refinanced" means Products Unlimited's existing ----------------------------- loan facility with Firstar Bank of Cedar Rapids, Iowa and the related loan documents. "Indemnified Liabilities" has the meaning provided in Section 12.05. ----------------------- ------------- "Indemnified Person" has the meaning provided in Section 12.05. ------------------ ------------- "Initial Transaction" means the "Transaction" under, and as defined ------------------- in, the Original Credit Agreement. "Insolvency Proceeding" means (a) any case, action or proceeding --------------------- before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors or similar proceedings, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally; in each case undertaken under U.S. Federal, State or foreign law, including the Bankruptcy Code. "Intercompany Loan" has the meaning provided in Section 8.05(xi). ----------------- ---------------- "Intercompany Note" means a promissory note in the form of Exhibit N. ----------------- --------- "Interest Payment Date" means, (a) with respect to any Base Rate Loan, --------------------- the last day of the last calendar month of each calendar quarter and the applicable Termination Date for Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or Swingline Loans, as the case may be, and (b) with respect to any Eurodollar Loan, the last day of each Interest Period applicable to such Loan and the date such Loan is repaid or prepaid; provided, however, that if any -------- ------- Interest Period for any Eurodollar Loan exceeds three months, then also the date which falls three months after the beginning of such Interest Period and, if applicable, at three month intervals thereafter shall also be an "Interest Payment Date". "Interest Period" means, in relation to any Eurodollar Loan, the --------------- period commencing on the applicable Borrowing Date or any Conversion Date or Continuation Date with respect thereto and ending on the date one, two, three or six months thereafter, as selected or deemed selected by the Borrower in its Notice of Borrowing or Notice of Conversion/Continuation; provided that: -------- -18- (i) if any Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month which is one, two, three or six months, as the case may be, after the calendar month in which such Interest Period began; (iii) the Borrower may not select an Interest Period with respect to any portion of principal of a Loan which extends beyond a date on which the Borrower is required to make a scheduled payment of that portion of principal; and (iv) no Interest Period for any Loan shall extend beyond the applicable Termination Date for Tranche A Term Loans, Tranche B Term Loans or Revolving Loans, as the case may be. "Interest Rate Protection Agreement" means an interest rate swap, cap, ---------------------------------- collar or similar arrangement entered into to hedge interest rate risk (and not for speculative purposes). "Inventory" means all of the Borrower's and its Domestic Subsidiaries' --------- and Mexican Subsidiaries' now owned and hereafter acquired inventory, goods, merchandise, and other personal property, wherever located, to be furnished under any contract of service or held for sale or lease, all returned goods, raw materials, other materials and supplies of any kind, nature or description which are or might be consumed in the Borrower's or its Domestic Subsidiaries' or Mexican Subsidiaries' business or used in connection with the packing, shipping, advertising, selling or finishing of such goods, merchandise and such other personal property, and all documents of title or other documents representing them. "Investment" has the meaning provided in Section 8.05. ---------- ------------ "Issuing Lender" means NationsBank or any Affiliate thereof in its -------------- capacity as issuer of one or more Letters of Credit hereunder (including Bank of America as issuer of the existing letters of credit referred to in the last sentence of Section 3.01(a)), and each other Lender which is designated as an --------------- Issuing Lender on the signature pages hereto, on an Assignment and Acceptance to which it is a party, or on another writing to which such Lender and the Administrative Agent is a party. "Kilovac Corporation" means Kilovac Corporation, a California ------------------- corporation. "Leaseholds" of any Person means all the right, title and interest of ---------- such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. -19- "Lender Affiliate" means a Person engaged in the business of making ---------------- loans that is an Affiliate of a Lender, including, in the case of any Lender that is a fund, any other fund that invests in commercial loans and is managed or is advised by the same investment advisor of such Lender. "Lenders" has the meaning specified in the preamble hereto. ------- "Lending Office" means, with respect to any Lender, the office or -------------- offices of such Lender specified as its "Lending Office", "Domestic Lending Office" or "Eurodollar Lending Office", as the case may be, on Schedule 1.01(a) ---------------- hereto, or such other office or offices of the Lender as it may from time to time notify the Borrower and the Agent. "Letter of Credit" means any letter of credit issued (or deemed ---------------- issued) by an Issuing Lender pursuant to Article III. ----------- "Letter of Credit Amendment Application" means an application form for -------------------------------------- amendment of outstanding standby or commercial documentary letters of credit as shall at any time be in use by an Issuing Lender, as such Issuing Lender shall request. "Letter of Credit Application" means an application form for issuances ---------------------------- of standby or commercial documentary letters of credit as shall at any time be in use by an Issuing Lender, as such Issuing Lender shall request. "Letter of Credit Borrowing" means an extension of credit resulting -------------------------- from a drawing under any Letter of Credit which shall not have been reimbursed on or before the Business Day following the respective Disbursement Date when made nor converted into a Borrowing of Revolving Loans under Section 3.03(b). --------------- "Letter of Credit Commitment" means the commitment of the Issuing --------------------------- Lenders to issue Letters of Credit, the Letter of Credit Obligations in respect thereof not to exceed in aggregate amount on any date the lesser of (i) the Aggregate Revolving Commitment on such date and (ii) $3,000,000. "Letter of Credit Obligations" means, at any time, the sum of (a) the ---------------------------- aggregate undrawn amount of all Letters of Credit then outstanding plus (b) the amount of all outstanding Letter of Credit Borrowings. "Letter of Credit Related Documents" means the Letters of Credit, the ---------------------------------- Letter of Credit Applications, the Letter of Credit Amendment Applications and any other document relating to any Letter of Credit, including any of the Issuing Lenders' standard form documents for letter of credit issuances. "Level I" has the meaning specified in Section 2.09(a)(ii). ------- ------------------- "Level II" has the meaning specified in Section 2.09(a)(ii). -------- ------------------- "Level III" has the meaning specified in Section 2.09(a)(ii). --------- ------------------- -20- "Level IV" has the meaning specified in Section 2.09(a)(ii). -------- ------------------- "Leverage Ratio Certificate" means a certificate duly executed by a -------------------------- Responsible Officer of Holdings, substantially in the form of Exhibit I (with --------- such changes thereto as may be agreed upon from time to time by the Administrative Agent and Holdings), and including therein, among other things, calculations supporting the information contained therein. "LIBOR" means, for each Interest Period for Eurodollar Loans ----- comprising the same Borrowing, (i) the rate of interest per annum determined by the Administrative Agent to be the arithmetic mean (rounded upward to the nearest whole multiple of 1/100%) of the rate of interest per annum as the rate at which Dollar deposits for such Interest Period and in an amount approximately equal to the amount of the proposed Eurodollar Loan of the Administrative Agent during such Interest Period, would be offered by the Administrative Agent's Eurodollar Lending Office to major banks in the London interbank market at or about 11:00 a.m. (London time) on the second Business Day prior to the commencement of such Interest Period divided (and rounded upwards to the nearest whole multiple of 1/100%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "Lien" means any interest in any real or personal property or fixture ---- which secures payment or performance of any obligation and shall include any mortgage, lien, pledge, encumbrance, charge or other security interest of any kind, whether arising under a Security Instrument or as a matter of law, judicial process or otherwise, including the retained security title of a conditional vendor or lessor. "Loan" means an extension of credit by a Lender to the Borrower ---- pursuant to Article II and shall include Revolving Loans, Tranche A Term Loans, ---------- Tranche B Term Loans and Swingline Loans. "Loan Documents" means this Agreement (including the guaranty of -------------- Holdings set forth in Article X), each Collateral Document, the Contribution --------- Agreement, each Revolving Note and Term Note and all other Security Instruments, agreements, instruments, certificates or other documents evidencing, guaranteeing or securing the Loans, Letter of Credit Borrowings or the other obligations of Holdings, the Borrower or any Subsidiary Guarantor hereunder or under any Collateral Document. "Majority Lenders" means at any time Lenders holding more than 50% of ---------------- the then Aggregate Commitment, provided that if the Commitments shall have been -------- terminated in full, "Majority Lenders" shall mean Lenders holding (including as a result of participations pursuant to Sections 2.01(b)(iv) and 3.03(a) and (d)) -------------------- ------- ---- more than 50% of the then aggregate unpaid amount of the Total Exposure. "Mandatory Borrowing" has the meaning specified in Section ------------------- ------- 2.01(b)(iv). - ----------- -21- "Margin Stock" means "margin stock" as such term is defined in ------------ Regulation T, U or X of the Federal Reserve Board. "Material Adverse Effect" means, relative to any occurrence of ----------------------- whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding), a material adverse effect on: (a) the operations, business, assets, properties, liabilities, condition (financial or otherwise) or prospects of the Borrower, or of Holdings and its Subsidiaries taken as a whole; or (b) the rights and remedies of the Administrative Agent, the Collateral Agent and the Lenders under this Agreement or under any other Loan Document. "Measurement Period" means (i) at any time on or prior to June 30, ------------------ 1999 for purposes of determining compliance with Sections 8.08, 8.09 and 8.10 and for purposes of determining the Senior Leverage Ratio, the period from July 1, 1998 through the last day of Holdings' fiscal quarter then last ended (taken as one accounting period) and (ii) at any time thereafter, any period of four consecutive fiscal quarters of Holdings (taken as one accounting period). "Mexican Subsidiary" means each Subsidiary of the Borrower that is ------------------ organized under the laws of Mexico. "Moody's" means Moody's Investors Service, Inc. ------- "Mortgage" has the meaning specified in Section 7.15(A)(i). -------- ------------------ "Mortgage Policies" has the meaning specified in Section 7.15(A)(ii). ----------------- ------------------- "Mortgaged Property" has the meaning specified in Section 7.15(A)(i). ------------------ ------------------ "NationsBank" means NationsBank, N.A., a national banking association, ----------- in its individual capacity. "Net Amount of Eligible Receivables" means, at any time, the gross ---------------------------------- amount of Eligible Receivables less returns, rebates, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding or claimed. "Net Cash Proceeds" means, in connection with any Asset Sale, the cash ----------------- proceeds (including any cash payments received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received in cash) of such Asset Sale net of (i) reasonable transaction costs (including any underwriting, brokerage or other customary selling commissions and reasonable legal, advisory and other fees and expenses, including title and recording expenses, associated therewith actually incurred), (ii) required debt payments (other than pursuant hereto), (iii) taxes estimated to be paid as a result of such Asset Sale and (iv) any portion of such cash proceeds which Holdings determines in good faith should be reserved for -22- post-closing adjustments or liabilities (to the extent Holdings delivers to the Lenders a certificate signed by a Responsible Officer of Holdings as to such determination). "Net Insurance Proceeds" means, with respect to any Recovery Event, ---------------------- the cash proceeds (net of reasonable costs and taxes incurred in connection with such Recovery Event) received by the respective Person in connection with the respective Recovery Event. "Net Issuance Proceeds" means, with respect to the issuance of any --------------------- Indebtedness for borrowed money, or the issuance or sale of any equity securities or other equity interests or rights: (a) the gross cash proceeds received in connection with such issuance or sale; minus (b) all reasonable transaction costs (including legal, investment banking or other fees and disbursements) paid or incurred in connection therewith in favor of any Person not an Affiliate of Holdings or the Borrower. "NMS" means NationsBanc Montgomery Securities LLC. --- "Notice of Borrowing" means a notice given by the Borrower to the ------------------- Administrative Agent pursuant to Section 2.03(a), in substantially the form of --------------- Exhibit C. - --------- "Notice of Conversion/Continuation" means a notice given by the --------------------------------- Borrower to the Administrative Agent pursuant to Section 2.04(b), in --------------- substantially the form of Exhibit D. --------- "Obligations" means all Loans, Letter of Credit Borrowings and other ----------- indebtedness, advances, debts, liabilities, obligations, expenses (including, without limitation, Attorney Costs), covenants and duties, of any kind or nature, owing by Holdings, the Borrower or any Subsidiary Guarantor to any Lender, the Administrative Agent, the Collateral Agent, any Issuing Lender or the Swingline Lender in connection with this Agreement or any other Loan Document, in each case whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and however acquired (including those acquired by assignment) or arising and whether or not for the payment of money or evidenced by any note, guarantee or other instrument. "OECD" means the Organization for Economic Cooperation and ---- Development. "Original Credit Agreement" has the meaning specified in the recitals ------------------------- to this Agreement. "Original Effective Date" means June 19, 1998. ----------------------- "Original Revolving Loans" means the "Revolving Loans" under, and as ------------------------ defined in, the Original Credit Agreement. -23- "Original Tranche A Term Commitments" means the "Term Commitments" ----------------------------------- under, and as defined in, the Original Credit Agreement. "Original Tranche A Term Loans" means the "Term Loans" under, and as ----------------------------- defined in, the Original Credit Agreement. "Originating Lender" has the meaning provided in Section 12.07(d). ------------------ ---------------- "Other Hedging Agreement" means any foreign exchange contracts, ----------------------- currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency or commodity values. "Other Taxes" has the meaning specified in Section 4.01(b). ----------- --------------- "Participant" has the meaning specified in Section 12.07(d). ----------- ---------------- "PBGC" means the Pension Benefit Guaranty Corporation established ---- pursuant to Section 4002 of ERISA, or any successor thereto. "Permitted Acquisition" has the meaning specified in Section 8.02(x). --------------------- --------------- "Permitted Encumbrance" means, with respect to any Mortgaged Property, --------------------- such exceptions to title as are set forth in the Mortgage Policy delivered with respect thereto, all of which exceptions must be reasonably acceptable to the Administrative Agent. "Permitted Holders" means Code, Hennessy & Simmons, Inc., CHS and ----------------- their respective Affiliates. "Permitted Liens" has the meaning provided in Section 8.01. --------------- ------------ "Person" means any natural person, corporation, firm, trust, ------ partnership, limited liability company, business trust, association, government, governmental agency or authority, or any other entity, whether acting in an individual, fiduciary, or other capacity. "Plan" means any pension plan as defined in Section 3(2) of ERISA ---- which is maintained or contributed to by (or to which there is an obligation to contribute of) Holdings or a Subsidiary of Holdings or an ERISA Affiliate and each such plan for the five year period immediately following the latest date on which Holdings, or a Subsidiary of Holdings or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such a plan. "Pledge Agreement" means the amended and restated Pledge Agreement in ---------------- the form of Exhibit E, as amended, modified or supplemented from time to time in --------- accordance with the terms thereof and hereof. "Pledged Agreement Collateral" means the "Collateral" as defined in ---------------------------- the Pledge Agreement. -24- "Post-Closing EBITDA of Products Unlimited" means that portion of ----------------------------------------- Consolidated EBITDA for the period from the Restatement Effective Date through and including the last day of Holdings' fiscal quarter then most recently ended to the extent attributable to Products Unlimited and its Subsidiaries. Pre-Closing EBITDA of Products Unlimited" means the actual ---------------------------------------- consolidated earnings before interest expense, taxes, depreciation and amortization of Products Unlimited and its Subsidiaries for the period from January 1, 1999 through but not including the Restatement Effective Date and adjusted by (i) adding thereto those items referred to on Part A of Schedule -------- 1.01(d) and (ii) subtracting therefrom those items referred to on Part B of - ------- Schedule 1.01(d). - ---------------- "Products Unlimited" means Products Unlimited Corporation, an Iowa ------------------ corporation. "Qualified Public Equity Offering" means a bona fide underwritten sale -------------------------------- to the public of common stock of Holdings pursuant to a registration statement (other than on Form S-8 or any other form relating to securities issuable under any benefit plan of Holdings or any of its Subsidiaries, as the case may be) that is declared effective by the Securities and Exchange Commission and such offering results in gross cash proceeds to Holdings (exclusive of underwriter's discounts and commissions and other expenses) of at least $30,000,000. "Qualified Seller Subordinated Debt" means unsecured junior ---------------------------------- subordinated notes issued by Holdings or any of its Subsidiaries so long as the terms of any such junior subordinated note (i) do not provide any collateral security, (ii) do not contain any mandatory put, redemption, repayment, sinking fund or other similar provision occurring before September 30, 2004, (iii) do not contain any covenants other than periodic reporting requirements, (iv) do not have an interest rate above 12% per annum, (v) do not have any defaults other than a payment thereunder or a bankruptcy of the obligor thereunder and (vi) are otherwise reasonably satisfactory to the Administrative Agent. "Real Property" of any Person means all the right, title and interest ------------- of such Person in and to land, improvements and fixtures, including Leaseholds. "Receivables" means all of the Borrower's and its Domestic ----------- Subsidiaries' now owned or hereafter acquired or arising accounts, contract rights, and any other rights to payment for the sale or lease of goods or rendition of services, whether or not they have been earned by performance. "Recovery Event" means the receipt by Holdings or any of its -------------- Subsidiaries of any cash insurance proceeds or condemnation awards payable by reason of theft, loss, physical destruction, damage, taking or any other similar event with respect to any property or assets of Holdings or any of its Subsidiaries. "Reference Rate" means the rate of interest publicly announced from -------------- time to time by NationsBank in Charlotte as its "reference rate." It is a rate set by NationsBank based upon various factors, including NationsBank's costs and desired return, general economic conditions -25- and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate. Any change in the Reference Rate announced by NationsBank shall take effect at the opening of business on the day specified in the public announcement of such change. "Refinancing" means, collectively, the repayment of all Indebtedness ----------- to be Refinanced, together with all accrued interest, premiums, fees, commissions and expenses owing in connection therewith, and the termination of all commitments in respect thereof. "Refinancing Documents" means payoff letters, termination agreements, --------------------- UCC termination statements, mortgage releases, intellectual property reconveyance documents and other similar Lien release instruments, in form and substance acceptable to the Administrative Agent and executed and delivered by the creditors to whom the Indebtedness to be Refinanced is owing to evidence such creditors' agreements as to the outstanding amount of Indebtedness to be Refinanced, the repayment thereof and such creditors' obligations to terminate their financing arrangements with the Credit Parties and release their Liens against the Credit Parties' properties. "Refinancing Subordinated Indebtedness" has the meaning specified in ------------------------------------- Section 8.04(viii). - ------------------ "Register" has the meaning specified in Section 2.02. -------- ------------ "Regulation D" shall mean Regulation D of the Federal Reserve Board or ------------ from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Replaced Lender" has the meaning specified in Section 4.08(b). --------------- --------------- "Replacement Lender" has the meaning specified in Section 4.08(b). ------------------ --------------- "Reportable Event" means, an event described in Section 4043(c) of ---------------- ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulations issued under Section 4043 of ERISA. "Requirement of Law" means, as to any Person, any law (statutory or ------------------ common), treaty, rule or regulation or determination of a court or of a Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Requisite Lenders" of any Tranche of Loans means at any time those ----------------- Lenders which would constitute the Majority Lenders under, and as defined in, this Agreement if all outstanding Obligations of the other Tranches under this Agreement were repaid in full and all Commitments with respect thereto were terminated. -26- "Responsible Officer" means, for Holdings, the Borrower or any ------------------- Subsidiary thereof, its chief executive officer, its president, any of its executive vice presidents, its chief operating officer, its chief financial officer or its treasurer or any other officer having substantially the same authority and responsibility as any of the foregoing officers. "Restatement Effective Date" means the date on which all conditions -------------------------- precedent set forth in Sections 5.01 and 5.02 are satisfied or waived in ------------- ---- accordance with this Agreement. "Retained Excess Cash Flow Percentage" means, in respect of any Excess ------------------------------------ Cash Payment Period, that percentage of Excess Cash Flow for such Excess Cash Payment Period that is not required to be applied pursuant to Section 2.05(f) or --------------- 2.07(f) (i.e., 25% or 50%, as determined pursuant to such Section 2.05(f) or - ------- ---- --------------- 2.07(f)). - ------- "Revolving Availability" means, at any time, (a) the Borrowing Base ---------------------- (based on the Borrowing Base Certificate last delivered) minus (b) all reserves ----- which the Agent deems necessary or desirable, in its reasonable credit judgment, in connection with the value of, or the perfection or ability to realize upon, its Liens on, Eligible Receivables or Eligible Inventory. "Revolving Borrowing" means a Borrowing hereunder consisting of ------------------- Revolving Loans made to the Borrower on the same Borrowing Date by the Lenders ratably according to their respective Revolving Commitment Percentages and in the case of Eurodollar Loans, having the same Interest Periods, provided that -------- (i) any Base Rate Loans incurred pursuant to Section 4.02 shall be considered as ------------ part of the related Revolving Borrowing of Eurodollar Loans and (ii) each Borrowing applicable to each of the Original Revolving Loans outstanding on the Restatement Effective Date shall continue to be applicable thereto as if the Original Credit Agreement had not been amended and restated as herein provided (although such Original Revolving Loans shall constitute Revolving Loans as provided for in this Agreement). "Revolving Commitment" means, for each Lender, the amount set forth -------------------- opposite such Lender's name in Schedule 1.01(b) (or on Schedule I of the most ---------------- recent Assignment and Acceptance to which such Lender is a party), as such amount may be modified from time to time pursuant to the provisions hereof. "Revolving Commitment Percentage" of any Lender at any time means a ------------------------------- fraction (expressed as a percentage) the numerator of which is the Revolving Commitment of such Lender at such time and the denominator of which is the Aggregate Revolving Commitment at such time, provided that if the Revolving -------- Commitment Percentage of any Lender is to be determined after the Aggregate Revolving Commitment has been terminated, then the Revolving Commitment Percentages of the Lenders shall be determined immediately prior (and without giving effect) to such termination. "Revolving Loan" means a Loan by a Lender to the Borrower under -------------- Section 2.01(a) (including by way of a conversion of an Original Revolving Loan), which may be a Eurodollar Loan or a Base Rate Loan. -27- "Revolving Notes" means the promissory notes executed by the Borrower --------------- and made payable to the Lenders pursuant to Section 2.02(b) to evidence the --------------- Revolving Loans. "RL Lenders" means, at any time, each Lender with a Revolving ---------- Commitment or with outstanding Revolving Loans. "S&P" means Standard & Poor's Ratings Service, a division of McGraw --- Hill, Inc. "Scheduled Repayment" means any Scheduled A Repayment or any Scheduled ------------------- B Repayment. "Scheduled A Repayment" has the meaning specified in Section --------------------- ------- 2.08(c)(i). - ---------- "Scheduled B Repayment" has the meaning specified in Section --------------------- ------- 2.08(c)(ii). - ----------- "Section 4.01(f) Certificate" has the meaning specified in Section --------------------------- ------- 4.01(f). - ------- "Security Agreement" means the amended and restated Security Agreement ------------------ in the form of Exhibit G, as amended, modified or supplemented from time to time --------- in accordance with the terms thereof and hereof. "Security Instrument" means any security agreement, chattel mortgage, ------------------- assignment, pledge agreement, financing or similar statement or notice, continuation statement, other agreement or instrument, or amendment or supplement to any thereof, providing for, evidencing or perfecting any security interest. "Specified Default" means (i) any Default under Section 9.01(a), ----------------- --------------- 9.01(f) or 9.01(g) or (ii) any Event of Default under Section 9.01(a), 9.01(b), - ------- ------- --------------- ------- 9.01(c) (but only as a result of a breach of Section 8.07, 8.08, 8.09 or 8.10), - ------- ------------------------ ---- 9.01(e), 9.01(f), 9.01(g), 9.01(i), 9.01(j) or 9.01(k). - ------- ------- ------- ------- ------- ------- "Standby Letter of Credit" has the meaning specified in Section ------------------------ ------- 3.01(a). - ------- "Subsidiary" of a Person means any corporation, association, ---------- partnership, limited liability company or other business entity of which more than 50% of the voting stock or other voting equity interests (in the case of Persons other than corporations) is owned or controlled directly or indirectly by such Person, or one or more of the Subsidiaries of the Person, or a combination thereof. "Subsidiary Guarantor" means each of the Domestic Subsidiaries of the -------------------- Borrower listed on Schedule 1.01(c) and each other Domestic Subsidiary of the ---------------- Borrower (and, to the extent Section 7.12 is operative, each Foreign Subsidiary ------------ of the Borrower) that hereafter executes and delivers a Guarantor Supplement. "Subsidiary Guaranty" means the amended and restated Guaranty in the ------------------- form of Exhibit F, as amended, modified or supplemented from time to time in --------- accordance with the terms hereof and thereof. -28- "Swingline Amount" means the least of (i) the Aggregate Revolving ---------------- Commitment, (ii) the Revolving Availability and (iii) $2,500,000. "Swingline Borrowing" means a Borrowing of a Swingline Loan hereunder ------------------- on any Borrowing Date. "Swingline Lender" means NationsBank. ---------------- "Swingline Loan" means a Loan by the Swingline Lender to the Borrower -------------- pursuant to Section 2.01(b). --------------- "Syndication Agent" means NMS. ----------------- "Taxes" has the meaning specified in Section 4.01(a). ----- --------------- "Term Commitment" means, for each Lender, the amount of such Lender's --------------- Original Tranche A Term Commitment or Tranche B Term Commitment, as applicable. "Termination Date" means (i) in the case of Revolving Loans and ---------------- Swingline Loans, the earlier to occur of (a) June 19, 2003 and (b) the date on which the Aggregate Revolving Commitment shall terminate in accordance with the provisions of this Agreement, (ii) in the case of Tranche A Term Loans, June 19, 2003 and (iii) in the case of Tranche B Term Loans, March 15, 2004. "Term Loan" means each Tranche A Term Loan and each Tranche B Term --------- Loan. "Term Notes" means the Tranche A Term Notes and the Tranche B Term ---------- Notes. "Total Exposure" means the sum of all outstanding Loans and Letters of -------------- Credit Obligations. "Trade Letter of Credit" has the meaning specified in Section 3.01(a). ---------------------- --------------- "Tranche" means the respective facility and commitments utilized in ------- making Loans hereunder, with there being four separate Tranches, i.e., Tranche A ---- Term Loans, Tranche B Term Loans, Revolving Loans and Swingline Loans. "Tranche A Term Borrowing" means a Borrowing hereunder consisting of ------------------------ Tranche A Term Loans made to the Borrower on the Restatement Effective Date by way of conversion of the Original Tranche A Term Loans by the Lenders ratably according to their respective Tranche A Term Commitment Percentages and in the case of Eurodollar Loans, having the same Interest Periods, provided that (i) -------- any Base Rate Loans incurred pursuant to Section 4.02 shall be considered as ------------ part of the related Tranche A Term Borrowing of Eurodollar Loans and (ii) each Borrowing applicable to each of the Original Tranche A Term Loans outstanding on the Restatement Effective Date shall continue to be applicable thereto as if the Original Credit Agreement had not been amended and restated as herein provided (although such -29- Original Tranche A Term Loans shall constitute Tranche A Term Loans as provided for in this Agreement). "Tranche A Term Commitment Percentage" of any Lender at any time ------------------------------------ means, a fraction (expressed as a percentage) the numerator of which is the outstanding principal amount of Tranche A Term Loans of such Lender at such time and the denominator of which is the aggregate outstanding principal amount of Tranche A Term Loans of all Lenders at such time. "Tranche A Term Loan" means an Original Tranche A Term Loan made by a ------------------- Lender to the Borrower under Section 2.01(c) of the Original Credit Agreement and maintained by such Lender pursuant to Section 2.01(c) of this Agreement, which may be a Eurodollar Loan or a Base Rate Loan. "Tranche A Term Note" means the promissory notes executed by the ------------------- Borrower and made payable to the Lenders pursuant to Section 2.02(b) to evidence --------------- the Tranche A Term Loans. "Tranche B Term Borrowing" means a Borrowing hereunder consisting of ------------------------ Tranche B Term Loans made to the Borrower on the Restatement Effective Date by the Lenders ratably according to their respective Tranche B Term Commitment Percentages and in the case of Eurodollar Loans, having the same Interest Periods, provided that any Base Rate Loans incurred pursuant to Section 4.02 -------- ------------ shall be considered as part of the related Tranche B Term Borrowing of Eurodollar Loans. "Tranche B Term Commitment" means, for each Lender, the amount set ------------------------- forth opposite such Lender's name under the caption "Tranche B Term Commitment" on Schedule 1.01(b), as such amount may be modified from time to time pursuant ---------------- to the terms hereof. "Tranche B Term Commitment Percentage" of any Lender at any time means ------------------------------------ (i) prior to the incurrence of Tranche B Term Loans on the Restatement Effective Date, a fraction (expressed as a percentage) the numerator of which is the Tranche B Term Commitment of such Lender at such time and the denominator of which is the Aggregate Tranche B Term Commitment at such time and (ii) at any time thereafter, a fraction (expressed as a percentage) the numerator of which is the outstanding principal amount of Tranche B Term Loans of such Lender at such time and the denominator of which is the aggregate outstanding principal amount of Tranche B Term Loans of all Lenders at such time. "Tranche B Term Loan" means a Loan made by a Lender to the Borrower ------------------- under Section 2.01(d), which may be a Eurodollar Loan or a Base Rate Loan. --------------- "Tranche B Term Note" means the promissory notes executed by the ------------------- Borrower and made payable to the Lenders pursuant to Section 2.02(b) to evidence --------------- the Tranche B Term Loans. "Transaction" means, collectively, (i) the Acquisition, (ii) the ----------- Refinancing, (iii) the issuance by Holdings of shares of its common stock and additional Holdings Junior -30- Subordinated Notes, (iv) the entering into of this Agreement and the making of the Tranche B Term Loans hereunder and (v) the occurrence of the Restatement Effective Date. "Transaction Documents" mean, this Agreement, the other Loan --------------------- Documents, the Acquisition Documents, the Refinancing Documents and the additional Holdings Junior Subordinated Notes issued on the Restatement Effective Date. "Transferee" has the meaning specified in Section 12.08. ---------- ------------- "UCC" means the Uniform Commercial Code as from time to time in effect --- in the relevant jurisdiction. "Unfunded Current Liability" of any Plan means the amount, if any, by -------------------------- which the value of the accumulated plan benefits under the Plan, determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions). "United States" and "U.S." each means the United States of America. ------------- ---- "Voting Stock" of any Person as of any date means the capital stock of ------------ such Person that is of the time entitled to vote in the election of the Board of Directors of such Person. "Waivable Mandatory Repayment" has the meaning specified in Section ---------------------------- ------- 2.07(k). - ------- "Wholly-Owned Domestic Subsidiary" means each Domestic Subsidiary of -------------------------------- Holdings that is also a Wholly-Owned Subsidiary of Holdings. "Wholly-Owned Foreign Subsidiary" means each Foreign Subsidiary of ------------------------------- Holdings that is also a Wholly-Owned Subsidiary of Holdings. "Wholly-Owned Subsidiary" means, as to any Person, (i) any corporation ----------------------- 100% of whose capital stock (other than director's or other qualifying shares) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association 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. "Year 2000 Compliant" has the meaning specified in Section 6.27. ------------------- ------------ 1.02 Other Definitional Provisions. ----------------------------- (a) Defined Terms. Unless otherwise specified herein or therein, all ------------- terms defined in this Agreement shall have such defined meanings when used in any certificate or other document made or delivered pursuant hereto. The meaning of defined terms shall be equally applicable to the singular and plural forms of the defined terms. Terms (including uncapitalized -31- terms) not otherwise defined herein and that are defined in the UCC shall have the meanings therein described. (b) The Agreement. The words "hereof", "herein", "hereunder" and ------------- words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and section, subsection, schedule and exhibit references are to this Agreement unless otherwise specified. (c) Certain Common Terms. -------------------- (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The terms "including" or "include" are not limiting and mean "including without limitation" or "include without limitation". (d) Performance; Time. Subject to the definition of the term ----------------- "Interest Period" in Section 1.01, whenever any performance obligation hereunder ------------ shall be stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied on the next succeeding Business Day. In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding"; and the word "through" means "to and including". If any provision of this Agreement refers to any action taken or to be taken by any Person, or which such Person is prohibited from taking, such provision shall be interpreted to encompass any and all means, direct or indirect, of taking, or not taking, such action. (e) Contracts. Unless otherwise expressly provided herein, references --------- to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document. (f) Laws. References to any statute or regulation are to be construed ---- as including all statutory and regulatory provisions consolidating, amending or replacing such statute or regulation. 1.03 Accounting Principles. Except as provided to the contrary --------------------- herein, all accounting terms used herein shall be interpreted in accordance with GAAP. Unless the context otherwise clearly requires, all financial computations required under this Agreement shall be made in accordance with generally accepted accounting principles applied in a manner consistent with those in effect on December 31, 1997. ARTICLE II THE CREDIT FACILITIES 2.01 Amounts and Terms of Commitments. -------------------------------- -32- (a) The Revolving Loans. Each Lender with a Revolving Commitment ------------------- severally agrees, on the terms and conditions hereinafter set forth, (A) to convert, on the Restatement Effective Date, Original Revolving Loans made by such Lender to the Borrower pursuant to the Original Credit Agreement and outstanding on the Restatement Effective Date into a Borrowing of Revolving Loans hereunder and (B) to make, at any time and from time to time on any Business Day during the period from the Restatement Effective Date to the Termination Date for Revolving Loans, additional Revolving Loans to the Borrower, all of which Revolving Loans made pursuant to preceding clauses (A) and (B) shall be in an aggregate amount not to exceed at any time outstanding the amount of such Lender's Revolving Commitment; provided, however, that after -------- ------- giving effect to any Revolving Borrowing, the aggregate principal amount of all outstanding Revolving Loans, together with the aggregate principal amount of all outstanding Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) plus the aggregate amount of all outstanding Letter of Credit Obligations (exclusive of unpaid drawings under any Letter of Credit which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans), shall not exceed the lesser of the Aggregate Revolving Commitment and the Revolving Availability. Within such limits, and subject to the other terms and conditions hereof, the Borrower may borrow Revolving Loans under this Section 2.01(a), repay pursuant --------------- to Section 2.08(a), prepay pursuant to Section 2.06 or 2.07(a) and reborrow --------------- ------------ ------- pursuant to this Section 2.01(a). --------------- (b) The Swingline Loans. (i) The Swingline Lender agrees, on the ------------------- terms and conditions hereinafter set forth, to make Swingline Loans to the Borrower on any Business Day during the period from the Restatement Effective Date to the Termination Date for Swingline Loans, in an aggregate amount not to exceed at any time outstanding the Swingline Amount; provided, however, (x) each -------- ------- Swingline Loan shall be made and maintained as a Base Rate Loan and (y) that after giving effect to any Swingline Borrowing, the aggregate principal amount of all outstanding Swingline Loans, together with the aggregate principal amount of all outstanding Revolving Loans plus the aggregate amount of all outstanding Letter of Credit Obligations (exclusive of unpaid drawings under any Letter of Credit which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans), shall not exceed the lesser of the Aggregate Revolving Commitment and the Revolving Availability. Within such limits, and subject to the other terms and conditions hereof, the Borrower may borrow Swingline Loans under this Section 2.01(b), repay pursuant --------------- to Section 2.08(b) or prepay pursuant to Section 2.06 or 2.07(a) and reborrow --------------- ------------ ------- pursuant to this Section 2.01(b). --------------- (ii) The Swingline Lender shall not be responsible for or liable to any Lender for determining whether (A) any representation or warranty of the Borrower in connection with any request for a Swingline Loan is correct or (B) any Default or Event of Default exists or would result from the making of any such Swingline Loan; provided, however, that the Swingline Lender shall not make -------- ------- any Swingline Loan after receiving a written notice from the Borrower or the Majority Lenders stating that a Default or an Event of Default exists and is continuing until such time as the Swingline Lender shall have received written notice from the Administrative Agent that such Default or Event of Default has been cured or waived. -33- (iii) Each Swingline Loan shall reduce the available Aggregate Revolving Commitment. For purposes of Section 2.10(a), each Swingline Loan --------------- shall be deemed to utilize only the Revolving Commitment of the Swingline Lender (but not any other Lender) by an amount equal to such Swingline Loan (it being understood that the aggregate principal amount of Swingline Loans at any time outstanding may exceed the otherwise unutilized portion of the Revolving Commitment of the Swingline Lender). (iv) On any Business Day, the Swingline Lender may, in its sole discretion, give notice to the RL Lenders that its outstanding Swingline Loans shall be funded with a Revolving Borrowing of Revolving Loans (provided that -------- each such notice shall be deemed to have been automatically given upon the occurrence of a Default or an Event of Default under Section 9.01(e) or 9.01(f) --------------- ------- or upon the exercise of any of the remedies provided in Section 9.02), in which ------------ case a Revolving Borrowing of Revolving Loans constituting Base Rate Loans (each such Revolving Borrowing, a "Mandatory Borrowing") shall be made on the ------------------- immediately succeeding Business Day by all RL Lenders pro rata based on each RL --- ---- Lender's Revolving Commitment Percentage, and the proceeds thereof shall be applied directly to repay the Swingline Lender for such outstanding Swingline Loans. Each RL Lender hereby irrevocably agrees to make Base Rate Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by the Swingline Lender notwithstanding (i) that the amount of the Mandatory Borrowing may not comply with the minimum borrowing denominations set forth in Section 2.03(a), (ii) whether any of the conditions precedent set forth --------------- in Section 5.02 is then satisfied and (iii) whether the borrowing limitations ------------ set forth in this Agreement are met or the amount of the Aggregate Revolving Commitment then in effect (including the fact that the Aggregate Revolving Commitment may have been terminated) or the amount of the Revolving Availability at such time. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code in respect of the Borrower), each RL Lender hereby agrees that it shall forthwith purchase from the Swingline Lender (without recourse or warranty) such assignment of the outstanding Swingline Loans as shall be necessary to cause the RL Lenders to share in such Swingline Loans ratably based upon their respective Revolving Commitment Percentages, provided that all interest payable on the -------- Swingline Loans shall be for the account of the Swingline Lender until the date the respective assignment is purchased and, to the extent attributable to the purchased assignment, shall be payable to the RL Lender purchasing same from and after such date of purchase. The failure of any RL Lender to pay such amount to the Swingline Lender shall not relieve any other RL Lender of its obligation to make the payment to be made by it. (c) The Tranche A Term Loans. Each Lender with outstanding Original ------------------------ Tranche A Term Loans severally agrees, on the terms and conditions hereinafter set forth, to convert, on the Restatement Effective Date, Original Tranche A Term Loans made by such Lender to the Borrower pursuant to the Original Credit Agreement and outstanding on the Restatement Effective Date into a Borrowing of Tranche A Term Loans hereunder. The principal amount of each Lender's outstanding Tranche A Term Loans on the Restatement Effective Date (and after -34- giving effect thereto and to the assignments described in Section 12.17) is set ------------- forth on Schedule 1.01(b) under the caption "Outstanding Tranche A Term Loans." (d) The Tranche B Term Loans. Each Lender with a Tranche B Term ------------------------ Commitment severally agrees, on the terms and conditions hereinafter set forth, to make a Tranche B Term Loan to the Borrower in an amount equal to such Lender's Tranche B Term Commitment. All Tranche B Term Loans shall be made on the Restatement Effective Date and upon the making of such Tranche B Term Loans, each such Lender's Tranche B Term Commitment shall terminate. 2.02 Loan Accounts and Register; Notes. --------------------------------- (a) The Loans made by each Lender shall be evidenced by the Revolving Notes, the Tranche A Term Notes, the Tranche B Term Notes and one or more loan accounts maintained by such Lender and the Register maintained by the Administrative Agent in the ordinary course of business. The Swingline Loans shall be evidenced by one or more loan accounts maintained by the Swingline Lender and the Register maintained by the Administrative Agent in the ordinary course of business. The Register maintained by the Administrative Agent shall, in the event of a discrepancy between the entries in the Administrative Agent's books and any Lender's or the Swingline Lender's books relating to such loan accounts, be controlling and, absent manifest error, shall be conclusive as to the amount of the Loans made by the Lenders or the Swingline Lender to the Borrower, the interest and payments thereon and any other amounts owing in respect of this Agreement. Any failure to make a notation in any such loan account or any error in doing so shall not limit or otherwise affect the obligations of the Borrower hereunder to pay any amount owing with respect to the Loans. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this Section 2.02, to maintain a ------------ register (the "Register") on which it will record the Commitments from time to -------- time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Acceptance pursuant to Section 12.07(a). ---------------- The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 2.02 (other than any losses, claims, ------------ damages and liabilities to the extent incurred by reason of the gross negligence or willful misconduct of the Administrative Agent as finally determined by a court of competent jurisdiction). -35- (b) On or before the Restatement Effective Date, the Borrower shall execute and deliver to each Lender (and deliver a copy thereof to the Administrative Agent) a Revolving Note in the form of Exhibit A to evidence the --------- Revolving Loans owing to such Lender, a Tranche A Term Note in the form of Exhibit B-1 to evidence the Tranche A Term Loan owing to such Lender and a - ------------ Tranche B Term Note in the form of Exhibit B-2 to evidence the Tranche B Term ----------- Loan owing to such Lender. Each such note shall be entitled to all of the rights and benefits of this Agreement and the other Loan Documents. 2.03 Procedure for Borrowing. ----------------------- (a) Each Borrowing of Revolving Loans (other than a Borrowing of Revolving Loans pursuant to Section 2.01(a)(A), Section 2.01(b)(iv) or Section ------------------ ------------------- ------- 3.03(b)) or Tranche B Term Loans shall be made upon the Borrower's irrevocable - ------- written notice delivered to the Administrative Agent in accordance with Section ------- 12.02 in the form of a Notice of Borrowing (which notice must be received by the - ----- Administrative Agent (i) prior to 10:00 a.m. (New York City time) not less than three Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans and (ii) prior to 11:00 a.m. (New York City time) on the requested Borrowing Date, in the case of Base Rate Loans, specifying: (A) whether such Borrowing is a Revolving Borrowing, a Tranche B Term Borrowing or both; (B) the amount of the Borrowing, which shall be in an aggregate minimum principal amount of (x) in the case of Base Rate Loans, $100,000 or any multiple of $100,000 in excess thereof and (y) in the case of Eurodollar Loans, $500,000 or any multiple of $100,000 in excess thereof; (C) the requested Borrowing Date, which shall be a Business Day; (D) whether the Borrowing is to be comprised of Eurodollar Loans or Base Rate Loans; and (E) the duration of the Interest Period, if any, applicable to such Loans included in such notice. If the Notice of Borrowing shall fail to specify the duration of the Interest Period for any Borrowing comprised of Eurodollar Loans, such Interest Period shall be one month. Notwithstanding anything to the contrary contained in this Agreement, Tranche B Term Loans incurred on the Restatement Effective Date shall be incurred as Eurodollar Loans based on a seven day LIBOR rate quoted by the Administrative Agent to the Borrower and the Lenders on the Restatement Effective Date and such Loans shall be maintained as such for no more than seven days following the Initial Borrowing Date. (b) Upon receipt of the Notice of Borrowing, the Administrative Agent will promptly notify each Lender thereof and of the amount of such Lender's Revolving Commitment -36- Percentage or Tranche B Term Commitment Percentage, as the case may be, of the respective Borrowing. (c) Each Lender will make the amount of its Revolving Commitment Percentage of each Revolving Borrowing, and its Tranche B Term Commitment Percentage of each Tranche B Term Loan Borrowing, as applicable, available to the Administrative Agent for the account of the Borrower at the Administrative Agent's Payment Office by 1:00 p.m. (New York City time) on the Borrowing Date (or by 2:00 p.m. (New York City time) on such Borrowing Date in the case of a Borrowing of Base Rate Loans made on same day notice) requested by the Borrower in funds immediately available to the Administrative Agent. Unless any applicable condition of Article V has not been satisfied, the proceeds of all --------- such Revolving Loans (other than Revolving Loans made pursuant to a Mandatory Borrowing) and Tranche B Term Loans will then be made available to the Borrower by the Administrative Agent by wire transfer in accordance with written instructions provided to the Administrative Agent by the Borrower. Each RL Lender will make the amount of its Revolving Commitment Percentage of each Mandatory Borrowing available to the Administrative Agent for the account of the Swingline Lender at the Administrative Agent's Payment Office by 1:00 p.m. (New York City time) on the date specified in Section 2.01(b)(iv). ------------------- (d) Upon the occurrence and during the continuance of (x) any Default under Section 9.01(a), 9.01(f) or 9.01(g) or (y) any Event of Default, the ------------------------ ------- Borrower shall not elect to have a Loan be made as a Eurodollar Loan. (e) After giving effect to any Borrowing, there shall not be more than ten different Interest Periods in effect in respect of all Loans. (f) Whenever the Borrower desires to make a Swingline Borrowing hereunder, the Borrower shall give the Administrative Agent and the Swingline Lender not later than 11:00 a.m. (New York City time) on the date that a Swingline Loan is to be made, written notice or telephonic notice promptly confirmed in writing of each Swingline Loan to be made hereunder. Each such notice shall be irrevocable and specify in each case: (A) the amount of the Swingline Loan, which shall be in an aggregate minimum principal amount of $50,000 or any multiple of $50,000 in excess thereof; and (B) the requested Borrowing Date, which shall be a Business Day. The Swingline Lender shall not incur any liability to the Borrower in acting upon any telephonic notice which the Swingline Lender believes in good faith to have been given by any officer authorized to act on behalf of the Borrower. 2.04 Conversion and Continuation Elections for Revolving and Term ------------------------------------------------------------ Borrowings. - ---------- (a) The Borrower may upon irrevocable written notice to the Administrative Agent in accordance with paragraph (b) below: ------------- -37- (i) elect to convert on any Business Day, any Base Rate Loans (or any part thereof so long as the minimum borrowing amounts set forth in Section 2.03(a)(ii)(B)(y) are still satisfied), other than those ------------------------- constituting Swingline Loans, into Eurodollar Loans; (ii) elect to convert on the last day of the Interest Period with respect thereto, any Eurodollar Loans (or any part thereof in an amount of not less than $500,000 or an integral multiple of $100,000 in excess thereof) into Base Rate Loans; or (iii) elect to continue on the last day of the Interest Period with respect thereto, any Eurodollar Loans (or any part thereof in an amount not less than $500,000 or an integral multiple of $100,000 in excess thereof); provided, however, (x) that if the aggregate amount of a Borrowing comprised of - -------- ------- Eurodollar Loans shall have been reduced, by payment, prepayment or conversion of part thereof to be less than $500,000, the Eurodollar Loans comprising such Borrowing shall automatically convert into Base Rate Loans, and on and after such date the right of the Borrower to continue such Loans as, and convert such Loans into, Eurodollar Loans shall terminate and (y) Swingline Loans may not be converted pursuant to this Section 2.04. ------------ (b) The Borrower shall deliver a Notice of Conversion/Continuation in accordance with Section 12.02 to be received by the Administrative Agent not ------------- later than (i) 10:00 a.m. (New York City time) not less than three Business Days in advance of the Conversion Date or Continuation Date, if the Loans are to be converted into or continued as Eurodollar Loans and (ii) 11:00 a.m. (New York City time) not less than one Business Day in advance of the Conversion Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed Conversion Date or Continuation Date which shall be a Business Day; (B) the aggregate principal amount of Loans to be converted or continued; (C) the nature of the proposed conversion or continuation; and (D) the duration of the requested Interest Period, if applicable. (c) If upon the expiration of any Interest Period applicable to Eurodollar Loans, the Borrower has failed to select timely a new Interest Period or the Borrower is not permitted to elect a new Interest Period, such Loans shall automatically convert into Base Rate Loans. (d) Upon receipt of a Notice of Conversion/Continuation, the Administrative Agent will promptly notify each Lender thereof, or, if no timely notice is provided by the Borrower, the Administrative Agent will promptly notify each Lender of the details of any automatic conversion. All conversions and continuations shall be made pro rata according to the respective outstanding --- ---- principal amounts of the Loans with respect to which the notice was given. -38- (e) Upon the occurrence and during the continuance of (x) any Default under Section 9.01(a), 9.01(f) or 9.01(g) or (y) any Event of Default, the ------------------------ ------- Borrower shall not elect to have a Loan converted into or continued as a Eurodollar Loan. (f) Notwithstanding any other provision contained in this Agreement, after giving effect to any conversion or continuation of any Loans, there shall not be more than ten different Interest Periods in effect in respect of all Loans. 2.05 Reduction and Termination of Commitments. ---------------------------------------- (a) The Borrower may, upon not less than three Business Days' prior notice to the Administrative Agent, terminate the Aggregate Revolving Commitment (including the Letter of Credit Commitment) or permanently reduce the Aggregate Revolving Commitment (including the Letter of Credit Commitment) by an aggregate minimum amount of $500,000 or any multiple of $100,000 in excess thereof; provided, however, that no such reduction or termination shall be permitted if - -------- ------- after giving effect thereto and to any prepayment of the Revolving Loans and/or Swingline Loans made on the effective date thereof, (i) the then outstanding principal amount of the Revolving Loans and Swingline Loans plus the outstanding Letter of Credit Obligations would exceed the Aggregate Revolving Commitment then in effect or (ii) the aggregate amount of Letter of Credit Obligations would exceed the Letter of Credit Commitment then in effect; and, provided -------- further, that once reduced in accordance with this Section 2.05, the Aggregate - ------- ------------ Revolving Commitment (including the Letter of Credit Commitment) may not be increased. (b) On each date after the Restatement Effective Date upon which Holdings or any of its Subsidiaries receives any Net Issuance Proceeds from any incurrence by Holdings or any of its Subsidiaries of Indebtedness for borrowed money (other than Indebtedness for borrowed money permitted to be incurred under Section 8.04 as in effect on the Restatement Effective Date), the Aggregate - ------------ Revolving Commitment shall be permanently reduced by an amount equal to 100% of the Net Issuance Proceeds of the respective incurrence of Indebtedness minus the ----- aggregate principal amount of the Term Loans which have been prepaid in connection with such incurrence of Indebtedness pursuant to Section 2.07(b); --------------- provided, however, that no reduction shall occur hereunder with respect to the - -------- ------- first $750,000 of such Net Issuance Proceeds received after the Restatement Effective Date or with respect to any Net Issuance Proceeds received after the Restatement Effective Date in connection with the incurrence of Indebtedness for borrowed money secured by Letters of Credit. Nothing in this paragraph (b) ------------- shall be deemed to permit the issuance of any Indebtedness not otherwise permitted under this Agreement. (c) On each date after the Restatement Effective Date upon which Holdings or any of its Subsidiaries receives any Net Issuance Proceeds from any issuance or sale by Holdings or any of its Subsidiaries of any equity securities or other equity interests or rights (other than $571,752.80 of such Net Issuance Proceeds received as contemplated by Section 9.01(l)), the Aggregate Revolving --------------- Commitment shall be permanently reduced by an amount equal to 50% of the Net Issuance Proceeds of the respective issuance or sale of such securities, interests or rights minus the aggregate principal amount of the Term Loans which ----- have been prepaid in connection with such issuance or sale pursuant to Section ------- 2.07(c); provided, however, that, no reduction - ------- -------- ------- -39- shall occur hereunder with respect to the first $250,000 of Net Issuance Proceeds received after the Restatement Effective Date in connection with the issuance or sale of any such equity securities or other equity interests or rights. (d) Within two Business Days after Holdings or any of its Subsidiaries receives any Net Cash Proceeds from any Asset Sale, the Aggregate Revolving Commitment shall be permanently reduced on such date by an amount equal to 100% of the Net Cash Proceeds from such Asset Sale minus the aggregate ----- principal amount of the Term Loans which have been prepaid in connection with such Asset Sale pursuant to Section 2.07(d); provided, however, that (i) with --------------- -------- ------- respect to no more than $1,000,000 in the aggregate of such Net Cash Proceeds in any fiscal year of Holdings, such Net Cash Proceeds shall not give rise to a reduction to the Aggregate Revolving Commitment pursuant to this paragraph (d) ------------- if no Default or Event of Default then exists and Holdings has delivered a certificate to the Administrative Agent on or prior to such date stating that such Net Cash Proceeds shall be used to purchase replacement assets used or to be used in the Borrower's or any of its Subsidiaries' business within 270 days following the date of receipt of such Net Cash Proceeds from such Asset Sale (which certificate shall set forth the estimates of the proceeds to be so expended), and if all or any portion of such Net Cash Proceeds are not so used within such 270 day period, the Aggregate Revolving Commitment shall be permanently reduced on the last day of such period by an amount equal to such remaining portion minus the aggregate principal amount of the Term Loans which ----- have been prepaid in connection with such Asset Sale pursuant to Section 2.07(d) --------------- and (ii) no reduction shall occur hereunder with respect to the first $250,000 of Net Cash Proceeds received in any fiscal year of Holdings. Nothing in this paragraph (d) shall be deemed to permit any Asset Sale not otherwise permitted - ------------- under this Agreement. (e) Within 10 days following each date after the Restatement Effective Date upon which Holdings or any of its Subsidiaries receives any cash proceeds from any Recovery Event, the Aggregate Revolving Commitment shall be permanently reduced on such date by an amount equal to 100% of the Net Insurance Proceeds from such Recovery Event minus the aggregate principal amount of the ----- Term Loans which have been prepaid in connection with such Recovery Event pursuant to Section 2.07(e); provided, however, that if no Default or Event of --------------- -------- ------- Default then exists and such proceeds from such Recovery Event do not exceed $4,000,000, such proceeds shall not give rise to a reduction to the Aggregate Revolving Commitment pursuant to this paragraph (e) on such date if Holdings has ------------- delivered a certificate to the Administrative Agent on or prior to such date stating that such proceeds shall be used to replace or restore any properties or assets in respect of which such proceeds were paid within 365 days following the date of receipt of such proceeds (which certificate shall set forth the estimates of the proceeds to be so expended), and provided further, that (i) if ---------------- the amount of such proceeds exceeds $4,000,000, then the Aggregate Revolving Commitment shall be reduced by the entire amount of such proceeds and not just the portion in excess of $4,000,000 as provided above in this paragraph (e), ------------- minus the aggregate principal amount of the Term Loans which have been prepaid - ----- in connection with such Recovery Event pursuant to Section 2.07(e) and (ii) if --------------- all or any portion of such proceeds are not contractually committed to be used within 180 days after the date of receipt of such proceeds or are not actually used within 365 days after the date of receipt of such proceeds to effect such restoration or replacement, the Aggregate Commitment shall be permanently reduced -40- on the last day of such 180-day or 365-day period, as the case may be, by an amount equal to such remaining portion minus the aggregate principal amount of ----- the Term Loans which have been prepaid in connection with such Recovery Event pursuant to Section 2.07(e). --------------- (f) On each Excess Cash Payment Date, the Aggregate Revolving Commitment shall be permanently reduced by an amount equal to 75% of the Excess Cash Flow for the relevant Excess Cash Payment Period minus the aggregate ----- principal amount of the Term Loans which have been prepaid in connection with such Excess Cash Flow pursuant to Section 2.07(f); provided, however, that the --------------- -------- ------- foregoing percentage shall be reduced to 50% for any Excess Cash Payment Period so long as (I) no Default or Event of Default exists on such Excess Cash Payment Date and (II) the Consolidated Leverage Ratio is less than 3.25:1.00 on the last day of the Measurement Period for the relevant Excess Cash Payment Period (after giving effect to any repayment of Term Loans on such date). (g) Any reduction of the Aggregate Revolving Commitment and the Letter of Credit Commitment pursuant to this Section 2.05 shall be applied pro ------------ --- rata to each Lender's Revolving Commitment in accordance with such Lender's - ---- Revolving Commitment Percentage. The amount of any such reduction of the Aggregate Revolving Commitment shall not be applied to the Letter of Credit Commitment unless otherwise specified by the Borrower or required by the definition thereof. All accrued commitment and letter of credit fees to the effective date of any reduction or termination of Aggregate Revolving Commitment, shall be paid on the effective date of such reduction or termination. The Administrative Agent shall promptly notify the Lenders of any reduction or termination of the Aggregate Revolving Commitment. (h) The Aggregate Revolving Commitment (and the Revolving Commitment of each RL Lender) shall terminate on the date on which a Change of Control occurs. (i) The Aggregate Commitment (and each of the Commitments of each Lender) shall terminate in its entirety on March 31, 1999 unless the Restatement Effective Date has occurred on or before such date and in the event of such termination this Agreement shall cease to be of any force or effect and the Original Credit Agreement shall continue to be effective, as the same may have been, or may thereafter be, amended, modified or supplemented from time to time. 2.06 Voluntary Prepayments. --------------------- (a) (i) The Borrower may, prior to 10:00 a.m. (New York City time), upon at least three Business Days' notice to the Administrative Agent in the case of Eurodollar Loans, and prior to 11:00 a.m. (New York City time), upon notice thereof to the Administrative Agent on the Business Day of the same in the case of Base Rate Loans, prepay Tranche A Term Loans, Tranche B Term Loans or Revolving Loans, in whole or in part in amounts of $100,000 or an integral multiple of $100,000 in excess thereof, and with each such prepayment to be applied ratably among the Lenders holding the Tranche of Loans so prepaid. (ii) The Borrower may at any time prepay Swingline Loans, in whole or in part in minimum amounts of $50,000 or an integral multiple of $50,000 in excess thereof; provided, -------- -41- however, that notice of such prepayment shall be required to be delivered to the - ------- Administrative Agent by 11:00 a.m. (New York City time) on the date of such prepayment. (b) Any notice of prepayment delivered pursuant to this Section 2.06 ------------ shall specify the date and amount of such prepayment, whether Revolving Loans, Tranche A Term Loans, Tranche B Term Loans or Swingline Loans are to be prepaid and the type of Loans to be prepaid, including in the case of Revolving Loans or Term Loans whether such prepayment is of Base Rate Loans or Eurodollar Loans or any combination thereof. Each such notice shall be irrevocable by the Borrower and the Administrative Agent will promptly notify each Lender thereof and of such Lender's Commitment Percentage of such prepayment, if applicable. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and the amounts, if any, required pursuant to Section 4.04; ------------ provided that interest shall be paid in connection with any such prepayment of - -------- Base Rate Loans (other than a prepayment in full) on the next occurring Interest Payment Date. (c) Each voluntary prepayment of Term Loans pursuant to this Section ------- 2.06 shall consist of a voluntary prepayment of both Tranche A Term Loans and - ---- Tranche B Term Loans, and with the amount of such voluntary prepayment to be allocated between both tranches of Term Loans on a pro rata basis (based upon --- ---- the then outstanding principal amount of Tranche A Term Loans and Tranche B Term Loans). Each prepayment of principal of any Tranche of Term Loans pursuant to this Section 2.06 shall be applied to reduce the then remaining Scheduled ------------ Repayments of the respective Tranche of Term Loans pro rata based upon the then --- ---- remaining principal amounts of the Scheduled Repayments of the respective Tranche after giving effect to all prior reductions thereto. 2.07 Mandatory Prepayments. --------------------- (a) (i) If on any date (A) the aggregate unpaid principal amount of outstanding Revolving Loans and Swingline Loans plus the outstanding Letter of Credit Obligations (to the extent not Cash Collateralized pursuant to clause ------ (ii) below or as provided for in Section 3.07) exceeds the lesser of the - ---- ------------ Aggregate Revolving Commitment and the Revolving Availability or (B) the aggregate unpaid principal amount of Swingline Loans exceeds the Swingline Amount, in each such case the Borrower shall immediately prepay the amount of such excess. (ii) If on any date the aggregate amount of all Letter of Credit Obligations shall exceed the lesser of the Letter of Credit Commitment and the Revolving Availability, the Borrower shall Cash Collateralize on such date its obligations in respect of Letters of Credit in an amount equal to such excess. (b) On each date after the Restatement Effective Date upon which Holdings or any of its Subsidiaries receives any Net Issuance Proceeds from the incurrence by Holdings or any of its Subsidiaries of Indebtedness for borrowed money (other than Indebtedness for borrowed money permitted to be incurred under Section 8.04 as in effect on the Restatement Effective Date), the Borrower shall - ------------ promptly prepay the Loans on such date in an amount equal -42- to 100% of the Net Issuance Proceeds thereof. Nothing in this paragraph (b) ------------- shall be deemed to permit the incurrence of any Indebtedness not otherwise permitted under this Agreement; provided, however, that no prepayment shall be -------- ------- required hereunder with respect to the first $750,000 of such Net Issuance Proceeds received after the Restatement Effective Date or with respect to any Net Issuance Proceeds received after the Restatement Effective Date in connection with the incurrence of Indebtedness for borrowed money secured by Letters of Credit. (c) On each date after the Restatement Effective Date upon which Holdings or any of its Subsidiaries receives any Net Issuance Proceeds from the issuance or sale by Holdings or any of its Subsidiaries of equity securities or other equity interests or rights (other than $571,752.80 of such Net Issuance Proceeds received as contemplated by Section 9.01(l)), the Borrower shall --------------- promptly prepay the Loans on such date in an amount equal to 50% of the Net Issuance Proceeds thereof; provided, however, that no prepayment shall be -------- ------- required hereunder with respect to the first $250,000 of Net Issuance Proceeds received after the Restatement Effective Date in connection with the issuance or sale of any such equity securities or other equity interests or rights. (d) Within two Business Days after Holdings or any of its Subsidiaries receives any Net Cash Proceeds from any Asset Sale, the Borrower shall promptly prepay the Loans on such date by an amount equal to 100% of the Net Cash Proceeds from such Asset Sale; provided, however, that (i) with respect -------- ------- to no more than $1,000,000 in the aggregate of such Net Cash Proceeds in any fiscal year of Holdings, such Net Cash Proceeds shall not give rise to a prepayment pursuant to this paragraph (d) if no Default or Event of Default then ------------- exists and Holdings has delivered a certificate to the Administrative Agent on or prior to such date stating that such Net Cash Proceeds shall be used to purchase replacement assets used or to be used in the Borrower's or any of its Subsidiaries' business within 270 days following the date of receipt of such Net Cash Proceeds from such Asset Sale (which certificate shall set forth the estimates of the proceeds to be so expended), and if all of any portion of such Net Cash Proceeds are not so used within such 270 day period, the Borrower shall promptly prepay the Loans on the last day of such period by an amount equal to such remaining portion and (ii) no prepayment shall be required hereunder with respect to the first $250,000 of Net Cash Proceeds received in any fiscal year of Holdings. Nothing in this paragraph (d) shall be deemed to permit any Asset ------------- Sale not otherwise permitted under this Agreement. (e) Within 10 days following each date after the Restatement Effective Date upon which Holdings or any of its Subsidiaries receives any cash proceeds from any Recovery Event, the Borrower shall promptly prepay the Loans on such date by an amount equal to 100% of the Net Insurance Proceeds from such Recovery Event; provided, however, that if no Default or Event of Default then -------- ------- exists and such proceeds from such Recovery Event do not exceed $4,000,000, such proceeds shall not give rise to a prepayment pursuant to this paragraph (e) on ------------- such date if Holdings has delivered a certificate to the Administrative Agent on or prior to such date stating that such proceeds shall be used to replace or restore any properties or assets in respect of which such proceeds were paid within 365 days following the date of receipt of such proceeds (which certificate shall set forth in the estimates of such proceeds to be so expended), and provided, further, that (i) if the amount of such proceeds -------- ------- exceeds $4,000,000, then the -43- Borrower shall promptly prepay the Loans by the entire amount of such proceeds and not just the portion in excess of $4,000,000 as provided above in this paragraph (e), and (ii) if all or any portion of such proceeds are not - ------------- contractually committed to be used within 180 days after the date of receipt of such proceeds or are not actually used within 365 days after the date of receipt of such proceeds to effect such restoration or replacement, the Borrower shall promptly prepay the Loans on the last day of such 180-day or 365-day period, as the case may be, by an amount equal to such remaining portion. (f) On each Excess Cash Payment Date, the Borrower shall promptly prepay the Loans on such date by an amount equal to 75% of the Excess Cash Flow for the relevant Excess Cash Payment Period; provided, however, that the -------- ------- foregoing percentage shall be reduced to 50% for any Excess Cash Payment Period so long as (I) no Default or Event of Default exists on such Excess Cash Payment Date and (II) the Consolidated Leverage Ratio is less than 3.25:1.00 on the last day of the Measurement Period for the relevant Excess Cash Payment Period (after giving effect to any repayment of Term Loans on such date). (g) On any date on which Holdings or any of its Subsidiaries receives any cash proceeds in excess of $250,000 from any purchase price adjustment under the Acquisition Agreement, an amount equal to 100% of the cash proceeds in excess of $250,000 from such purchase price adjustment shall be applied on such date as a mandatory repayment of principal of outstanding Loans. (h) Each repayment of Loans pursuant to this Section 2.07 shall be ------------ applied first to outstanding Term Loans, with each such repayment, except as otherwise provided by paragraph (k) of this Section 2.07, to be applied to the ------------- ------------ Tranche A Term Loans and the Tranche B Term Loans on a pro rata basis (based --- ---- upon the then outstanding principal amount of Tranche A Term Loans and Tranche B Term Loans); provided that any repayment under paragraph (g) of this Section -------- ------------- ------- 2.07 shall be applied (i) first, to repay outstanding Revolving Loans and - ---- Swingline Loans in an aggregate principal amount equal to that amount of Revolving Loans and Swingline Loans incurred on the Restatement Effective Date to finance, in part, the Acquisition and the Refinancing, and (ii) second, to the extent in excess thereof, to repay outstanding Term Loans as otherwise provided in this paragraph (h). Each repayment of principal of any Tranche of ------------- Term Loans pursuant to this Section 2.07 shall be applied to reduce the then ------------ remaining Scheduled Repayments of the respective Tranche of Term Loans pro rata --- ---- based upon the then remaining principal amounts of the Scheduled Repayments of the respective Tranche after giving effect to all prior reductions thereto. After all Term Loans have been repaid in full, any amounts required to be applied pursuant to this Section 2.07 shall be applied to prepay any outstanding ------------ Swingline Loans and then to any outstanding Revolving Loans. If, at the time of the application of any amounts otherwise required to be prepaid pursuant to this Section 2.07, no Loans are outstanding, but Letter of Credit Obligations are outstanding, then the Borrower shall Cash Collateralize such Letter of Credit Obligations in amounts equal to the prepayments otherwise required hereby. (i) The Borrower shall pay, together with each prepayment made by the Borrower under this Section 2.07, accrued interest on the amount prepaid and any ------------ amounts required -44- pursuant to Section 4.04; provided that interest shall be paid in connection ------------ -------- with any such prepayment of Base Rate Loans (other than a prepayment in full) on the next occurring Interest Payment Date. (j) Any prepayments pursuant to this Section 2.07 made on a day other ------------ than an Interest Payment Date for any Loan shall be applied first to any Base Rate Loans then outstanding and then to Eurodollar Loans with the shortest Interest Periods remaining. (k) Notwithstanding anything to the contrary contained in paragraph --------- (h) of this Section 2.07, so long as any Tranche A Term Loans remain outstanding - --- ------------ the Borrower shall have the option, in its sole discretion, to give the B Lenders the option to waive their pro rata share of a mandatory repayment of --- ---- Tranche B Term Loans which is to be made pursuant to Section 2.07(b), (c), (d), --------------- --- --- (e), (f) or (g) (each such repayment, a "Waivable Mandatory Repayment") upon the - --- --- --- ---------------------------- terms and provisions set forth in this Section 2.07(k). If the Borrower elects --------------- to exercise the option referred to in the immediately preceding sentence, the Borrower shall give to the Administrative Agent written notice of the Borrower's intention to give the B Lenders the right to waive a Waivable Mandatory Repayment (including in such notice, the aggregate amount of such proposed repayment) at least five Business Days prior to the date of the proposed repayment, which notice the Administrative Agent shall promptly forward to all B Lenders (indicating in such notice the amount of such repayment to be applied to each such B Lender's outstanding Tranche B Term Loans). The Borrower's offer to permit the B Lenders to waive any such Waivable Mandatory Repayment may apply to all or part of such repayment, provided that any offer to waive part of such -------- repayment must be made ratably to the B Lenders on the basis of their outstanding Tranche B Term Loans. In the event that any such B Lender desires to waive its pro rata share of such B Lender's right to receive any such --- ---- Waivable Mandatory Repayment in whole or in part, such B Lender shall so advise the Administrative Agent no later than 5:00 p.m. (New York City time) on the date which is two Business Days after the date of such notice from the Administrative Agent, which notice shall also include the amount such B Lender desires to receive in respect of such repayment. If any B Lender does not reply to the Administrative Agent within the two Business Days, such B Lender will be deemed not to have waived any part of such repayment. If any B Lender does not specify an amount it wishes to receive, such B Lender will be deemed to have accepted 100% of its share of such repayment. In the event that any such B Lender waives all or any part of its share of any such Waivable Mandatory Repayment, the Administrative Agent shall apply 100% of the amount so waived by such B Lender to the outstanding Tranche A Term Loans in accordance with Section ------- 2.07(h). - -------- (l) The Borrower shall repay in full all outstanding Loans on the date on which a Change of Control occurs. 2.08 Repayment of Principal. ---------------------- (a) The Revolving Loans. The Borrower shall repay to the Lenders in ------------------- full on the Termination Date for Revolving Loans, the aggregate principal amount of the Revolving Loans outstanding on such Termination Date. -45- (b) The Swingline Loans. The Borrower shall repay to the Swingline ------------------- Lender in full on the Termination Date for Swingline Loans the aggregate principal amount of the Swingline Loans outstanding on such Termination Date. (c) (i) The Tranche A Term Loans. The Borrower shall repay the ------------------------ Tranche A Term Loans on each of the following dates in the following corresponding amounts (each such repayment, as the same may be reduced as provided in Sections 2.06(c) and 2.07(h), a "Scheduled A Repayment"): ---------------- ------- --------- ----------- Date Amount ---- ------ March 31, 1999 $1,000,000 June 30, 1999 $1,000,000 September 30, 1999 $1,375,000 December 31, 1999 $1,375,000 March 31, 2000 $1,375,000 June 30, 2000 $1,375,000 September 30, 2000 $1,750,000 December 31, 2000 $1,750,000 March 31, 2001 $1,750,000 June 30, 2001 $1,750,000 September 30, 2001 $2,125,000 December 31, 2001 $2,125,000 March 31, 2002 $2,125,000 June 30, 2002 $2,125,000 September 30, 2002 $2,500,000 December 31, 2002 $2,500,000 March 31, 2003 $2,500,000 June 19, 2003 $2,500,000 (ii) The Tranche B Term Loans. The Borrower shall repay the Tranche ------------------------ B Term Loans on each of the following dates in the following corresponding amounts (each such repayment, as the same may be reduced as provided in Sections -------- 2.06(c) and 2.07(h), a "Scheduled B Repayment"): - ------- ------- --------------------- Date Amount ---- ------ September 30, 1999 $137,500 December 31, 1999 $137,500 March 31, 2000 $137,500 June 30, 2000 $137,500 September 30, 2000 $137,500 December 31, 2000 $137,500 March 31, 2001 $137,500 June 30, 2001 $137,500 -46- September 30, 2001 $137,500 December 31, 2001 $137,500 March 31, 2002 $137,500 June 30, 2002 $137,500 September 30, 2002 $137,500 December 31, 2002 $137,500 March 31, 2003 $137,500 June 30, 2003 $137,500 September 30, 2003 $137,500 December 31, 2003 $26,262,500 March 15, 2004 $26,400,000 2.09 Interest. -------- (a) Each Loan (other than a Tranche B Term Loan) shall bear interest on the outstanding principal amount thereof from the Borrowing Date applicable thereto until it becomes due at a rate per annum equal to the Base Rate or LIBOR, as the case may be, plus the Applicable Margin then in effect as set forth below: (i) for the period commencing on the Original Effective Date and ending on the day immediately preceding the First Adjustment Date: Applicable Margin ----------------- Base Rate 1.500% LIBOR 2.500% (ii) from and after the First Adjustment Date, for each period beginning on an Adjustment Date and ending on the day immediately preceding the next succeeding Adjustment Date, the rate per annum for the relevant type of Loan set forth below opposite the Consolidated Senior Leverage Ratio determined as at the end of the last fiscal quarter ended prior to the first day of such period: Applicable Margin ----------------- LIBOR Base Rate Consolidated Senior Leverage Ratio is less than 0.50 to 1.00 ("Level I") 1.500% 0.500% ------- Consolidated Senior Leverage Ratio is less than 1.00 to 1.00 but greater than or equal to 0.50 to 1.00 ("Level II") 2.000% 1.000% -------- -47- Consolidated Senior Leverage Ratio is less than 1.75 to 1.00 but greater than or equal to 1.00 to 1.00 ("Level III") 2.250% 1.250% --------- Consolidated Senior Leverage Ratio is greater than or equal to 1.75 to 1.00 ("Level IV") 2.500% 1.500%. -------- (iii) If by the last day for determining any Adjustment Date, Holdings has failed to deliver a Leverage Ratio Certificate as at the end of the fiscal quarter ended immediately prior to such Adjustment Date, interest for the next succeeding period commencing on such Adjustment Date and ending on the day immediately preceding the next succeeding Adjustment Date shall be computed as if the Consolidated Senior Leverage Ratio were at Level IV; provided, however, to the extent that Holdings thereafter -------- ------- delivers a Leverage Ratio Certificate during such succeeding period, interest for the remainder of such succeeding period shall be computed at the rate prescribed by Section 2.09(a)(ii). Subject to Section 2.09(e), at ------------------- --------------- any time that a Specified Default shall exist, the Applicable Margin shall be computed as if the Consolidated Senior Leverage Ratio were at Level IV. (b) Each Tranche B Term Loan shall bear interest on the outstanding principal amount thereof from the Borrowing Date applicable thereto until it becomes due at a rate per annum equal to the Base Rate or LIBOR, as the case may be, plus the Applicable Margin as set forth below: Applicable Margin ----------------- Base Rate 2.250% LIBOR 3.250% (c) Except as provided in the last sentence of Section 2.09(a)(iii) -------------------- or in the proviso to the first sentence of Section 2.09(a)(iii), any change in -------------------- the Applicable Margin due to a change in the Consolidated Senior Leverage Ratio shall be effective on the applicable Adjustment Date and shall apply to all Loans that are outstanding at any time during the period commencing on such Adjustment Date and ending on the date immediately preceding the next Adjustment Date. (d) Interest on each Loan (including each Original Tranche A Term Loan and each Original Revolving Loan converted pursuant to this Agreement) shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of any portion of Loans (excluding Base Rate Loans) for the portion of such Loans so prepaid and upon -48- payment (including prepayment) of any Loans (excluding Base Rate Loans) in full thereof. In addition, interest which accrues under Section 2.09(e) also shall be --------------- paid on demand by the Administrative Agent or the Majority Lenders. (e) If any amount of principal of or interest on any Loan, or any other regularly scheduled amount payable hereunder or under any other Loan Document is not paid in full when due, after giving effect to any applicable grace period (whether at stated maturity, by acceleration, demand or otherwise), then, notwithstanding the provisions of Sections 2.09(a) and (b), the Borrower ------------------------ shall pay interest (after as well as before judgment) on the overdue principal amount of all outstanding Loans and on all other overdue amounts (including interest to the extent permitted by law), at a rate per annum equal to the Base Rate plus the Applicable Margin for the relevant Tranche of Loans plus 2%. (f) Anything herein to the contrary notwithstanding, the obligations of the Borrower hereunder shall be subject to the limitation that payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by the respective Lender would be contrary to the provisions of any law applicable to such Lender limiting the highest rate of interest which may be lawfully contracted for, charged or received by such Lender, and in such event the Borrower shall only pay such Lender interest at the highest rate permitted by applicable law. 2.10 Fees. In addition to fees described in Section 3.08: ---- ------------ (a) Commitment Fees. --------------- The Borrower shall pay to the Administrative Agent for the account of each RL Lender a commitment fee on the average daily unused portion of such RL Lender's Revolving Commitment (subject to Section 2.01(b)(iii) in the case of -------------------- the Swingline Lender), computed on a quarterly basis in arrears, on each Interest Payment Date for Base Rate Loans based upon the daily utilization for the previous three month period as calculated by the Administrative Agent, equal to (A) for the period from the Original Effective Date and ending on the day immediately preceding the First Adjustment Date, 0.50% per annum, and (B) from and after the First Adjustment Date, for each period commencing on an Adjustment Date and ending on the day immediately preceding the next succeeding Adjustment Date, the rate per annum set forth below opposite the relevant Level of Consolidated Senior Leverage Ratio determined as at the end of the last fiscal quarter ended prior to the first day of such period: -49- Consolidated Senior Leverage Ratio Rate -------------- ---- Level I 0.300% Level II 0.400% Level III 0.500% Level IV 0.500% provided, however, that if by the last day for determining any Adjustment Date, - -------- ------- Holdings has failed to deliver a Leverage Ratio Certificate as at the end of the fiscal quarter ended immediately prior to such Adjustment Date, the commitment fee for the next succeeding period beginning on such Adjustment Date and ending on the next succeeding Adjustment Date shall be computed as if the Consolidated Senior Leverage Ratio were at Level IV; provided further, however, to the extent ---------------- ------- that Holdings thereafter delivers a Leverage Ratio Certificate during such succeeding period the commitment fee for the remainder of such succeeding period shall be computed at the rate prescribed in the table above in this Section ------- 2.10(a). In addition, at any time that a Specified Default shall exist, the - ------- commitment fee shall be computed as if the Consolidated Senior Leverage Ratio were at Level IV. Such commitment fees shall be paid in arrears on each Interest Payment Date for Base Rate Loans. (b) Other Fees. The Borrower shall pay such other fees as have or ---------- may be agreed between or among, CHS, Holdings, the Borrower, the Administrative Agent and the Arranger from time to time. 2.11 Computation of Fees and Interest. -------------------------------- (a) All computations of interest payable in respect of Base Rate Loans shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest under this Agreement shall be made on the basis of a 360-day year (of 12 months with 30 days each) and actual days elapsed. Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (b) The Administrative Agent will promptly notify the Borrower and the Lenders of each determination of LIBOR; provided, however, that any failure -------- ------- to do so shall not relieve the Borrower of any liability hereunder. Except as otherwise provided in the last sentence of Section 2.09(a)(iii) or in the -------------------- proviso to the first sentence of Section 2.09(a)(iii), any change in the -------------------- interest rate on a Loan resulting from a change in the Applicable Margin shall become effective as of the opening of business on the relevant Adjustment Date. The Administrative Agent will promptly notify the Borrower and the Lenders of the effective date and the amount of each such change, provided, however, that -------- ------- any failure to do so shall not relieve the Borrower of any liability hereunder. -50- (c) Each determination of an interest rate by the Administrative Agent shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. 2.12 Payments by the Borrower. ------------------------ (a) All payments (including prepayments) to be made by the Borrower on account of principal, interest, drawings under Letters of Credit, fees and other amounts required hereunder shall be made, except as otherwise expressly provided herein, without set-off or counterclaim and shall, except as otherwise expressly provided with respect to drawings under Letters of Credit and elsewhere herein, be made to the Administrative Agent for the ratable account of the Lenders entitled thereto at the Administrative Agent's Payment Office, and shall be made in Dollars and in immediately available funds, no later than 1:00 p.m. (New York City time) on the date specified herein. The Administrative Agent will promptly distribute to each Lender its share, if any, of such principal, interest, fees or other amounts, in like funds as received. Any payment which is received by the Administrative Agent later than 1:00 p.m. (New York City time) shall be deemed to have been received on the immediately succeeding Business Day and any applicable interest or fee shall continue to accrue until such payment is deemed to have been received. (b) Whenever any payment hereunder 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 interest or fees, as the case may be, subject to the provisions set forth in the definition of the term of "Interest Period" herein. (c) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make the payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent as required hereunder on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, cause to be distributed to each 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 made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent 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 Administrative Agent, at the Federal Funds Rate as in effect for each such day. 2.13 Payments by the Lenders to the Administrative Agent. --------------------------------------------------- (a) Unless the Administrative Agent shall have received notice from a Lender on the Restatement Effective Date or, with respect to each Borrowing after the Restatement Effective Date, at least one Business Day prior to the date of any proposed Borrowing (other than a Borrowing of a Swingline Loan which in accordance with Section 2.03(f) is funded directly by the Swingline Lender), --------------- that such Lender will not make available to the Administrative Agent for the account of the Borrower the amount of such Lender's Commitment Percentage (if any) of the -51- Loans included in such Borrowing, the Administrative Agent may assume that each Lender has made such amount available to the Administrative Agent as required hereunder on the Borrowing Date and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to the Administrative Agent in immediately available funds and the Administrative Agent in such circumstances has made available to the Borrower such amount, such Lender shall immediately make such amount available to the Administrative Agent, together with interest at the Federal Funds Rate from the date of such Borrowing to the date on which the Administrative Agent recovers such amount from such Lender or the Borrower. A notice of the Administrative Agent submitted to any Lender with respect to amounts owing under this Section 2.13(a) shall be conclusive, absent manifest --------------- error. If such amount is so made available, such payment to the Administrative Agent shall constitute such Lender's Loan on the Borrowing Date for all purposes of this Agreement. If such amount is not made available to the Administrative Agent on the next Business Day following such Borrowing Date, the Administrative Agent may notify the Borrower of such failure to fund and, upon demand by the Administrative Agent, the Borrower shall pay such amount to the Administrative Agent for the Administrative Agent's account, together with interest thereon for each day elapsed since such Borrowing Date, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. (b) The failure of any Lender to make any Loan on any Borrowing Date shall not relieve any other Lender of any obligation hereunder to make a Loan on such Borrowing Date, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on any Borrowing Date. 2.14 Sharing of Payments, etc. ------------------------- (a) If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Obligations owing to it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its applicable Commitment Percentage of payments on account of the Obligations of the same kind obtained by all the Lenders entitled to such payment, such Lender shall forthwith (i) notify the Administrative Agent of such fact, and (ii) purchase from the other Lenders entitled to such payment such participations in such Obligations made by them 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 the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender entitled to such payment shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's applicable Commitment Percentage (according to the proportion of (A) the amount of such paying Lender's required repayment to (B) 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 Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased pursuant to this Section 2.14 and will in each case notify the Lenders ------------ following any such purchases. -52- (b) The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.14 may, to the fullest extent ------------ permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 12.09) with respect to such participation as ------------- fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. 2.15 Security and Guaranties. ----------------------- (a) All Obligations of the Borrower, Holdings and the Subsidiary Guarantors under this Agreement and all other Loan Documents to which they are a party shall be secured in accordance with the Collateral Documents. (b) All Obligations of the Borrower under this Agreement and all other Loan Documents to which it is a party shall be unconditionally guaranteed by Holdings pursuant to Article X and by the Subsidiary Guarantors pursuant to --------- the Subsidiary Guaranty. ARTICLE III THE LETTERS OF CREDIT 3.01 The Letter of Credit Subfacility. -------------------------------- (a) On the terms and conditions set forth herein, (i) each Issuing Lender agrees, (A) from time to time, on any Business Day during the period from the Restatement Effective Date to the date which is 30 days prior to the Termination Date for Revolving Loans to issue (x) irrevocable sight standby Letters of Credit (each such standby Letter of Credit, a "Standby Letter of ----------------- Credit") for the account of the Borrower and (y) irrevocable sight commercial - ------ Letters of Credit (each such commercial Letter of Credit, a "Trade Letter of --------------- Credit" and each such Trade Letter of Credit and each Standby Letter of Credit, - ------ a "Letter of Credit") for the account of the Borrower, and to amend or renew ---------------- Letters of Credit previously issued by it, in accordance with Sections 3.02(c) ---------------- and 3.02(d), and (B) to honor drafts, and honor other payment demands that ------- strictly comply with, the Letters of Credit; and (ii) the RL Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower; provided, however, that no Issuing Lender shall issue any Letter of -------- ------- Credit if as of the date of, and after giving effect to, the issuance of such Letter of Credit, (x) the aggregate amount of all Letter of Credit Obligations (exclusive of unpaid drawings under any Letter of Credit which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) plus the aggregate principal amount of all Revolving Loans and all Swingline Loans shall exceed the lesser of the Aggregate Revolving Commitment and the Revolving Availability, or (y) the Letter of Credit Obligations (exclusive of unpaid drawings under any Letter of Credit which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) shall exceed the lesser of the Letter of Credit Commitment and the Revolving Availability. All Letters of Credit shall be denominated in Dollars. The Borrower and the Lenders hereby acknowledge and agree that all letters of credit that were issued under the Original Credit Agreement and that remain outstanding on the Restatement Effective Date shall -53- constitute a Letter of Credit under this Agreement and which shall be deemed issued on their original issuance date. (b) No Issuing Lender shall issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority shall by its terms purport to enjoin or restrain such Issuing Lender from issuing such Letter of Credit, or any Requirement of Law applicable to such Issuing Lender or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuing Lender shall prohibit, or request that such Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Lender with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Lender is not otherwise compensated hereunder) not in effect on the Original Effective Date or shall impose upon such Issuing Lender any unreimbursed loss, cost or expense which was not applicable on the Original Effective Date and which such Issuing Lender in good faith deems material to it; (ii) such Issuing Lender has received written notice from the Majority Lenders, the Administrative Agent or the Borrower on or prior to the Business Day prior to the requested date of issuance of such Letter of Credit, that one or more of the applicable conditions contained in Article ------- V is not then satisfied; - (iii) the expiry date of any requested Letter of Credit (x) is more than (A) in the case of Standby Letters of Credit, one year after the date of issuance or (B) in the case of Trade Letters of Credit, 180 days after the date of issuance, unless (in each case) the Majority Lenders and such Issuing Lender have approved such expiry date in writing or (y) is later than the 30th day prior to the Termination Date for Revolving Loans; (iv) any requested Letter of Credit is not in form and substance acceptable to such Issuing Lender, or the issuance, of a Letter of Credit shall violate any applicable policies of such Issuing Lender; or (v) such Letter of Credit is in a face amount less than $100,000. 3.02 Issuance, Amendment and Renewal of Letters of Credit. ---------------------------------------------------- (a) Each Letter of Credit shall be issued upon the irrevocable written request of the Borrower received by an Issuing Lender (with a copy sent by the Borrower to the Administrative Agent) at least five days (or such shorter time as such Issuing Lender may agree in a particular instance in its sole discretion) prior to the proposed date of issuance. Each such request for issuance of a Letter of Credit shall be by facsimile, confirmed immediately in an original writing, in the form of a Letter of Credit Application, and shall specify in form and detail satisfactory to such Issuing Lender: (i) the proposed date of issuance of the Letter of Credit (which shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the name and address of the beneficiary thereof; (v) the documents to -54- be presented by the beneficiary of the Letter of Credit in case of any drawing thereunder; (vi) the full text of any certificate to be presented by the beneficiary in case of any drawing thereunder; and (vii) such other matters as the Issuing Lender may reasonably require. (b) From time to time while a Letter of Credit is outstanding and prior to the Termination Date for Revolving Loans, the Issuing Lender with respect thereto will, upon the written request of the Borrower received by such Issuing Lender (with a copy sent by the Borrower to the Administrative Agent) at least five days (or such shorter time as such Issuing Lender may agree in a particular instance in its sole discretion) prior to the proposed date of amendment, amend any Letter of Credit issued by it. Each such request for amendment of a Letter of Credit shall be made by facsimile, confirmed immediately in an original writing, made in the form of a Letter of Credit Amendment Application and shall specify in form and detail satisfactory to the Issuing Lender with respect thereto: (i) the Letter of Credit to be amended; (ii) the proposed date of amendment of the Letter of Credit (which shall be a Business Day); (iii) the nature of the proposed amendment; and (iv) such other matters as such Issuing Lender may reasonably require. No Issuing Lender shall be under any obligation to amend any Letter of Credit if: (A) such Issuing Lender would have no obligation at such time to issue such Letter of Credit in its amended form under the terms of this Agreement; or (B) the beneficiary of any such Letter of Credit does not accept the proposed amendment to the Letter of Credit. (c) The Administrative Agent will promptly notify the Lenders of the receipt by it of any Letter of Credit Application or Letter of Credit Amendment Application. (d) Each Issuing Lender and the Lenders agree that, while a Letter of Credit issued by such Issuing Lender is outstanding and prior to the Termination Date for Revolving Loans, at the option of the Borrower and upon the written request of the Borrower received by such Issuing Lender (with a copy sent by the Borrower to the Administrative Agent) at least five days (or such shorter time as such Issuing Lender may agree in a particular instance in its sole discretion) prior to the proposed date of notification of renewal, such Issuing Lender shall be entitled to authorize the automatic renewal of such Letter of Credit. Each such request for renewal of a Letter of Credit shall be made by facsimile, confirmed immediately in an original writing, in the form of a Letter of Credit Amendment Application, and shall specify in form and detail satisfactory to the applicable Issuing Lender: (i) the Letter of Credit to be renewed; (ii) the proposed date of notification of renewal of the Letter of Credit (which shall be a Business Day); (iii) the revised expiry date of the Letter of Credit; and (iv) such other matters as such Issuing Lender may reasonably require. No Issuing Lender shall be under any obligation to renew any Letter of Credit if such Issuing Lender would have no obligation at such time to issue or amend such Letter of Credit in its renewed form under the terms of this Agreement. If any outstanding Letter of Credit shall provide that it shall be automatically renewed unless the beneficiary thereof receives notice from the applicable Issuing Lender that such Letter of Credit shall not be renewed, and if at the time of renewal such Issuing Lender would be entitled to authorize the automatic renewal of such Letter of Credit in accordance with this Section 3.02(d) upon the request of the Borrower but such Issuing Lender shall - --------------- not have received any Letter of Credit Amendment Application from the Borrower with respect to such renewal or other written direction by the Borrower with respect thereto, such Issuing Lender shall nonetheless be -55- permitted to allow such Letter of Credit to be renewed, and the Borrower and the Lenders hereby authorize such renewal, and, accordingly, such Issuing Lender shall be deemed to have received a Letter of Credit Amendment Application from the Borrower requesting such renewal. Notwithstanding anything in this Section ------- 3.02(d) to the contrary, no Issuing Lender shall issue a Letter of Credit that, - ------- by its terms, automatically renews unless such Letter of Credit expressly provides that, regardless of such automatic renewal provisions, in no event shall such Letter of Credit's term be extended beyond a date which is later than the 30th day prior to the Termination Date for Revolving Loans. (e) This Agreement shall control in the event of any conflict with any Letter of Credit Related Document (other than any Letter of Credit). (f) Each Issuing Lender will also deliver to the Administrative Agent, concurrently or promptly following its delivery of a Letter of Credit, or amendment to or renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and complete copy of each such Letter of Credit or amendment to or renewal of a Letter of Credit. 3.03 Participations, Drawings and Reimbursements. ------------------------------------------- (a) Immediately upon the issuance of each Letter of Credit, each RL Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the applicable Issuing Lender a participation in such Letter of Credit and each drawing thereunder in an amount equal to the product of (i) the Revolving Commitment Percentage of such RL Lender times (ii) the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. For purposes of Section 2.10(a), each issuance of a --------------- Letter of Credit shall be deemed to utilize the Revolving Commitment of each RL Lender by an amount equal to the amount of such participation. (b) In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the applicable Issuing Lender will promptly notify the Borrower. The Borrower shall reimburse such Issuing Lender prior to 1:00 p.m. (New York City time), on the Business Day immediately following each date that any amount is paid by such Issuing Lender under any Letter of Credit (each such date on which any amount is so paid by an Issuing Lender, a "Disbursement Date"), in an amount equal to the amount so paid by such ----------------- Issuing Lender. In the event the Borrower shall fail to reimburse an Issuing Lender for the full amount of any drawing under any Letter of Credit issued by it by 1:00 p.m. (New York City time) on the Business Day immediately following the respective Disbursement Date, such Issuing Lender will promptly notify the Administrative Agent and the Administrative Agent will promptly notify each RL Lender thereof, and the Borrower shall be deemed to have requested that Revolving Loans consisting of Base Rate Loans be made by the RL Lenders (and hereby irrevocably consents to such deemed request) pursuant to Section 2.01(a) --------------- to be disbursed on the Business Day immediately following the respective Disbursement Date under such Letter of Credit. Any notice given by an Issuing Lender or the Administrative Agent pursuant to this Section 3.03(b) may be oral --------------- if immediately confirmed in writing (including by facsimile); -56- provided, however, that the lack of such an immediate confirmation shall not - -------- ------- affect the conclusiveness or binding effect of such notice. (c) Regardless of any failure of the satisfaction of any condition set forth in Section 5.02 or any other reason, each RL Lender shall upon receipt ------------ of any notice pursuant to Section 3.03(b) make available to the Administrative --------------- Agent for the account of the applicable Issuing Lender an amount in Dollars and in immediately available funds equal to its Revolving Commitment Percentage of the amount of the drawing, whereupon the participating RL Lenders shall each be deemed to have made a Revolving Loan consisting of a Base Rate Loan to the Borrower in that amount. If any RL Lender so notified shall fail to make available to the Administrative Agent for the account of the applicable Issuing Lender the amount of such RL Lender's Revolving Commitment Percentage of the amount of the drawing by no later than 1:00 p.m. (New York City time) on the Business Day immediately following the respective Disbursement Date, then interest shall accrue on such RL Lender's obligation to make such payment, from the Business Day immediately following the respective Disbursement Date to the date such RL Lender makes such payment, at a rate per annum equal to (i) the Federal Funds Rate in effect from time to time during the period commencing on the later of the Business Day immediately following the respective Disbursement Date and the date such RL Lender receives notice of the Disbursement Date prior to 1:00 p.m. (New York City time) on such date and ending on the date three Business Days thereafter, and (ii) thereafter at the Base Rate as in effect from time to time plus the Applicable Margin for Revolving Loans. The Administrative Agent will promptly give notice of the occurrence of the Disbursement Date, but failure of the Administrative Agent to give any such notice on the Disbursement Date or in sufficient time to enable any RL Lender to effect such payment on such date shall not relieve such RL Lender from its obligations under this Section 3.03. - ------------ (d) With respect to any unreimbursed drawing which is not converted into Revolving Loans consisting of Base Rate Loans to the Borrower in whole or in part, for any reason, the Borrower shall be deemed to have incurred from the applicable Issuing Lender a Letter of Credit Borrowing in the amount of such drawing, which Letter of Credit Borrowing shall be due and payable on demand by the Majority Lenders (together with interest) and shall bear interest from the respective Disbursement Date at a rate per annum equal to the Base Rate, plus the Applicable Margin for Revolving Loans constituting Base Rate Loans, plus in the case of any Letter of Credit Borrowing outstanding after the Business Day immediately following the respective Disbursement Date, 2% per annum, and each RL Lender's payment to such Issuing Lender pursuant to Section 3.03(c) shall be --------------- deemed payment in respect of its participation in such Letter of Credit Borrowing. (e) Each RL Lender's obligation in accordance with this Agreement to make the Revolving Loans or fund its participation in any Letter of Credit Borrowing, as contemplated by this Section 3.03, as a result of a drawing under ------------ a Letter of Credit shall be absolute and unconditional and without recourse to the applicable Issuing Lender and shall not be affected by any circumstance, including (i) any set-off, counterclaim, defense or other right which such RL Lender may have against such Issuing Lender, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default, an Event of Default, a Material -57- Adverse Effect, or any failure of the satisfaction of any condition set forth in Section 5.02; or (iii) any other circumstance, happening or event whatsoever, - ------------ whether or not similar to any of the foregoing. 3.04 Repayment of Participations. --------------------------- (a) Upon (and only upon) receipt by the Administrative Agent for the account of an Issuing Lender of funds from the Borrower (i) in reimbursement of any payment made by such Issuing Lender under the Letter of Credit with respect to which any RL Lender has paid the Administrative Agent for the account of such Issuing Lender for such RL Lender's participation in a Letter of Credit pursuant to Section 3.03, or (ii) in payment of interest on amounts described in clause ------------ ------ (i), the Administrative Agent will pay to each RL Lender, in the same funds as - --- those received by the Administrative Agent for the account of such Issuing Lender, the amount of such RL Lender's Revolving Commitment Percentage of such funds, and such Issuing Lender shall receive the amount of the Revolving Commitment Percentage of such funds of any RL Lender that did not so pay the Administrative Agent for the account of such Issuing Lender. (b) If the Administrative Agent or an Issuing Lender is required at any time to return to the Borrower, or to a trustee, receiver, liquidator, custodian, or any similar official in any Insolvency Proceeding, any portion of the payments made by the Borrower to the Administrative Agent for the account of such Issuing Lender pursuant to Section 3.04(a) in reimbursement of a payment --------------- made under the Letter of Credit or interest or fee thereon, each RL Lender shall, on demand of the Administrative Agent, forthwith return to the Administrative Agent or such Issuing Lender the amount of its Revolving Commitment Percentage of any amounts so returned by the Administrative Agent or such Issuing Lender plus interest thereon from the date such demand is made to the date such amounts are returned by such RL Lender to the Administrative Agent or such Issuing Lender, at a rate per annum equal to the Federal Funds Rate in effect from time to time. 3.05 Role of the Issuing Lenders. --------------------------- (a) Each RL Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the applicable Issuing Lender shall not have any responsibility to obtain any document (other than any sight draft and certificates expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. (b) Neither the Issuing Lenders nor any of their respective correspondents, participants or assignees of any such Issuing Lender shall be liable to any Lender for: (i) any action taken or omitted in connection herewith at the request or with the approval of the Majority Lenders; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any Letter of Credit Related Document. (c) The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit. Neither the Issuing -58- Lenders nor any of the respective correspondents, participants or assignees of any such Issuing Lender, shall be liable or responsible for any of the matters described in clauses (i) through (vii) of Section 3.06; provided, however, that ----------- ----- ------------ -------- ------- the Borrower may have a claim against an Issuing Lender, and an Issuing Lender may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such Issuing Lender's willful misconduct or gross negligence or such Issuing Lender's willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) or other documents strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing: (i) each Issuing Lender 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; and (ii) each Issuing Lender shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. 3.06 Obligations Absolute. The obligations of the Borrower under -------------------- this Agreement and any Letter of Credit Related Document to reimburse an Issuing Lender for a drawing under a Letter of Credit, and to repay any Letter of Credit Borrowing and any drawing under a Letter of Credit converted into Revolving Loans, shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and each such other Letter of Credit Related Document under all circumstances, including the following: (i) any lack of validity or enforceability of this Agreement or any Letter of Credit Related Document; (ii) 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 Letter of Credit or any other amendment or waiver of or any consent to departure from all or any of the Letter of Credit Related Documents; (iii) the existence of any claim, set-off, defense or other right that the Borrower or any Subsidiary of the Borrower may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), an Issuing Lender or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by the Letter of Credit Related Documents or any unrelated transaction; (iv) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit; (v) any payment by an Issuing Lender under any Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of any -59- Letter of Credit; or any payment made by an Issuing Lender under any Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of any Letter of Credit, including any arising in connection with any Insolvency Proceeding; (vi) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the obligations of the Borrower in respect of any Letter of Credit; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. 3.07 Cash Collateral Pledge. Upon (a) the request of the ---------------------- Administrative Agent, (i) if an Issuing Lender has honored any full or partial drawing request on any Letter of Credit and such drawing has resulted in a Letter of Credit Borrowing hereunder, or (ii) if, as of the Termination Date for Revolving Loans, any Letters of Credit may for any reason remain outstanding and partially or wholly undrawn, or (b) the occurrence of the circumstances described in Section 2.07 requiring the Borrower to Cash Collateralize Letters ------------ of Credit, then the Borrower shall immediately Cash Collateralize the Letter of Credit Obligations in an amount equal to such Letter of Credit Obligations (or in the case of clause (b) above, the amount required pursuant to Section 2.07) ---------- ------------ and such cash will be held as security for all Obligations of the Borrower to the Lenders hereunder in a cash collateral account to be established by the Administrative Agent, and during the existence of an Event of Default, the Administrative Agent may, upon the request of the Majority Lenders, apply such amounts so held to the payment of such outstanding Obligations. 3.08 Letter of Credit Fees. --------------------- (a) The Borrower shall pay to the Administrative Agent for the account of each Lender a letter of credit fee with respect to the Letters of Credit computed on the average daily maximum amount available to be drawn of the outstanding Letters of Credit, on each Interest Payment Date for Base Rate Loans based upon Letters of Credit outstanding for the previous three-month period. The letter of credit fee shall be equal to (i) for the period from the Original Effective Date and ending on the day immediately preceding the First Adjustment Date, 2.500% per annum and (ii) from and after the First Adjustment Date, for each period commencing on an Adjustment Date and ending on the day immediately preceding the next succeeding Adjustment Date, the rate per annum set forth below opposite the relevant Level of Consolidated Senior Leverage Ratio determined as at the end of the last fiscal quarter ended prior to the first day of such period: -60- Consolidated Senior Leverage Ratio Rate -------------- ---- Level I 1.500% Level II 2.000% Level III 2.250% Level IV 2.500% provided, however, that if by the day for determining any Adjustment Date - -------- ------- Holdings has failed to deliver a Leverage Ratio Certificate as at the end of the fiscal quarter ended immediately prior to such Adjustment Date, the letter of credit fee for the next succeeding period beginning on such Adjustment Date and ending on the day immediately preceding the next succeeding Adjustment Date shall be computed as if the Consolidated Senior Leverage Ratio were at Level IV; provided further, however, to the extent that Holdings thereafter delivers a - ---------------- ------- Leverage Ratio Certificate during such succeeding period, the letter of credit fee for the remainder of such succeeding period shall be computed at the rate prescribed in the table above in this Section 3.08(a). In addition, at any time --------------- that a Specified Default shall exist, the letter of credit fee shall be computed as if the Consolidated Senior Leverage Ratio were at Level IV. Such letter of credit fee shall be due and payable in arrears on each Interest Payment Date for Base Rate Loans. (b) The Borrower shall pay to each Issuing Lender a letter of credit fronting fee for each Letter of Credit issued by such Issuing Lender in an amount, and at such times, as is required by such Issuing Lender (but in no event in an amount in excess of .25% per annum of the face amount of such Letter of Credit). (c) The Borrower shall pay to each Issuing Lender from time to time on demand the normal issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such Issuing Lender relating to letters of credit as from time to time in effect. 3.09 Uniform Customs and Practice. The Uniform Customs and Practice ---------------------------- for Documentary Credits as most recently published by the International Chamber of Commerce shall in all respects be deemed a part of this Article III as if ----------- incorporated herein and (unless otherwise expressly provided in the Letters of Credit) shall apply to the Letters of Credit. ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY 4.01 Taxes. ----- (a) Subject to Section 4.01(g), any and all payments made by Holdings --------------- and the Borrower to any Lender or the Administrative Agent under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any and all present or -61- future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent (except as otherwise provided in Section 4.01(c)), as the --------------- case may be, such taxes as are imposed on or measured by such Person's net income or net profits by the jurisdiction under the laws of which such Person is organized or has its principal office or in which the Lending Office of such Person is located or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). ----- (b) In addition, the Borrower and Holdings shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). ----------- (c) Subject to Section 4.01(g), the Borrower and Holdings shall --------------- indemnify and hold harmless each Lender and the Administrative Agent for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under Section 4.01(d) and this Section --------------- ------- 4.01(c)) and (ii) the full amount of all taxes imposed on or measured by the net - ------- income or net profits of such Lender or the Administrative Agent pursuant to the laws of the jurisdiction in which such Lender or the Administrative Agent is organized or has its principal office or in which the Lending Office of such Person is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Lender or the Administrative Agent is organized or has its principal office or in which their Lending Office is located paid by such Lender or the Administrative Agent as a result of amounts payable by the Borrower under Section 4.01(d) and this Section 4.01(c), --------------- --------------- and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such taxes or other liabilities were correctly or legally asserted. (d) If the Borrower or Holdings shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent, then, subject to Section ------- 4.01(g): - ------- (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 4.01(d)) such Lender or the --------------- Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made; (ii) the Borrower or Holdings shall make such deductions; and (iii) the Borrower or Holdings shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (e) Within 30 days after the date of any payment by the Borrower or Holdings of Taxes or Other Taxes, such Person shall furnish to the Administrative Agent, at its address -62- referred to in Section 12.02, the original or a certified copy of a receipt ------------- evidencing payment thereof, or other evidence of payment satisfactory to the Administrative Agent. (f) Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for federal income tax purposes agrees that: (i) it shall, no later than the Restatement Effective Date (or, in the case of a Lender which becomes a party hereto pursuant to Section 12.07 after the Restatement Effective Date, the date upon which such Lender becomes a party hereto) deliver to the Borrower and the Administrative Agent either (A) two accurate and complete signed originals of Internal Revenue Service Form 4224 or any successor thereto ("Form 4224"), or two --------- accurate and complete signed originals of Internal Revenue Service Form 1001 or any successor thereto ("Form 1001"), as appropriate, in each case --------- indicating that such Lender is on the date of delivery thereof entitled to receive all payments under this Agreement free from withholding of United States Federal income tax, or (B) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (f)(i)(A), (x) a certificate substantially in the form of Exhibit R (a "Section ------- 4.01(f) Certificate") and (y) two accurate and complete signed originals of ------------------- Internal Revenue Service Form W-8 or any successor thereto ("Form W-8") certifying to such Lender's entitlement on the date of delivery thereof to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement. (ii) if at any time a Lender that provides forms pursuant to paragraph (f)(i)(A) above makes any change in its place of incorporation or ------------------- fiscal residence necessitating a new Form 4224 or Form 1001, such Lender shall promptly deliver to the Borrower through the Administrative Agent in replacement for, or in addition to, the forms previously delivered by such Lender hereunder, two accurate and complete signed originals of Form 4224 or Form 1001 or Form W-8 and a Section 4.01(f) Certificate, as appropriate, in each case indicating that such Lender is on the date of delivery thereof entitled to receive all payments under this Agreement free from withholding of United States Federal income tax; (iii) it shall, to the extent it is legally entitled to do so, before or promptly after a Lender that provides forms pursuant to paragraph --------- (f)(i)(A) above makes any change of a Lending Office or its principal --------- office, or the occurrence of any event (including the passing of time but excluding any event mentioned in clause (ii) above) requiring a change in ----------- or renewal of the most recent Form 4224 or Form 1001 previously delivered by such Lender, deliver to the Borrower through the Administrative Agent two accurate and complete original signed copies of Form 4224 or Form 1001 in replacement for the forms previously delivered by such Lender indicating that such Lender continues to be entitled to receive all payments under this Agreement free from any withholding of any United States Federal income tax; -63- (iv) it shall, to the extent it is legally entitled to do so, promptly upon the Borrower's or the Administrative Agent's reasonable request to that effect, deliver to the Borrower or the Administrative Agent (as the case may be) such other forms or similar documentation as may be required from time to time by any applicable law, treaty, rule or regulation in order to establish such Lender's complete exemption from withholding on all payments under this Agreement; and (v) without limiting or restricting any Lender's right to increased amounts under Section 4.01(d) from the Borrower and Holdings upon --------------- satisfaction of such Lender's obligations under the provisions of this Section 4.01(f), if such Lender is entitled to a reduction in the --------------- applicable withholding tax, the Administrative Agent may (but shall not be obligated to) withhold from any interest to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other administrative documentation required by clause (i) are not delivered to the Administrative Agent, then the ---------- Administrative Agent shall withhold from any interest payment to Lender not providing such forms or other documentation, an amount equivalent to the applicable withholding tax and in addition, the Administrative Agent shall also withhold against periodic payments other than interest payments to the extent United States withholding tax is not eliminated by obtaining Form 4224, Form 1001 or Form W-8 and a Section 4.01(f) Certificate. The Borrower shall indemnify and hold harmless the Administrative Agent and each of its officers, directors, employees, counsel, agents and attorney- in-fact, on an after tax basis, from and against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including attorney's fees) of any kind whatsoever incurred as a result of or in connection with the Administrative Agent's failure to withhold as provided pursuant to the preceding sentence, unless such failure constitutes gross negligence or willful misconduct of the Administrative Agent itself as the same is determined by a final judgment of a court of competent jurisdiction and the obligations in this sentence shall survive payment of all other Obligations. (g) Neither the Borrower nor Holdings will be required to pay any additional amounts in respect of Taxes imposed by the United States Federal government pursuant to Sections 4.01(a) or 4.01(d) to any Lender if and to the ---------------- ------- extent the obligation to pay such additional amounts would not have arisen but for a failure by such Lender to comply with its obligations under Section ------- 4.01(f) in respect of its Lending Office. - ------- (h) Each Lender agrees that it shall, at any time upon reasonable advance request in writing by the Borrower or the Administrative Agent, promptly deliver such certification or other documentation as may be required under the law or regulation in any applicable jurisdiction and which such Lender is entitled to submit to avoid or reduce withholding taxes on amounts to be paid by the Borrower or Holdings and received by such Lender pursuant to this Agreement or any other Loan Document. (i) Subject to Section 4.01(g), the Borrower and Holdings shall --------------- indemnify each Lender and the Administrative Agent, to the extent required by this Section 4.01 within 30 days ------------ -64- after receipt of written request from such Lender or the Administrative Agent thereof accompanied by a written statement describing in reasonable detail the Taxes or Other Taxes or other additional amounts that are the subject of the basis for such indemnity and the computation of the amount payable. (j) If the Borrower or Holdings is required to pay additional amounts to any Lender or the Administrative Agent pursuant to Section 4.01(d), then such --------------- Lender shall, upon the Borrower's request, use its reasonable best efforts (consistent with policy considerations of such Lender) to change the jurisdiction of its Lending Office so as to reduce or eliminate any such additional payment which may thereafter accrue if such change in the sole judgment of such Lender is not otherwise disadvantageous to such Lender. (k) Each Lender agrees that it will (i) take all reasonable actions reasonably requested by Holdings or the Borrower (consistent with policy considerations by such Lender) to maintain all exemptions, if any, available to it from withholding taxes (whether available by treaty or existing administrative waiver), and (ii) to the extent reasonable, otherwise cooperate with Holdings or the Borrower to minimize any amounts payable by Holdings or the Borrower under this Section 4.01, in any case described in the preceding clauses ------------ (i) and (ii), however, only if such action or cooperation is not disadvantageous to such Lender in the sole judgment of such Lender. 4.02 Illegality. ---------- (a) If any Lender shall determine that (i) the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration thereof, has made it unlawful, or (ii) any central bank or other Governmental Authority has asserted that it is unlawful for any Lender or its Lending Office to make a Eurodollar Loan or to convert any Base Rate Loan to a Eurodollar Loan, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, the obligation of such Lender to make or convert any such Loans shall be suspended until such Lender shall have notified the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. (b) If a Lender shall determine that it is unlawful to maintain any Eurodollar Loan, the Borrower shall, unless otherwise permitted under paragraph --------- (c) below, prepay in full all Eurodollar Loans of such Lender then outstanding, - --- together with interest accrued thereon, either on the last day of the Interest Period thereof if such Lender may lawfully continue to maintain such Eurodollar Loans to such day, or immediately, if the Lender may not lawfully continue to maintain such Eurodollar Loans, together with any amounts required to be paid in connection therewith pursuant to Section 4.04. ------------ (c) If the Borrower is required to prepay any Eurodollar Loan immediately, then concurrently with such prepayment, the Borrower shall borrow from the affected Lender, in the aggregate amount of such repayment, Base Rate Loans. (d) Before giving any notice to the Administrative Agent pursuant to this Section 4.02, the affected Lender shall designate a different Lending ------------ Office with respect to its Eurodollar -65- Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of such Lender, be illegal, inconsistent with the policies of such Lender or otherwise disadvantageous to such Lender. 4.03 Increased Costs and Reduction of Return. --------------------------------------- (a) If any Lender or Issuing Lender shall determine that, due to either (i) the introduction of or any change in or in the interpretation or administration of any law or regulation (other than any law or regulation relating to taxes, including those relating to Taxes or Other Taxes) after the Original Effective Date 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) made after the Original Effective Date, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any Eurodollar Loans or participating in any Letter of Credit Obligations, or any increase in the cost to such Issuing Lender of agreeing to issue, issuing or maintaining any Letter of Credit or of agreeing to make or making, funding or maintaining any unpaid drawing under any Letter of Credit, then the Borrower shall be liable for, and shall from time to time, within ten days of demand therefor by such Lender or Issuing Lender, as the case may be (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender or Issuing Lender, additional amounts as are sufficient to compensate such Lender or Issuing Lender for such increased costs. (b) If any Lender or Issuing Lender shall have determined that (i) the introduction of any Capital Adequacy Regulation after the Original Effective Date, (ii) any change in any Capital Adequacy Regulation after the Original Effective Date, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof after the Original Effective Date, or (iv) compliance by any Lender (or its Lending Office) or Issuing Lender, as the case may be, or any corporation controlling such Lender or Issuing Lender, as the case may be, with any Capital Adequacy Regulation adopted after the Original Effective Date, affects or would affect the amount of capital required or expected to be maintained by such Lender or Issuing Lender or any corporation controlling such Lender or Issuing Lender and (taking into consideration such Lender's, Issuing Lender's or such corporation's policies with respect to capital adequacy and such Lender's, the Issuing Lender's or corporation's desired return on capital) determines that the amount of such capital is (or is required to be) increased as a consequence of its Commitment, Loans, participations in Letters of Credit, or obligations under this Agreement, then, within ten days of demand by Issuing Lender (with a copy to the Administrative Agent), the Borrower shall be liable for and shall immediately pay to such Lender or Issuing Lender, from time to time as specified by such Lender or Issuing Lender, additional amounts sufficient to compensate such Lender or Issuing Lender for such increase. 4.04 Funding Losses. The Borrower agrees to reimburse each Lender -------------- and to hold each Lender harmless from any loss, cost or expense (other than loss of margin) which such Lender may sustain or incur as a consequence of: -66- (a) any failure by the Borrower to make any payment of principal of any Eurodollar Loan (including payments made after any acceleration thereof) when due; (b) any failure by the Borrower to borrow a Eurodollar Loan or continue a Eurodollar Loan or convert a Base Rate Loan to a Eurodollar Loan after the Borrower has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/ Continuation as the case may be; (c) any failure by the Borrower to make any prepayment of a Eurodollar Loan after the Borrower has given a notice in accordance with Section 2.06; or ------------ (d) any payment or prepayment (including pursuant to Section 2.07 or ------------ after acceleration thereof) of a Eurodollar Loan for any reason whatsoever on a day which is not the last day of the Interest Period with respect thereto; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain any Eurodollar Loan hereunder or from fees payable to terminate the deposits from which such funds were obtained. 4.05 Inability to Determine Rates. Notwithstanding any provisions ---------------------------- herein to the contrary, if, in relation to any proposed Eurodollar Loan, (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon all parties hereto) that by reason of circumstances affecting the interbank markets adequate and fair means do not exist for ascertaining LIBOR to be applicable to such Eurodollar Loan or (b) the Administrative Agent shall have received notice from the Majority Lenders that LIBOR determined or to be determined for any Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such affected Interest Period, then, the obligation of the Lenders to make, continue or maintain Eurodollar Loans or to convert Base Rate Loans into Eurodollar Loans shall be suspended until the Administrative Agent upon the instruction of the Majority Lenders revokes such notice in writing. If, notwithstanding the provisions of this Section 4.05, any Lender has made available to the Borrower ------------ its applicable Commitment Percentage of any such proposed Eurodollar Loan, then such Eurodollar Loan shall immediately be converted into a Base Rate Loan. 4.06 Increased Costs on Eurodollar Loans. At any time that any ----------------------------------- Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of net income taxes or similar charges) because of (x) any change since the Original Effective Date in any Requirement of Law or governmental guideline, order or request (whether or not having the force of law), or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline, order or request (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of LIBOR) and/or (y) other circumstances affecting such Lender, the interbank Eurodollar market or the position of such Lender in such market, then the Borrower shall pay to each such Lender, upon written demand therefor -67- (accompanied by the written notice referred to in Section 4.07 below), such ------------ additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts received or receivable hereunder. 4.07 Certificates of Lenders. Any Lender, the Swingline Lender or ----------------------- any Issuing Lender claiming reimbursement or compensation pursuant to this Article IV shall deliver to the Borrower or Holdings, as applicable (with a copy - ---------- to the Administrative Agent) a certificate setting forth in reasonable detail the amount payable to such Person hereunder and such certificate shall be conclusive and binding on the Borrower or Holdings in the absence of manifest error. In determining any amounts payable under Section 4.03(b), each Lender, --------------- the Swingline Lender and each Issuing Lender, as the case may be, shall act reasonably and in good faith and will use averaging and attribution methods which are reasonable. 4.08 Change of Lending Office, Replacement Lender, etc. -------------------------------------------------- (a) Each Lender agrees that upon the occurrence of an event giving rise to the operation of Section 4.02, 4.03 or 4.06 with respect to such Lender, ------------------ ---- it will if so requested by the Borrower, use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Lending Office for any Loans affected by such event with the object of avoiding the consequence of the event giving rise to the operation of such section; provided, however, that such designation would not, in the sole -------- ------- judgment of such Lender, be otherwise disadvantageous to such Lender. Nothing in this Section 4.08(a) shall affect or postpone any of the obligations of the --------------- Borrower or the right of any Lender provided in Section 4.02, 4.03 or 4.06. ------------------ ---- (b) Notwithstanding anything to the contrary contained herein or in any other Loan Document, (x) upon the occurrence of any event that obligates the Borrower or Holdings to pay any amount under Section 4.01 or giving rise to ------------ the operation of Section 4.02, 4.03 or 4.06 with respect to such Lender or (y) ------------------ ---- as provided in Section 12.01(b) in the case of certain refusals by a Lender to ---------------- consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Majority Lenders, the Borrower shall have the right, if no Default or Event of Default then exists or will exist immediately after giving effect to the respective replacement, to replace such Lender (the "Replaced Lender") by designating another Lender or an --------------- Eligible Assignee (such Lender or Eligible Assignee being herein called a "Replacement Lender") to which such Replaced Lender shall assign, in accordance - ------------------- with Section 12.07 and without recourse to or warranty by, or expense to, such ------------- Replaced Lender, the rights and obligation of such Replaced Lender hereunder (except for such rights as survive repayment of the Loans), and, upon such assignment, such Replaced Lender shall no longer be a party hereto or have any rights hereunder and such Replacement Lender shall succeed to the rights and obligations of such Replaced Lender hereunder. The Borrower shall pay to such Replaced Lender in same day funds on the date of replacement all interest, fees and other amounts then due and owing such Replaced Lender by the Borrower hereunder to and including the date of replacement, including, without limitation, costs incurred under Sections 4.01, 4.02, 4.03 or 4.06. ------------- ---- ---- ---- -68- (c) Notwithstanding anything to the contrary contained in Section ------- 4.02, 4.03 or 4.06, unless a Lender gives notice to the Borrower that the - ---------- ---- Borrower is obligated to pay an amount under any such Section within 180 days after the later of (x) the date such Lender incurs the respective increased costs, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital or (y) the date such Lender has actual knowledge of its incurrence of the respective increased costs, loss, expense or liability, reductions in amounts received or receivable or reduction in return on capital, then such Lender shall only be entitled to be compensated for such amount by the Borrower pursuant to said Section 4.02, 4.03 or 4.06, as the case ------------------ ---- may be, to the extent the respective increased costs, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital are incurred or suffered on or after the date which occurs 180 days prior to such Lender giving such notice to the Borrower as provided above that the Borrower is obligated to pay the respective amounts pursuant to said Section ------- 4.02, 4.03 or 4.06, as the case may be. This paragraph (c) shall have no - ---------- ---- ------------- applicability to any Section of this Agreement other than said Section 4.02, ------------- 4.03 or 4.06. - ---- ---- 4.09 Survival. The agreements and obligations of Holdings and the -------- Borrower in this Article IV shall survive the payment of all other Obligations. ---------- ARTICLE V CONDITIONS PRECEDENT 5.01 Conditions to Loans and Letters of Credit on the Restatement ------------------------------------------------------------ Effective Date. The occurrence of the Restatement Effective Date, the - -------------- obligation of each Lender to make Loans hereunder and the obligation of each Issuing Lender to issue Letters of Credit on the Restatement Effective Date is subject to the condition that the Administrative Agent shall be reasonably satisfied that the following conditions have been satisfied on or before the Restatement Effective Date and, to the extent applicable, shall have received on or before the date for making such Loans and/or issuing such Letters of Credit all of the following, in form and substance reasonably satisfactory to the Administrative Agent and each Lender and (except for the original instruments or documents representing Pledge Agreement Collateral) in sufficient copies for each Lender: (a) Credit Agreement. This Agreement executed by the Borrower, ---------------- Holdings, the Administrative Agent, the Issuing Lender, the Swingline Lender, the Majority Lenders under (and as defined in) the Original Credit Agreement and each of the Lenders with a Tranche B Term Commitment (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of facsimile or other written confirmation from such party of execution of a counterpart hereof by such party), together with the Revolving Notes, Tranche A Term Notes and Tranche B Term Notes executed by the Borrower and made payable to the Lenders. (b) Resolutions; Incumbency. ----------------------- -69- (i) Copies of the resolutions of the Board of Directors of the Borrower approving and authorizing the execution, delivery and performance by the Borrower of this Agreement and the other Transaction Documents to be delivered by the Borrower, and authorizing the borrowing of the Loans and the issuance of the Letters of Credit, certified as of the Restatement Effective Date by the Secretary or an Assistant Secretary of the Borrower; (ii) Copies of the resolutions of the Board of Directors of Holdings approving and authorizing the execution, delivery and performance by Holdings of this Agreement (including the guaranty of the Obligations of the Borrower) and the other Transaction Documents to be delivered by Holdings, certified by the Secretary or an Assistant Secretary of Holdings; (iii) Copies of the resolutions of the Board of Directors of each Subsidiary Guarantor approving and authorizing the execution, delivery and performance by such Subsidiary Guarantor of the Subsidiary Guaranty and the other Transaction Documents to be delivered by such Subsidiary Guarantor, certified as of the Restatement Effective Date by the Secretary or an Assistant Secretary of such Subsidiary Guarantor; and (iv) Certificates of the Secretary or Assistant Secretary of Holdings, the Borrower, and each Subsidiary Guarantor certifying the names, incumbency and true signatures of the officers of Holdings, the Borrower and such Subsidiary Guarantor authorized to execute, deliver and perform, as applicable, this Agreement and all other Transaction Documents, notices, requests and other communications to be delivered hereunder or thereunder. (c) Articles of Incorporation; By-laws and Good Standing. Each of ---------------------------------------------------- the following documents: (i) the articles or certificate of incorporation of Holdings, the Borrower and each Subsidiary Guarantor as in effect on the Restatement Effective Date, certified by the Secretary of State (or similar, applicable Governmental Authority) of the State of such Credit Party's organization as of a recent date and by the Secretary or Assistant Secretary of Holdings, the Borrower and such Subsidiary Guarantor as of the Restatement Effective Date, and the bylaws of Holdings, the Borrower and such Subsidiary Guarantor as in effect on the Restatement Effective Date, certified by the Secretary or Assistant Secretary of Holdings, the Borrower and each Subsidiary Guarantor as of the Restatement Effective Date; (ii) a good standing certificate for Holdings, the Borrower and each Subsidiary Guarantor from the Secretary of State of the State of such Credit Party's organization and each state where Holdings, the Borrower and each Subsidiary Guarantor is qualified to do business as a foreign corporation as of a recent date; and -70- (iii) a bring-down certificate, to the extent reasonably available, of Holdings, the Borrower and each Subsidiary Guarantor from the Secretary of State of the State of such Credit Party's organization, dated the Restatement Effective Date. (d) Subsidiary Guaranty; Contribution Agreement. (i) The ------------------------------------------- Subsidiary Guaranty, duly executed by each Subsidiary Guarantor; and (ii) the Contribution Agreement, duly executed by the Borrower and each Subsidiary Guarantor. (e) Pledge Agreement. ---------------- (i) The Pledge Agreement, duly executed by each Credit Party; (ii) all certificates and instruments (endorsed in blank) representing the Pledge Agreement Collateral then to be pledged; (iii) an undated stock power for each such certificate executed in blank; and (iv) with respect to Pledge Agreement Collateral, if any, consisting of book-entry shares, evidence that all actions described in the Pledge Agreement which are necessary to create and perfect the security interests pursuant to the Pledge Agreement in accordance with Articles 8 and 9 of the UCC have been taken. (f) Security Agreement. ------------------ (i) The Security Agreement, duly executed by each Credit Party; (ii) proper Financing Statements (Form UCC-1 or the equivalent) fully executed for filing under the UCC or other appropriate filing offices of each jurisdiction as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect the security interests purported to be created by the Security Agreement; (iii) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name Products Unlimited or any of its Subsidiaries as debtor and that are filed in the jurisdictions referred to in clause (ii) above, together with copies of such other financing statements that name Products Unlimited or any of its Subsidiaries as debtor (none of which shall cover the Collateral except to the extent evidencing Permitted Liens or in respect of which the Administrative Agent shall have received Form UCC-3 termination statements or such other termination statements as shall be required by local law fully executed for filing); (iv) evidence of the completion of all other recordings and filings of, or with respect to, the Security Agreement as may be necessary or to perfect the security interests intended to be created by the Security Agreement; and -71- (v) evidence that all other actions necessary or to perfect and protect the security interests purported to be created by the Security Agreement have been taken. (g) Legal Opinions. -------------- (i) An opinion of Kirkland & Ellis, counsel to Holdings, the Borrower and the Subsidiary Guarantors, addressed to the Administrative Agent and the Lenders, containing opinions substantially in the form of Exhibit J-1 ----------- and as to such other matters as the Administrative Agent may reasonably request; (ii) An opinion of McGuire, Wood & Bissette, P.A., North Carolina counsel to the Borrower, addressed to the Administrative Agent and the Lenders containing opinions substantially in the form of Exhibit J-2 and as to such ----------- other matters as the Administrative Agent may reasonably request; and (iii) Opinions delivered in connection with the Acquisition pursuant to the Acquisition Agreement, together with reliance letters in favor of the Administrative Agent and the Lenders to the extent available. (h) Insurance. Evidence of insurance complying with the requirements --------- of Section 7.05 for the business and properties of Holdings and its ------------ Subsidiaries. (i) Payment of Fees and Expenses. Evidence that all fees, costs ---------------------------- and expenses (including Attorney Costs of the Administrative Agent) payable by the Borrower on or before the Restatement Effective Date have been (or, upon application of the proceeds of the initial Loans hereunder, will be) paid to the extent then invoiced, and evidence that the fees payable on the Restatement Effective Date pursuant to the Fee Letter will be paid upon application of the proceeds of the initial Loans hereunder. (j) Certificates. ------------ (i) Certificates signed by a Responsible Officer of Holdings and the Borrower, dated as of the Restatement Effective Date stating that: (A) The representations and warranties of Holdings and the Borrower contained in Article VI and in the other Loan Documents to which they are a ---------- party are true and correct in all material respects on and as of such date, as though made on and as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); (B) no Default or Event of Default exists or would result from any Borrowing on the Restatement Effective Date; and (C) the conditions set forth in paragraphs (l), (n) and (o)(i) of -------------- --- ------ this Section 5.01 have been satisfied; ------------ -72- (ii) Certificates signed by a Responsible Officer of each of the Subsidiary Guarantors, dated as of the Restatement Effective Date, stating that the representations and warranties of such Subsidiary Guarantor contained in the Subsidiary Guaranty, the Pledge Agreement, the Security Agreement and each other Loan Document to which it is a party, are true and correct in all material respects on and as of such date, as though made on and as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); (iii) a pro forma Borrowing Base Certificate as of the Restatement Effective Date, based upon the most recently available financial information available to the Borrower and giving effect to the consummation of the Transaction; and (iv) a Compliance Certificate (as defined in the Original Credit Agreement) signed by the Chief Financial Officer of Holdings demonstrating compliance with Sections 8.08, 8.09 and 8.10 of the Original Credit Agreement ------------------- ---- for the Measurement Period (as defined in the Original Credit Agreement) ended on December 31, 1998. (k) Solvency Certificate. A solvency certificate from the Chief -------------------- Financial Officer of Holdings in the form of Exhibit K. --------- (l) Transaction. (i)(x) The Acquisition shall have been consummated ----------- in all material respects in accordance with the Acquisition Documents and all applicable laws, (y) each of the conditions precedent to the consummation of the Acquisition, as set forth in the Acquisition Documents, shall have been satisfied (including, but not limited to, the entering into of a new supply agreement with Motors & Armatures) and not waived except with the consent of the Administrative Agent and (z) no material breach of any term or provision of the Acquisition Documents has occurred; (ii) Holdings shall have received gross cash proceeds of (x) $1,428,247 from the issuance of shares of its common stock and (y) $3,571,753 from the issuance of a like principal amount of additional Holdings Junior Subordinated Notes (of which $1,429,382 shall consist of Holdings Bridge Junior Subordinated Notes), and all such proceeds shall have been contributed by Holdings to the equity capital of the Borrower; (iii) The Administrative Agent shall have received the Refinancing Documents containing agreements and other assurances from the creditors holding Indebtedness to be Refinanced that, upon application of the proceeds of the Tranche B Term Loans to be made hereunder, (x) the Refinancing will have been consummated and shall be effective, (y) such creditors will have thereupon terminated and released all security interests and Liens on the assets owned by Products Unlimited and its Subsidiaries and all guaranties in respect thereof and (z) the Administrative Agent will immediately receive such releases of security interests in and Liens on the assets owned by Products Unlimited and its Subsidiaries as may be reasonably requested by the Administrative Agent; and -73- (iv) The Administrative Agent shall have received true and correct copies of all Transaction Documents. (m) Adverse Changes. Since September 30, 1998, nothing shall have --------------- occurred (and neither the Administrative Agent nor the Lenders shall have become aware of any facts or conditions not known previous to such date) which the Administrative Agent or the Majority Lenders shall reasonably determine has had, or could reasonably be expected to have, a Material Adverse Effect. Since August 31, 1998, nothing shall have occurred (and neither the Administrative Agent nor the Lenders shall have become aware of any facts or conditions not known by such Persons previous to such date) which the Administrative Agent or the Majority Lenders shall reasonably determine has had, or could reasonably be expected to have, a material adverse effect upon the operations, business, assets, properties, liabilities, condition (financial or otherwise) or prospects of Products Unlimited and its Subsidiaries taken as a whole. (n) Governmental and Third Party Approvals. All governmental and -------------------------------------- material third party approvals necessary in connection with the Transaction shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose materially adverse conditions on the Transaction or the financing thereof. (o) Litigation. There shall be no actions, suits or proceedings ---------- pending or threatened (i) with respect to the Transaction or any Transaction Document or (ii) which the Administrative Agent or the Majority Lenders shall reasonably determine could reasonably be expected to have a (x) material adverse effect on the Transaction, (y) a Material Adverse Effect or (z) a material adverse effect upon the operations, business, assets, properties, liabilities, condition (financial or otherwise) or prospects of Products Unlimited and its Subsidiaries taken as a whole. (p) Shareholders' Agreements, Management Agreements and Holdings Tax ---------------------------------------------------------------- Sharing Agreement. - ----------------- (i) All agreements entered into by Holdings or any of its Subsidiaries 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; (ii) the Holdings Tax Sharing Agreement; and (iii) all management and consulting agreements entered into by Holdings or any of its Subsidiaries (including the CHS Management Agreement). -74- (q) Financial Statements. -------------------- (i) A pro forma consolidated balance sheet as at December 31, --- ----- 1998 and a pro forma income statement and cash flow statement for the twelve --- ----- month period ended on December 31, 1998, in each case of Holdings and its Subsidiaries after giving effect to the consummation of the Transaction, the making of the initial Loans hereunder and the application of the proceeds thereof; (ii) a draft consolidated balance sheet and related draft consolidated statements of income and cash flows of Holdings for its fiscal year ended December 31, 1998; (iii) consolidated balance sheets and statements of income and cash flows of Products Unlimited for its fiscal year ended August 31, 1998 and its fiscal quarter ended November 30, 1998; and (iv) consolidated projected financial statements (including cash flow projections) of Holdings and its Subsidiaries for the years 1999 through 2004, after giving effect to the Transactions. (r) Minimum Revolving Loan Availability. After giving effect to the ----------------------------------- Loans to be made and the Letters of Credit to be issued or outstanding on the Restatement Effective Date, each of the Aggregate Revolving Commitment and the Revolving Availability as of the Restatement Effective Date shall exceed the sum of the aggregate principal amount of all outstanding Revolving Loans and Swingline Loans, plus the aggregate amount of all outstanding Letter of Credit Obligations, by an amount equal to or greater than $9,500,000. (s) Subordinated Debt Compliance. (i) The Borrower shall have ---------------------------- delivered to the Administrative Agent a certificate of its chief financial officer demonstrating in reasonable detail (and showing the financial calculations therefor) that the full amount of the Tranche B Term Loans may be incurred on the Restatement Effective Date in accordance with, and will not violate the provisions of, Section 4.12(a) of the Borrower Senior Subordinated Note Indenture; and (ii) the Borrower also shall have delivered to the trustee under the Borrower Senior Subordinated Note Indenture and to the Administrative Agent the officers' certificate contemplated by clause (z) of the final sentence of the definition of "Senior Debt" contained therein. 5.02 Conditions to all Borrowings and the Issuance of any Letters of --------------------------------------------------------------- Credit. The obligation of each Lender to make any Loan hereunder (other than - ------ a Revolving Loan made pursuant to a Mandatory Borrowing) and the obligation of each Issuing Lender to issue, renew or amend any Letter of Credit is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date or date of issuance, as the case may be: (a) Notice. The Administrative Agent shall have received a Notice ------ of Borrowing or in the case of a Swingline Loan, the notice required under Section 2.03(f); or in the case of any - --------------- -75- issuance of any Letter of Credit, the applicable Issuing Lender and the Administrative Agent shall have received a Letter of Credit Application, as required under Section 3.02; ------------ (b) Continuation of Representations and Warranties. The ---------------------------------------------- representations and warranties contained in Article VI and in the other Loan ---------- Documents shall be true and correct in all material respects on and as of such Borrowing Date or date of issuance (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date); (c) No Existing Default. No Default or Event of Default shall ------------------- exist or shall result from such Borrowing or issuance of such Letter of Credit; and (d) No Material Adverse Effect. Since September 30, 1998, no -------------------------- events have occurred which, individually or in the aggregate, have had, or could reasonably be expected to have, a Material Adverse Effect. Each Notice of Borrowing, request for a Swingline Loan or Letter of Credit Application submitted by the Borrower hereunder shall be deemed to constitute a representation and warranty by the Borrower hereunder, as of the date of each such notice or application and as of the date of each Borrowing that the applicable conditions in this Section 5.02 are satisfied. ------------ ARTICLE VI REPRESENTATIONS AND WARRANTIES Each of Holdings and the Borrower represents and warrants with respect to itself and its Subsidiaries to the Administrative Agent, the Issuing Lenders and each Lender as of the Restatement Effective Date and as of the date of each Borrowing of Loans or issuance, renewal or amendment of each Letter of Credit that: 6.01 Corporate Existence and Power. Each of Holdings and each of ----------------------------- its Subsidiaries: (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has the power and authority and has or will have on or prior to the date required to be obtained all governmental licenses, authorizations, consents and approvals to execute, deliver and perform its obligations under the Transaction Documents to which it is a party and has duly executed and delivered each such Transaction Document, in each case other than (i) immaterial third party authorizations, consents and approvals for the Transaction and (ii) filings necessary to perfect the security interest in that portion of the Collateral under the Security Agreement which was acquired pursuant to the Acquisition (which filings have been made to the extent that this representation and warranty is made (or deemed made) after 10 days after the Restatement Effective Date); -76- (c) is duly qualified to do business as a foreign corporation, and licensed and in good standing, under the laws of each jurisdiction where its ownership, lease or operation of property or the nature or conduct of its business requires such qualification or license except where the failure so to qualify could not reasonably be expected to have a Material Adverse Effect; and (d) is in compliance with all Requirements of Law, except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.02 Corporate Authorization; No Contravention. The execution, ----------------------------------------- delivery and performance by each of Holdings and each of its Subsidiaries of any Transaction Document to which such Person is party have been duly authorized by all necessary corporate action, and do not and will not: (a) contravene the terms of any of such Person's charter or by-laws; (b) conflict with or result in any breach or contravention of, or the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Collateral Documents) under, any document evidencing any material Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its property is subject; or (c) violate any Requirement of Law. 6.03 Governmental Authorization. No approval, consent, exemption, -------------------------- authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, Holdings or any of its Subsidiaries of any Transaction Document to which any such Person is a party, in each case other than (i) immaterial approvals, consents, exemptions or authorizations relating to the Transaction and (ii) filings necessary to perfect security interest in that portion of the Collateral under the Security Agreement which was acquired pursuant to the Acquisition (which filings have been made to the extent that this representation and warranty is made (or deemed made) after 10 days after the Restatement Effective Date). 6.04 Binding Effect. This Agreement and each other Transaction -------------- Document to which Holdings or any of its Subsidiaries is a party constitute the legal, valid and binding obligations of Holdings and each of its Subsidiaries to the extent such Person is a party thereto, enforceable against such Person in accordance with their respective terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles of general applicability. 6.05 Litigation. There are no actions, suits, proceedings, claims ---------- or disputes pending, or to the best knowledge of Holdings or the Borrower, threatened at law, in equity, in arbitration or before any Governmental Authority, against Holdings or any of its Subsidiaries or any of their respective properties or assets which: -77- (a) purport to affect or pertain to this Agreement or any other Loan Document; or (b) could reasonably be expected to have a Material Adverse Effect. As of the Restatement Effective Date, no injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Transaction Document, or directing that any other transaction provided for herein not be consummated as herein provided. 6.06 No Default. No Default or Event of Default exists or would ---------- result from the incurring of any Obligations by Holdings, the Borrower or any Subsidiary Guarantor. Neither Holdings nor any of its Subsidiaries is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, could reasonably be expected to have a Material Adverse Effect. 6.07 ERISA Compliance. Each Plan (and each related trust, insurance ---------------- contract or fund) is in material compliance with its terms and with all applicable laws, including, without limitation, ERISA and the Code; each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; no Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded Current Liability which, when added to the aggregate amount of Unfunded Current Liabilities with respect to all other Plans, exceeds $250,000; no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period, within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan have been timely made; neither Holdings nor any Subsidiary of Holdings nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such material liability under any of the foregoing sections with respect to any Plan; no condition exists which presents a material risk to Holdings or any Subsidiary of Holdings or any ERISA Affiliate of incurring a material liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted to terminate or appoint a trustee to administer any Plan which is subject to Title IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, expected or threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of Holdings and its Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan, would not exceed $250,000; each -78- group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of Holdings, any Subsidiary of Holdings, or any ERISA Affiliate has at all times been operated in material compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets of Holdings or any Subsidiary of Holdings or any ERISA Affiliate exists or is likely to arise on account of any Plan; and Holdings and its Subsidiaries may cease contributions to or terminate any employee benefit plan maintained by any of them without incurring any material liability. 6.08 Use of Proceeds; Margin Regulations. The proceeds of the ----------------------------------- Loans are intended to be and shall be used solely for the purposes set forth in and permitted by Section 7.14. ------------ 6.09 Title to Properties. Holdings and each of its Subsidiaries ------------------- have good record and marketable title in fee simple to, or valid leasehold interests in, all material property owned or leased by them, free and clear of all Liens other than Permitted Liens. All Real Property owned or leased by Holdings or any of its Subsidiaries as of the Restatement Effective Date, and the nature of the interest therein, is correctly set forth on Schedule 6.09. 6.10 Taxes. Each of Holdings and each of its Subsidiaries has ----- filed all federal and state income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all taxes and assessments payable by it which have become due, except for immaterial taxes and taxes contested in good faith and adequately disclosed and fully provided for on the financial statements of Holdings and its Subsidiaries in accordance with GAAP. Holdings and each of its Subsidiaries have at all times paid, or have provided adequate reserves (in the good faith judgment of the management of Holdings) for the payment of, all federal, state, local and foreign income taxes (other than immaterial taxes) applicable for all prior fiscal years and for the current fiscal year to date. There is no material action, suit, proceeding, investigation, audit, or claim now pending or, to the best knowledge of Holdings and the Borrower threatened, by any authority regarding any taxes relating to Holdings or any of its Subsidiaries. As of the Restatement Effective Date, neither Holdings nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of Holdings or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of Holdings or any of its Subsidiaries not to be subject to the normally applicable statute of limitations. 6.11 Financial Statements. (a) All balance sheets, statements of -------------------- operations and other financial data of Holdings and its Subsidiaries and Products Unlimited and its Subsidiaries which have been or shall hereafter be furnished to the Administrative Agent and the Lenders for the purposes of or in connection with this Agreement or any transaction contemplated hereby do and will present fairly, in all material respects, the financial condition of Holdings and its Subsidiaries and Products Unlimited and its Subsidiaries as of the dates thereof and the results of their operations for the period(s) covered thereby. The projections which have been furnished by (or on behalf of) Holdings or any of its Subsidiaries to the Administrative Agent or any Lender -79- pursuant to Section 5.01(q) represent management's good faith estimates of --------------- future performance based upon historical financial information and reasonable assumptions of management, it being recognized that such projections are not to be viewed as facts and do not constitute a warranty as to the future performance of Holdings or its Subsidiaries and that actual results may vary from projected results and such variances may be material. (b) The audited financial statements for Holdings' fiscal year ended December 31, 1998 shall be (and at the time of delivery thereof to the Lenders are) the same in all material respects to the draft financial statements which have been furnished by (or on behalf of) Holdings pursuant to Section ------- 5.01(q)(ii). - ----------- 6.12 Securities Law, etc.; Compliance. All transactions -------------------------------- contemplated by this Agreement and the other Loan Documents comply with (x) Regulations T, U and X of the Federal Reserve Board and (y) all other applicable laws and any rules and regulations thereunder. 6.13 Governmental Regulation. 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 or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a holding company", within the meaning of the Public Utility Holding Company Act of 1935. 6.14 Labor Controversies. There are no labor controversies pending ------------------- or, to the best of Holdings' and the Borrower's knowledge, threatened against it or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. 6.15 Subsidiaries. Holdings has no Subsidiaries, except, on the ------------ Restatement Effective Date, those Subsidiaries which are identified in Schedule -------- 6.15 and, thereafter, those Subsidiaries permitted to be formed or acquired in - ---- compliance with the terms hereof. 6.16 Patents, Trademarks, etc. Each of Holdings and each of its ------------------------- Subsidiaries owns (or is licensed to use) and possesses all such patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights, copyrights, permits, licenses and authorizations as it considers necessary for the conduct of the business of Holdings and its Subsidiaries as now conducted without, individually or in the aggregate, any infringement upon rights of other Persons which could reasonably be expected to have a Material Adverse Effect. 6.17 Accuracy of Information. All factual information heretofore ----------------------- or contemporaneously herewith furnished by or on behalf of Holdings or any of its Subsidiaries in writing to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby and all other such factual information hereafter furnished by or on behalf of Holdings or any of its Subsidiaries to the Administrative 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 material fact -80- necessary to make such information, in the light of the circumstances existing at the time such information was delivered, not misleading. 6.18 Hazardous Materials. Neither Holdings nor any of its ------------------- Subsidiaries have caused or permitted any Hazardous Material to be disposed of or otherwise released, either from, on or under any property currently or formerly legally or beneficially owned or operated by, or otherwise used by, Holdings or any of its Subsidiaries, which has or could reasonably be expected to have a Material Adverse Effect. No such property has ever been used as a dump site or storage site for any Hazardous Materials or otherwise contains or contained Hazardous Materials, which has or could reasonably be expected to have a Material Adverse Effect. The failure, if any, of Holdings or any of its Subsidiaries, in connection with their current and former properties or their businesses, to be in compliance with any Environmental Law or to obtain any permit, certificate, license, approval and other authorization under such Environmental Laws has not had, nor is reasonably expected to have, a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries have entered into, have agreed to or are subject to any judgment, decree or order or other similar requirement of any Governmental Authority under any Environmental Law, including without limitation, relating to compliance or to investigation, cleanup, remediation or removal of Hazardous Materials, which has or could reasonably be expected to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries have contractually assumed any liabilities or obligations under any Environmental Law which have or could reasonably be expected to have a Material Adverse Effect. There are no facts or circumstances which exist that could reasonably be expected to give rise to liabilities with respect to Hazardous Materials or any Environmental Law, which have or could reasonably be expected to have a Material Adverse Effect. 6.19 Collateral Documents. -------------------- (i) The provisions of the Pledge Agreement will be, on and after the Restatement Effective Date, effective to create, in favor of the Collateral Agent for the benefit of the Lenders and the Collateral Agent, legal, valid and enforceable security interests in all of the Collateral described therein, and upon the taking of and continued possession of such Collateral by the Collateral Agent on or prior to the Restatement Effective Date, the Pledge Agreement shall constitute, as of and after the Restatement Effective Date, a fully perfected security interest in such Collateral superior in right to any other security interests, existing or future, which any Person may have against such Collateral, except to the extent, if any, otherwise provided in the Pledge Agreement; (ii) the provisions of the Security Agreement are effective to create in favor of the Collateral Agent for the benefit of the Lenders and the Collateral Agent, a legal, valid and enforceable security interest in all right, title and interest in all of the Collateral described therein, and the Security Agreement, upon the filing of Form UCC-1 financing statements or the appropriate equivalent (which filing has been made or to the extent that this representation is being made with respect to that portion of such Collateral acquired pursuant to the Acquisition, such filing will have been made within 10 days after the Restatement Effective Date), create a fully perfected first priority lien on, and security interest in, all right, title and interest in all of the -81- Collateral described in the Security Agreement to the extent that such security interests can be perfected by the filing of a financing statement under the UCC or in which a filing may be made in the United States Patent and Trademark Office or in the United States Copyright Office, subject to no other Liens other than Permitted Liens; and (iii) after the execution and delivery thereof, the Mortgages create, for the obligations purported to be secured thereby, a valid and enforceable perfected security interest in and mortgage lien on the respective Mortgaged Properties covered thereby in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefits of the Lenders and the Collateral Agent, superior to and prior to the rights of all third Persons (except that the security interest and mortgage lien created in the Mortgaged Properties may be subject to the Permitted Encumbrances related thereto) and subject to no other Liens (other than Permitted Liens). 6.20 Solvency. On and as of the Restatement Effective Date and -------- after giving effect to the Transaction and to all Indebtedness being incurred or assumed and Liens created by the Credit Parties in connection therewith (a) the sum of the assets, at a fair valuation on a going-concern basis, of each of the Borrower on a stand-alone basis and of Holdings and its Subsidiaries taken as a whole will exceed its debts; (b) each of the Borrower on a stand-alone basis and Holdings and its Subsidiaries taken as a whole has not incurred and does not intend to incur, and does not believe that it will incur, debts beyond its ability to pay such debts as such debts mature; and (c) each of the Borrower on a stand alone basis and Holdings and its Subsidiaries taken as a whole will have sufficient capital with which to conduct its business. For purposes of this Section 6.20, "debt" means any liability on a claim, and "claim" means (i) right - ------------ to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. 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. 6.21 Representations and Warranties in the other Documents. All ----------------------------------------------------- representations and warranties made by any Credit Party or Products Unlimited (or any shareholder thereof) in the Acquisition Documents and in the other Transaction Documents were true and correct in all material respects at the time as of which such representations and warranties were made (or deemed made) and shall be true and correct in all material respects as of Restatement Effective Date as if such representations and warranties were made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. -82- 6.22 Capitalization. -------------- (a) On the Restatement Effective Date and after giving effect to the Transaction and the other transactions contemplated hereby, the authorized capital stock of Holdings shall consist of (i) 7,800,000 shares of common stock, $.01 par value per share ("Holdings Common Stock"), of which 1,064,472 shares --------------------- shall be issued and outstanding and (ii) 110,000 shares of preferred stock, $.01 par value per share ("Holdings Preferred Stock"), of which 1,932 shares shall be ------------------------ issued and outstanding. All outstanding shares of capital stock of Holdings have been duly and validly issued and are fully paid and non-assessable. Holdings does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock, except (i) for options and warrants to purchase shares of Holdings' Common Stock which may be issued from time to time, (ii) as provided in the Holdings Bridge Junior Subordinated Notes and (iii) as provided in the Shareholders Agreement. (b) On the Restatement Effective Date and after giving effect to the Transaction and the other transactions contemplated hereby, the authorized capital stock of (i) the Borrower shall consist of 1,000 shares of common stock, $.01 par value per share, of which 1,000 shares shall be issued and outstanding and owned by Holdings, (ii) Kilovac shall consist of 200,000 shares of Class A common stock, $.01 par value per share, of which 124,785 shares shall be issued and outstanding and owned by the Borrower and 200,000 shares of Class B shares of common stock, $.01 par value per shares, none of which shares shall be issued and outstanding, (iii) Corcom shall consist of 1,000 shares of common stock, $.01 par value per share, of which 1,000 shares shall be issued and outstanding and owned by the Borrower and (iv) Products Unlimited shall consist of 50,000 shares of Class B common stock, $1.00 par value per share, of which 1,000 shares shall be issued and outstanding and owned by the Borrower and 50,000 shares of preferred stock, no par value per share, of which 1,000 shares shall be issued and outstanding and owned by the Borrower. All outstanding shares of capital stock of the Borrower, Kilovac, Corcom, and Products Unlimited have been duly and validly issued, are fully paid and nonassessable. Neither the Borrower, Kilovac, Corcom nor Products Unlimited has outstanding securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. 6.23 Special Purpose Corporation. Holdings engages in no significant --------------------------- business activities and has no significant assets (other than the capital stock of the Borrower, Investments permitted to be made by it pursuant to Section ------- 8.05(xvi), immaterial assets used for the performance of those activities - --------- permitted to be performed by Holdings pursuant to Section 8.14(b) and any --------------- obligations held by it to the extent permitted by Section 8.05(vi)) or ---------------- liabilities (other than those incurred under this Agreement and under the other Transaction Documents to which it is a party and, after the issuance thereof in accordance with the terms of this Agreement, the Holdings Junior Subordinated Notes, the Holdings Shareholder Subordinated Notes, any Intercompany Note and any guaranty issued under Section 8.04(vii) or 8.04(viii)). ----------------- ---------- -83- 6.24 Insurance. Schedule 6.24 sets forth a true and complete --------- ------------- listing of all insurance maintained by Holdings and its Subsidiaries as of the Restatement Effective Date, and with the amounts insured (and any deductibles) set forth therein. 6.25 Borrower Senior Subordinated Note; etc. --------------------------------------- (a) The subordination provisions contained in the Borrower Senior Subordinated Note Documents are enforceable against the Borrower, the respective Subsidiary Guarantors and the holders thereof, and all Obligations and Guaranteed Obligations (as defined in the Subsidiary Guaranty) are within the definition of "Senior Debt" or "Guarantor Senior Debt", as the case may be, included in such subordination provisions, and the Borrower's incurrence of the Obligations are permitted under Section 4.12 of the Borrower Senior Subordinated Note Indenture. (b) The subordination provisions contained in the Holdings Junior Subordinated Notes and any Holdings Shareholder Subordinated Notes are enforceable against Holdings and the holders thereof, and all Guaranteed Obligations (as defined in this Agreement) and within the definition of "Superior Debt" and "Senior Indebtedness", as the case may be, included in such subordination provisions. 6.26 The Transaction. --------------- (a) Each of the Transaction Documents filed with the Securities and Exchange Commission and other securities authorities complied in all material respects with the provisions of the Exchange Act and all other applicable federal securities laws, state securities or "Blue Sky" laws, foreign securities laws, general corporation laws and rules and regulations thereunder; (b) All conditions precedent to, and all consents necessary to permit, the Acquisition and the other components of the Transaction pursuant to the Acquisition Documents and the other Transaction Documents have been satisfied or delivered, or waived with the prior written consent of the Administrative Agent, and no material breach of any term or provision of any Acquisition Document or any other Transaction Document has occurred and no action has been taken by any competent authority which restrains, prevents or imposes material adverse conditions upon, or seeks to restrain, prevent or impose material adverse conditions upon, the Acquisition, the other components of the Transaction or the funding of any Loans and issuance of any Letters of Credit hereunder; (c) (x) The Acquisition has been consummated in all material respects in accordance with the Acquisition Documents and all applicable laws, (y) Holdings has received gross cash proceeds of at least $1,428,247.20 from the issuance of additional shares of Holdings Common Stock and $3,571,752.80 from the issuance of a like principal amount of additional Holdings Junior Subordinated Notes and (z) all such proceeds have been contributed by Holdings to the equity capital of the Borrower. 6.27 Year 2000 Compliance. As of the Restatement Effective Date, the -------------------- Borrower is in the process of reviewing and assessing all computer applications which are material to the Borrower's and its Subsidiaries' businesses (including those affected by key -84- suppliers and vendors) with respect to the ability of such applications to correctly recognize references to, and abbreviations of, the year 2000 (including, without limitation, references to "00" as the year 2000 and not the year 1900) (referred to herein as "Year 2000 Compliant") and has developed a ------------------- plan and timeline for addressing the "Year 2000 Problem" on a timely basis. The Borrower reasonably believes that to the extent one or more of such computer applications of the Borrower or its Subsidiaries is not Year 2000 Compliant, that such deficiencies would be addressed prior to the year 2000 to the extent such deficiencies could reasonably be expected to have a Materially Adversely Effect. ARTICLE VII AFFIRMATIVE COVENANTS Each of Holdings and the Borrower agrees with the Administrative Agent, each Issuing Lender and each Lender that, until all Commitments and Letters of Credit have terminated and all Obligations (other than indemnities for which no request for payment has been made) have been paid and performed in full: 7.01 Financial Statements. Holdings and the Borrower shall deliver -------------------- to the Administrative Agent in form and detail reasonably satisfactory to the Administrative Agent and the Majority Lenders: (a) as soon as available, but not later than 90 days after the end of each fiscal year of Holdings (commencing with its fiscal year ending December 31, 1998), (i) a copy of the audited consolidated balance sheet of Holdings and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of Deloitte & Touche LLP or another nationally- recognized independent public accounting firm reasonably acceptable to the Administrative Agent which report shall state that such consolidated financial statements present fairly, in all material respects, the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except for changes agreed upon by Holdings and such auditors which are disclosed and described in such statements), and (ii) management's discussion and analyses of the material operational and financial developments during such fiscal year. The accountant's opinion referred to above shall not be qualified or limited because of a restricted or limited examination by such accountant of any material portion of the records of Holdings or any of its Subsidiaries; (b) as soon as available, but not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year of Holdings, (i) a copy of the unaudited consolidated balance sheet of Holdings and its consolidated Subsidiaries as of the end of such fiscal quarter and the related consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such fiscal quarter, in each case setting forth comparative figures for the corresponding fiscal quarter in the prior fiscal year, and certified by the Chief Financial Officer, the Vice -85- President-Finance or any other Responsible Officer of Holdings as being complete and correct and fairly presenting in all material respects, in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnote disclosure), the financial position and the results of operations of Holdings and its Subsidiaries and (ii) management's discussion and analysis of the material operational and financial developments during such fiscal quarter; (c) as soon as available, but not later than 45 days after the end of each fiscal month of each fiscal year of Holdings, a copy of the unaudited consolidated balance of Holdings and its consolidated Subsidiaries as of the end of such fiscal month and the related consolidated statements of income, shareholders' equity and cash flows for such fiscal month and for the elapsed portion of the fiscal year ended the last day of such fiscal month, in each case setting forth comparative figures for the corresponding fiscal month in the prior fiscal year and comparable budgeted figures for such fiscal month and certified by the Chief Financial Officer, the Vice President-Finance or any other Responsible Officer of Holdings as being complete and correct and fairly presenting in all material respects, in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnote disclosure), the financial position and the results of operations of Holdings and its Subsidiaries; (d) as soon as available, but not later than 30 days following the first day of each fiscal year of Holdings, a budget (including budgeted statements of income and sources and uses of cash and balance sheets) prepared by Holdings for each of the twelve months of such fiscal year prepared in detail; and (e) as soon as available, but in any event not later than 30 days after the end of each calendar month, a Borrowing Base Certificate with respect to such month then ended. 7.02 Certificates; Other Information. Holdings and the Borrower ------------------------------- shall furnish to the Administrative Agent: (a) concurrently with the delivery of the financial statements referred to in Sections 7.01(a) and (b), (x) a Compliance Certificate and ---------------- --- (y) a certificate executed and delivered by a Responsible Officer of Holdings certifying that the Borrower was in compliance with the provisions of Section 4.12 of the Borrower Senior Subordinated Note Indenture for the period ended as of the date of such financial statements (together with a schedule calculating such compliance in reasonable detail satisfactory to the Administrative Agent); (b) to the extent not previously delivered with respect to any Adjustment Date, concurrently with the delivery of the financial statements referred to in Sections 7.01(a) and (b), a Leverage Ratio Certificate duly ---------------- --- executed by a Responsible Officer of Holdings; -86- (c) promptly after Holdings' or any of its Subsidiaries' receipt thereof, a copy of any "management letter" received from its certified public accountants and management's response thereto; (d) promptly after the same are sent, copies of all financial statements and reports which Holdings sends to its shareholders generally; and promptly after the same are filed, copies of all financial statements and regular, periodical or special reports which Holdings or any of its Subsidiaries may make to, or file with, the Securities and Exchange Commission; (e) promptly, such additional business, financial and other information with respect to Holdings or any of its Subsidiaries as the Administrative Agent or any Lender may from time to time reasonably request; and (f) within five Business Days after receipt of same, notice of receipt by Holdings of the additional financing contemplated by Section 9.01(l). 7.03 Notices. Holdings and the Borrower shall, upon any ------- Responsible Officer of Holdings or the Borrower obtaining knowledge thereof, give notice (accompanied by a reasonably detailed explanation with respect thereto) promptly to the Administrative Agent, the Issuing Lender and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any litigation, arbitration or governmental investigation or proceeding which has been instituted or, to the knowledge of a Responsible Officer of Holdings or the Borrower, is threatened against Holdings or any of its Subsidiaries or to which any of their respective properties is subject (i) which could reasonably be expected to result in a Material Adverse Effect or (ii) relates to this Agreement, any other Transaction Document, the Transaction or any of the transactions contemplated hereby; (c) promptly after any Responsible Officer of Holdings or the Borrower obtains knowledge thereof, notice of one or more of the following environmental matters, unless such environmental matters could not, individually or when aggregated with all other such environmental matters, be reasonably expected to have a Material Adverse Effect: (i) any pending or threatened Environmental Claim against Holdings or any of its Subsidiaries or any real property owned or operated by Holdings or any of its Subsidiaries; (ii) any condition or occurrence on or arising from any real property owned or operated by Holdings or any of its Subsidiaries that (a) results in noncompliance by Holdings or any of its Subsidiaries with any applicable Environmental Law or (b) could be expected to form the basis of an Environmental Claim against Holdings or any of its Subsidiaries or any such real property; -87- (iii) any condition or occurrence on any real property owned or operated by Holdings or any of its Subsidiaries that could be expected to cause such real property to be subject to any restrictions on the ownership, occupancy, use or transferability by Holdings or any of its Subsidiaries of such real property under any Environmental Law; and (iv) the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any real property owned or operated by Holdings or any of its Subsidiaries as required by any Environmental Law or any governmental or other administrative agency; provided, that in any event Holdings shall -------- deliver to the Administrative Agent and each Lender all notices received by Holdings or any of its Subsidiaries from any government or governmental agency under, or pursuant to, CERCLA which identify Holdings or any of its Subsidiaries as potentially responsible parties for remediation costs or which otherwise notify Holdings or any of its Subsidiaries of potential liability under CERCLA; and (d) as soon as possible and, in any event, within ten (10) days after any Responsible Officer of Holdings or the Borrower knows or has reason to know of the occurrence of any of the following, Holdings will deliver to the Administrative Agent a certificate of the Chief Financial Officer of Holdings setting forth in reasonable detail information as to such occurrence and the action, if any, that Holdings, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by Holdings, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred (except to the extent that Holdings has previously delivered to the Lenders a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with respect to such Plan within the following 30 days; that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application may reasonably be expected to be or has been made for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan; that any contribution required to be made with respect to a Plan has not been timely made; that a Plan has been or may reasonably be expected to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability which, when added to the amount of Unfunded Current Liabilities with respect to all other Plans, exceeds $250,000; that proceedings may be reasonably expected to be or have been instituted to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent -88- contribution to a Plan; that Holdings, any Subsidiary of Holdings or any ERISA Affiliate will or may reasonably be expected to incur any material liability (including any indirect, contingent, or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA or with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or that Holdings or any Subsidiary of Holdings may incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) with respect to providing benefits to retired employees or other former employees (other than as required by Section 601 of ERISA or Section 4980B of the Code) or any Plan in addition to the liability that existed under the terms of such Plan or Plans on the Original Effective Date. Upon request of the Administrative Agent or any Lender, Holdings will deliver to the Administrative Agent (i) a complete copy of the annual report (on Internal Revenue Service Form 5500-series) of each Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with the Internal Revenue Service and (ii) copies of any records, documents or other information that must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA. In addition to any certificates or notices delivered to the Administrative Agent pursuant to the first sentence hereof, copies of annual reports and any records, documents or other information required to be furnished to the PBGC, and any material notices received by Holdings, any Subsidiary of Holdings or any ERISA Affiliate with respect to any Plan shall be delivered to the Administrative Agent no later than ten (10) days after the date such annual report has been filed with the Internal Revenue Service or such records, documents and/or information has been furnished to the PBGC or such notice has been received by Holdings, the Subsidiary or the ERISA Affiliate, as applicable. 7.04 Books, Records and Inspections. Holdings shall, and shall ------------------------------ cause each of its Subsidiaries to, keep proper books of record and accounts in which full, true and correct entries in conformity with GAAP and all requirements of law shall be made of all dealings and transactions in relation to its business and activities. Holdings shall, and shall cause each of its Subsidiaries to, permit officers and designated representatives of the Administrative Agent or any Lender to visit and inspect, under guidance of officers of Holdings or such Subsidiary, any of the properties of Holdings or such Subsidiary and, under guidance of officers of Holdings or such Subsidiary, to examine the books of account of Holdings or such Subsidiary and discuss the affairs, finances and accounts of Holdings or such Subsidiary with, and be advised as to the same by, its and their officers and independent accountants, all upon reasonable prior notice and at such reasonable times and intervals and to such reasonable extent as the Administrative Agent or such Lender may reasonably request. 7.05 Maintenance of Property; Insurance. ---------------------------------- (a) Holdings shall, and shall cause each of its Subsidiaries to, (i) keep all property necessary to the business of Holdings and its Subsidiaries in reasonably good working order and -89- condition, ordinary wear and tear excepted, (ii) maintain insurance on all such property in at least such amounts and against at least such risks as is consistent and in accordance with industry practice for companies similarly situated owning similar properties in the same general areas in which Holdings or any of its Subsidiaries operates, and (iii) furnish to the Administrative Agent, on each date on which financial statements are delivered pursuant to Section 7.01(a), full information as to the insurance carried. - --------------- (b) Holdings shall, and shall cause each of its Subsidiaries to, at all times keep its property insured in favor of the Collateral Agent, and all policies or certificates (or certified copies thereof) with respect to such insurance (and any other insurance maintained by Holdings and/or such Subsidiaries) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee and/or additional insured), (ii) shall state that such insurance policies shall not be cancelled without at least 30 days' prior written notice thereof (or 10 days' prior written notice in the case of nonpayment of premium) by the respective insurer to the Collateral Agent (or such shorter period of time as a particular insurance company policy generally provides) and (iii) shall be deposited with the Collateral Agent. (c) If Holdings or any of its Subsidiaries shall fail to insure its property in accordance with this Section 7.05, or if Holdings or any of its ------------ Subsidiaries shall fail to so endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and Holdings and the Borrower agree to reimburse the Collateral Agent for all reasonable costs and expenses of procuring such insurance. 7.06 Corporate Franchises. Holdings shall, and shall cause each of -------------------- its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents; provided, however, that nothing in this -------- ------- Section 7.06 shall prevent (i) sales of assets and other transactions by - ------------ Holdings or any of its Subsidiaries in accordance with Section 8.02 or (ii) the ------------ withdrawal by Holdings or any of its Subsidiaries of its qualification as a foreign corporation in any jurisdiction where such withdrawal could not reasonably be expected to have a Material Adverse Effect. 7.07 Compliance with Law. Holdings shall, and shall cause each of ------------------- its Subsidiaries to, comply with all Requirements of Law of any Governmental Authority, except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 7.08 Payment of Taxes. Holdings shall pay and discharge, and shall ---------------- cause each of its Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 8.01(i); --------------- provided, that neither Holdings nor any of its Subsidiaries shall be required to - -------- pay any such tax, assessment, charge, levy or claim which is immaterial or is being contested in good -90- faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP. 7.09 Contributions. Except as expressly permitted by Section ------------- ------- 8.03(vii), Section 8.05(xvi) and the last sentence of Section 8.11, Holdings - ---------- ----------------- ------------ shall contribute as a common equity contribution to the capital of the Borrower upon its receipt thereof, any cash proceeds received by Holdings from any asset sale, any incurrence of Indebtedness, any Recovery Event, any sale or issuance of its equity or any cash capital contributions received by Holdings. 7.10 End of Fiscal Years; Fiscal Quarters. Holdings shall, for ------------------------------------ financial reporting purposes, cause (i) each of its, and each of its Subsidiaries', fiscal years to end on December 31 of each year and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year. Notwithstanding the foregoing, Products Unlimited and its Subsidiaries may have a fiscal year and fiscal quarter ends that are on dates that are different than those of Holdings and its other Subsidiaries, although Holdings agrees to cause Products Unlimited to change its and its Subsidiaries' fiscal year and fiscal quarter ends to dates that are consistent with those of Holdings and its other Subsidiaries as promptly as practicable following the Restatement Effective Date. 7.11 Cash Management System. Holdings shall maintain, and shall ---------------------- cause each of its Subsidiaries to maintain, their cash management system on a basis consistent with their cash management system as in effect on the Restatement Effective Date (although no daily cash sweeps against outstanding Loans shall be required); provided, however, to the extent that any Credit Party -------- ------- maintains any bank account (other than payroll accounts) with an institution other than the Administrative Agent in which more than $250,000 is maintained at any time, such Credit Party shall promptly notify the Administrative Agent thereof, and to the extent requested by the Administrative Agent or the Majority Lenders, such Credit Party shall cause such other institution to enter into lockbox and blocked account arrangements with the Collateral Agent on terms reasonably acceptable to the Administrative Agent. 7.12 Foreign Subsidiaries Security. (a) Within 30 days following ----------------------------- the request therefor by the Administrative Agent at any time after the Restatement Effective Date, or immediately upon Holdings' or any of its Subsidiaries acquisition thereof after the Restatement Effective Date if requested by the Administrative Agent, in any case in the Administrative Agent's sole discretion, Holdings shall pledge, or cause to be pledged, pursuant to the Pledge Agreement, an amendment thereto, or a similar separate pledge agreement, in any case in form and substance reasonably acceptable to the Administrative Agent, 66% of the issued and outstanding capital stock and other equity interests of each Foreign Subsidiary of Holdings (or such lesser percentage owned by Holdings and its Subsidiaries), as additional security for the Obligations. (b) If following a change in the relevant sections of the Code or the regulations, rules, rulings, notices or other official pronouncements issued or promulgated thereunder, counsel for the Borrower reasonably acceptable to the Administrative Agent does not within 30 days after a request from the Administrative Agent or the Majority Lenders deliver evidence, in -91- form and substance mutually satisfactory to the Agent and the Borrower, with respect to any Foreign Subsidiary which has not already had all of its stock pledged pursuant to the Pledge Agreement that (i) a pledge (x) of 66-2/3% or more of the total combined voting power of all classes of capital stock of such Foreign Subsidiary entitled to vote, or (y) of any promissory note issued by such Foreign Subsidiary to the Borrower or any of its Domestic Subsidiaries, (ii) the entering into by such Foreign Subsidiary of a security agreement in substantially the form of the Security Agreement or (iii) the entering into by such Foreign Subsidiary of a guaranty in substantially the form of the Subsidiary Guaranty, in any such case could reasonably be expected to cause (I) the undistributed earnings of such Foreign Subsidiary as determined for Federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary's United States parent for Federal income tax purposes or (II) other material adverse federal income tax consequences to the Credit Parties, then in the case of a failure to deliver the evidence described in clause (i) above, ---------- that portion of such Foreign Subsidiary's outstanding capital stock or any promissory notes so issued by such Foreign Subsidiary, in each case not theretofore pledged pursuant to the Pledge Agreement shall be pledged to the Collateral Agent for the benefit of the Lenders pursuant to the Pledge Agreement or a Guarantor Supplement (or another pledge agreement in substantially similar form, if needed), and in the case of a failure to deliver the evidence described in clause (ii) above, such Foreign Subsidiary shall execute and deliver the ----------- Security Agreement and the Pledge Agreement or a Guarantor Supplement (or another security agreement and pledge agreement in substantially similar form, if needed), granting the Collateral Agent for the benefit of the Lenders a security interest in all of such Foreign Subsidiary's assets and securing the Obligations of the Borrower under the Loan Documents and, in the event the Subsidiary Guaranty shall have been executed by such Foreign Subsidiary, the obligations of such Foreign Subsidiary thereunder, and in the case of a failure to deliver the evidence described in clause (iii) above, such Foreign Subsidiary ------------ shall execute and deliver the Subsidiary Guaranty or a Guarantor Supplement (or another guaranty in substantially similar form, if needed), guaranteeing the Obligations of the Borrower under the Loan Documents, in each case to the extent that the entering into such Pledge Agreement, Security Agreement, Subsidiary Guaranty, Guarantor Supplement (or similar instrument) is permitted by the laws of the respective foreign jurisdiction and with all documents delivered pursuant to this Section 7.12 to be in form and substance reasonably satisfactory to the ------------ Administrative Agent. (c) The Borrower shall execute and deliver, or cause to be executed and delivered, to the Administrative Agent, concurrently with the execution and delivery of any Collateral Documents pursuant to this Section 7.12, such ------------ corporate resolutions, legal opinions, corporate certificates, financing statements, stock certificates, stock powers, and other foreign and domestic perfection documents (as applicable) as the Administrative Agent shall reasonably request in connection with such execution and delivery. 7.13 Holdings Preferred Stock. Holdings shall pay all Dividends on ------------------------ the Holdings Preferred Stock in additional shares of Holdings Preferred Stock rather than in cash; provided that in lieu of issuing additional shares of Holdings Preferred Stock as Dividends, Holdings may increase the liquidation preference of the shares of the Holdings Preferred Stock in respect of which such Dividends have accrued. -92- 7.14 Use of Proceeds; Margin Regulations. ----------------------------------- (a) All proceeds of the Revolving Loans and Swingline Loans shall be used for the working capital and general corporate purposes of the Borrower and its Subsidiaries, including to make Permitted Acquisitions, provided that up to $1,250,000 of Revolving Loans and Swingline Loans in the aggregate (plus up to an additional $500,000 to reflect the increased working capital of Products Unlimited as of the Restatement Effective Date) may be used to finance the Acquisition and the Refinancing and to pay any fees and expenses in connection with the Transaction. All proceeds of the Tranche B Term Loans shall be used to finance, in part, the Acquisition and the Refinancing and to pay fees and expenses in connection with the Transaction. All proceeds of Tranche A Term Loans were used as provided under the Original Credit Agreement. (b) Holdings and the Borrower shall ensure that no part of any Loan or Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock or will violate or be inconsistent with the provisions of Regulations T, U and X of the Federal Reserve Board. 7.15 Liens on Real Property. (A) Within 90 days following the ---------------------- Restatement Effective Date, the Collateral Agent shall have received: (i) fully executed counterparts of mortgages, deeds of trust or deeds to secure debt, in each case in form and substance reasonably satisfactory to the Administrative Agent (the "Mortgages"), which Mortgages shall cover such of the Real Property owned or leased by the Credit Parties (after giving effect to the occurrence of the Restatement Effective Date) as shall be designated on Schedule 6.09 (together with any Real Property designated pursuant to paragraph (B) of this Section 7.15, the "Mortgaged ------------- ------------ Properties"), together with evidence that counterparts of the Mortgages have been delivered to the title insurance company insuring the Lien of the Mortgages for recording in all places to the extent necessary or, in the reasonable opinion of the Administrative Agent, desirable, to effectively create a valid and enforceable first priority mortgage lien on each Mortgaged Property in favor of the Collateral Agent (or such other trustee as may be required or desirable under local law) for the benefit of the Lenders and the Collateral Agent; (ii) a mortgagee policy (or a binding commitment with respect thereto) on each such Mortgaged Property (the "Mortgage Policies") issued by a title insurer reasonably satisfactory to the Administrative Agent in amounts reasonably satisfactory to the Administrative Agent assuring the Administrative Agent that the Mortgages on such Mortgaged Properties are valid and enforceable first priority mortgage liens on the respective Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Encumbrances related thereto and such Mortgage Policies shall otherwise be in form and substance reasonably satisfactory to the Administrative Agent, and shall include, as appropriate, an endorsement for future advances under this Agreement, the Revolving Notes and the Term Notes, shall not include an exception for mechanics' liens, shall provide for affirmative insurance and such reinsurance as the Administrative Agent -93- may reasonably request and shall provide for any other matter that the Administrative Agent may reasonably request; (iii) a recent survey, in form and substance reasonably satisfactory to the Administrative Agent, of each such Mortgaged Property, certified by a licensed professional surveyor reasonably satisfactory to the Administrative Agent; (iv) one or more opinions of counsel reasonably satisfactory to the Administrative Agent, addressed to the Administrative Agent, the Collateral Agent and each of the Lenders, from such counsel reasonably satisfactory to the Administrative Agent as the Administrative Agent may reasonably request, which opinions shall cover certain of the matters (but not title or lien priority) relating to the security interests granted pursuant to the Mortgages and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request; and (v) a landlord lien waiver with respect to each Leasehold of the Borrower and its Domestic Subsidiaries as set forth on Schedule 6.09, which landlord lien waivers shall be in form and substance reasonably satisfactory to the Administrative Agent. (B) The Borrower shall, and shall cause its Subsidiaries to, execute and deliver to the Collateral Agent, for the benefit of the Lenders, as additional security for the Obligations, within 30 days following the request therefor by the Administrative Agent after the Restatement Effective Date, in the Administrative Agent's sole discretion, a mortgage on any material Real Property now or hereafter acquired by Holdings or any of its Subsidiaries and located in the United States, together with such Mortgage Policies, surveys and opinions of counsel with respect thereto, the same to be in form and substance reasonably acceptable to the Administrative Agent. Each such Mortgage shall create a first priority Lien in favor of the Collateral Agent, for the benefit of the Lenders, against such Mortgaged Property, subject only to Permitted Liens related thereto. (C) The Administrative Agent and the Lenders hereby acknowledge and agree that the terms of this Section 7.15 shall not require the Borrower or any of its ------------ Subsidiaries to take any action, other than using their commercially reasonable efforts, to obtain consents from third parties that are not Affiliates of Holdings or any of its Subsidiaries with respect to their compliance with this Section 7.15. - ------------ 7.16 Year 2000 Compliant. Holdings and the Borrower will take all ------------------- reasonable steps to ensure that its, and its Subsidiaries', information systems and equipment are at all times after June 30, 1999 Year 2000 Complaint, except in so far as the failure to be Year 2000 Compliant could not reasonably be expected to result in Material Adverse Effect, and Holdings and the Borrower shall notify the Administrative Agent and each Lender promptly upon detecting any failure of such information systems and equipment to the Year 2000 Compliant. In addition, Holdings and the Borrower will provide the Administrative Agent and each Lender with such information about its year 2000 computer readiness (including, without limitation, information as to contingency plans, budgets and testing resulting) as the Administrative Agent or such Lender shall reasonably request. -94- ARTICLE VIII NEGATIVE COVENANTS Each of Holdings and the Borrower agrees with the Administrative Agent, each Issuing Lender and each Lender that, until all Commitments and Letters of Credit have terminated and all Obligations (other than indemnities for which no request for payment has been made) have been paid and performed in full: 8.01 Liens. Holdings will not, and will not permit any of its ----- Subsidiaries to, create, incur, assume, or suffer to exist any Lien upon or with respect to any property or assets (real or personal, tangible or intangible) of Holdings or any of its Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable with recourse to Holdings or any of its Subsidiaries), or assign any right to receive income or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute; provided that the provisions of this Section 8.01 -------- ------------ shall not prevent the creation, incurrence, assumption or existence of the following (Liens described below are herein referred to as "Permitted Liens"): --------------- (i) inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP or which are immaterial; (ii) Liens in respect of property or assets of Holdings or any of its Subsidiaries imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of Holdings' or such Subsidiary's property or assets or materially impair the use thereof in the operation of the business of Holdings or such Subsidiary 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; (iii) Liens in existence on the Restatement Effective Date which are listed, and the property subject thereto described, in Schedule 8.01, ------------- provided that (x) the aggregate principal amount of the Indebtedness, if -------- any, secured by such Liens does not increase from that amount outstanding at the time of any such renewal, replacement or extension and (y) any such renewal, replacement or extension does not encumber any additional assets or properties (other than proceeds and products of such assets or properties and accessions, replacements and substitutions thereof) of Holdings or any of its Subsidiaries; (iv) Liens created pursuant to the Collateral Documents; -95- (v) licenses, sublicenses, leases or subleases granted to other Persons not materially interfering with the conduct of the business of Holdings or any of its Subsidiaries; (vi) Liens upon assets of the Borrower or any of its Subsidiaries subject to Capital Lease Obligations to the extent such Capital Lease Obligations are permitted by Section 8.04(iv), provided that (x) such Liens ---------------- -------- only serve to secure the payment of Indebtedness arising under such Capital Lease Obligation and (y) the Lien encumbering the asset giving rise to the Capital Lease Obligation does not encumber any other asset of the Borrower or any Subsidiary of the Borrower; (vii) Liens placed upon property acquired after the Restatement Effective Date and used in the ordinary course of business of the Borrower or any of its Subsidiaries at the time of the acquisition thereof by the Borrower or any such Subsidiary or within 90 days thereafter to secure Indebtedness incurred to pay all or a portion of the purchase price thereof or to secure Indebtedness incurred solely for the purpose of financing the acquisition of any such property or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided that (x) the -------- aggregate outstanding principal amount of all Indebtedness secured by Liens permitted by this clause (vii), when added to the aggregate outstanding ------------ principal of all Indebtedness secured by Liens permitted under clause (vi) ----------- of this Section 8.01, shall not at any time outstanding exceed $2,000,000 ------------ and (y) in all events, the Lien encumbering the property so acquired does not encumber any other asset (other than proceeds and products of such property and accessions, replacements and substitutions thereof) of the Borrower or such Subsidiary; (viii) easements, rights-of-way, restrictions, zoning rights, encroachments and other similar charges or encumbrances, and minor title deficiencies, in each case not securing Indebtedness and not materially interfering with the conduct of the business of Holdings or any of its Subsidiaries; (ix) Liens arising from precautionary UCC financing statement filings regarding operating leases; (x) Liens arising out of the existence of judgments or awards to the extent not constituting an Event of Default under Section 9.01(i); --------------- (xi) statutory and common law landlords' liens under leases to which Holdings or any of its Subsidiaries is a party; (xii) (x) Liens (other than Liens imposed under ERISA) incurred in the ordinary course of business in connection with workers compensation claims, unemployment insurance and social security benefits and (y) Liens securing the performance of bids, tenders, leases and contracts in the ordinary course of business, statutory obligations, surety bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money), provided that the aggregate outstanding amount -------- of obligations secured -96- by Liens permitted by this clause (xii)(y) (and the value of all cash and --------------- property encumbered by Liens permitted pursuant to this clause (xii)(y)) --------------- shall not at any time exceed $1,000,000; (xiii) Liens on property or assets acquired pursuant to a Permitted Acquisition, or on property or assets of a Subsidiary of the Borrower in existence at the time such Subsidiary is acquired pursuant to a Permitted Acquisition, provided that (i) any Indebtedness that is secured -------- by such Liens is permitted to exist under Section 8.04(xi) and (ii) such ---------------- Liens are not incurred in connection with or anticipation of such Permitted Acquisition and do not attach to any other asset of Holdings or any of its Subsidiaries; (xiv) Liens securing reimbursement obligations in respect of documentary letters of credit permitted to be issued under Section 8.04, ------------ provided that such Liens attach only to the documents, the goods covered -------- thereby and the proceeds thereof; (xv) Liens in favor of customs and revenue authorities which secure payment of customs duties in connection with the importation of goods; (xvi) Liens consisting of rights of set-off of a customary nature or bankers' liens on amounts on deposit, whether arising by contract or operation of law, incurred in the ordinary course of business; and (xvii) Liens on property and assets of any Foreign Subsidiary of the Borrower securing Indebtedness permitted to be incurred by such Foreign Subsidiary pursuant to Section 8.04. ------------ In connection with the granting of Liens of the type described in clauses (vi) ------------ and (vii) of this Section 8.01 by the Borrower or any of its Subsidiaries, the ----- ------------ Administrative Agent and the Collateral Agent shall be authorized to take any actions deemed appropriate by it in connection therewith (including, without limitation, by executing appropriate lien releases or lien subordination agreements in favor of the holder or holders of such Liens, in either case solely with respect to the item or items of equipment or other assets subject to such Liens). 8.02 Consolidation, Merger, Purchase or Sale of Assets, etc. ------------------------------------------------------- Holdings will not, and will not permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of all or any part of its property or assets, or enter into any sale-leaseback transactions, or, other than pursuant to the Acquisition Agreement, purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials and equipment in the ordinary course of business) of any Person (or agree to do any of the foregoing at any future time), except that: (i) Capital Expenditures by the Borrower and its Subsidiaries shall be permitted to the extent not in violation of Section 8.07; ------------ -97- (ii) each of the Borrower and its Subsidiaries may make sales of inventory in the ordinary course of business; (iii) each of the Borrower and its Subsidiaries may sell obsolete or worn-out equipment or materials; (iv) each of the Borrower and its Subsidiaries may sell other assets, provided that the aggregate sale proceeds from all assets subject to such sales pursuant to this clause (iv) shall not exceed $150,000 in any ----------- fiscal year of the Borrower; (v) each of the Borrower and its Subsidiaries may sell assets (other than the capital stock of any Subsidiary Guarantor), so long as (w) no Default or Event of Default then exists or would result therefrom, (x) each such sale is in an arm's-length transaction and the Borrower or the respective Subsidiary receives at least fair market value (as determined in good faith by the Borrower or such Subsidiary, as the case may be), (y) at least 75% of the total consideration received by the Borrower or such Subsidiary is cash and is paid at the time of the closing of such sale, and (z) the aggregate amount of the proceeds received from all assets sold pursuant to this clause (v) shall not exceed $1,000,000 in any fiscal year ---------- of the Borrower; (vi) Investments may be made to the extent permitted by Section ------- 8.05; ---- (vii) each of the Borrower and its Subsidiaries may lease (as lessee) or license (as licensee) real or personal property (so long as any such lease or license does not create a Capital Lease Obligation except to the extent permitted by Section 8.04(iv)); ---------------- (viii) each of the Borrower and its Subsidiaries may sell or discount, in each case without recourse and in the ordinary course of business, accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (ix) each of the Borrower and its Subsidiaries may grant licenses, sublicenses, leases or subleases to other Persons in the ordinary course of business and not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries; (x) the Borrower and its Wholly-Owned Subsidiaries may acquire all or substantially all of the assets of any Person (or all or substantially all of the assets of a product line or division of any Person) or 100% (or at least 75% to the extent provided below) of the capital stock of any Person (any such acquisition permitted by this clause ------ (x), as well as any acquisition permitted by clause (xi) of this Section --- ----------- ------- 8.02, a "Permitted Acquisition"; provided, however, that the Acquisition ---- --------------------- -------- ------- shall not constitute a Permitted Acquisition), so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) each of the representations and warranties contained in Article VI shall be true and ---------- correct in all material respects both before and after giving effect to such Permitted Acquisition, (iii) any Liens or Indebtedness assumed or issued in connection with such acquisition are otherwise permitted under Section 8.01 or 8.04, as the case may ------------ ---- -98- be, (iv) at least 10 Business Days prior to the consummation of any Permitted Acquisition, Holdings shall deliver to the Administrative Agent and each of the Lenders a certificate of Holdings' Chief Financial Officer certifying (and showing the calculations therefor in reasonable detail) that Holdings would have been in compliance with the financial covenants set forth in Sections 8.08, 8.09 and 8.10 for the Measurement Period then ------------- ---- ---- most recently ended prior to the date of the consummation of such Permitted Acquisition, in each case with such financial covenants to be determined on a pro forma basis as if such Permitted Acquisition had been consummated on --- ----- the first day of such Measurement Period (and assuming that any Indebtedness incurred, issued or assumed in connection therewith had been incurred, issued or assumed on the first day of, and had remained outstanding throughout, such Measurement Period), (v) the only consideration paid by the Borrower or any of its Wholly-Owned Subsidiaries in connection with any such Permitted Acquisition consists solely of cash (including as a result of any earnout, non-compete or deferred compensation arrangements), Indebtedness assumed to the extent permitted by Section ------- 8.04, Qualified Seller Subordinated Debt, Holdings Common Stock and/or ---- Holdings Preferred Stock, (vi) on or prior to December 31, 2000, the aggregate consideration paid in connection with all such Permitted Acquisitions in any fiscal year of the Borrower (including, without limitation, any earnout, non-compete or deferred compensation arrangements, the aggregate principal amount of any Indebtedness assumed or issued in connection therewith and the fair market value of any Holdings Common Stock or Holdings Preferred Stock issued in connection therewith (as determined in good faith by Holdings)) does not exceed $7,500,000 in each of fiscal years 1999 and 2000, provided, however, if the amount actually expended in respect of all Permitted Acquisitions in fiscal year 1999 is less than $7,500,000, such excess may be carried forward and utilized to make Permitted Acquisitions in fiscal year 2000, (vii) no more than $3,000,000 in the aggregate in any fiscal year of the Borrower may be expended on Permitted Acquisitions in which the Borrower or a Wholly-Owned Subsidiary thereof acquires less than 100% of the capital stock of any Person and (viii) after giving effect to any such Permitted Acquisition, the aggregate unutilized Revolving Commitments shall be at least $10,000,000; (xi) in addition to the Permitted Acquisitions permitted by clause ------ (x) of this Section 8.02, the Borrower and its Wholly-Owned Subsidiaries --- ------------ may make additional Permitted Acquisitions (A) with cash equity contributions and the net cash proceeds from the sale of capital stock of Holdings and Holdings Junior Subordinated Notes, in each case which are received by Holdings after the Restatement Effective Date and are contributed to the Borrower to the extent that such proceeds are not used (1) to make Capital Expenditures pursuant to Section 8.07(f), (2) to pay --------------- Dividends pursuant to Section 8.03(vi), (3) to make Investments pursuant to ---------------- Section 8.05(xvi), (4) to repurchase or redeem outstanding Borrower Senior ----------------- Subordinated Notes pursuant to Section 8.11(i) or (5) to prepay the Loans --------------- pursuant to Section 2.07(c) or reduce the Aggregate Revolving Commitment --------------- pursuant to Section 2.05(c) and (B) in any fiscal year of the Borrower --------------- (commencing on January 1, 2000) in an amount not to exceed the Retained Excess Cash Flow Percentage of Excess Cash Flow for the Excess Cash Payment Period ending on the last day of the immediately preceding fiscal year, in each case so long as each of the -99- conditions set forth in Section 8.02(x) (other than clause (vi) thereof) --------------- ----------- have been satisfied in respect of each such Permitted Acquisition; (xii) any Subsidiary of the Borrower may transfer any of its assets to the Borrower and may be merged, consolidated or liquidated with or into the Borrower so long as the Borrower is the surviving corporation of such merger, consolidation or liquidation; (xiii) any Subsidiary of the Borrower may transfer any of its assets to a Subsidiary Guarantor and may be merged, consolidated or liquidated with or into any other Subsidiary of the Borrower so long as (i) in the case of any such merger, consolidation or liquidation involving a Subsidiary Guarantor, the Subsidiary Guarantor is the surviving corporation of such merger, consolidation or liquidation and (ii) in the case of any such merger, consolidation or liquidation involving a Wholly-Owned Subsidiary of the Borrower, the Wholly-Owned Subsidiary is the surviving corporation of such merger, consolidation or liquidation; (xiv) the Borrower and its Subsidiaries may sell or exchange specific items of equipment, so long as the purpose of each sale or exchange is to acquire (and results within 90 days of such sale or exchange in the acquisition of) replacement items of equipment which are, in the reasonable business judgment of the Borrower and its Subsidiaries, the functional equivalent of the item of equipment so sold or exchanged; (xv) any Foreign Subsidiary of the Borrower may transfer any of its assets to a Wholly-Owned Foreign Subsidiary of the Borrower or to a Subsidiary Guarantor; (xvi) the Borrower and its Subsidiaries may sell inventory to their respective Subsidiaries in the ordinary course of business and consistent with past practices for resale by such Subsidiaries in the ordinary course of their business; (xvii) the Borrower and the Subsidiary Guarantors may sell or otherwise transfer equipment to their Subsidiaries in the ordinary course of business so long as no more than $1,000,000 of equipment is sold or transferred in any fiscal year of the Borrower pursuant to this clause ------ (xvii); and ------ (xviii) any Foreign Subsidiary of the Borrower may enter into factoring arrangements with respect to its receivables in the ordinary course of business and consistent with the practices in the region in which such Foreign Subsidiary operates so long as no more than $500,000 of receivables are subject to such factoring arrangements at any one time outstanding. To the extent the Majority Lenders waive the provisions of this Section 8.02 ------------ with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 8.02 (other than to Holdings or a Subsidiary thereof), ------------ such Collateral shall be sold free and clear of the Liens created by the Collateral Documents, and the Administrative Agent and the Collateral Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing. -100- 8.03 Dividends. Holdings will not, and will not permit any of its --------- Subsidiaries to, authorize, declare or pay any Dividends with respect to Holdings or any of its Subsidiaries, except that: (i) (x) any Subsidiary of the Borrower may pay cash Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower and (y) so long as no Default or Event of Default then exists or would result therefrom, any non-Wholly-Owned Subsidiary of the Borrower may pay cash Dividends to its shareholders generally so long as the Borrower or its respective Subsidiary which owns the equity interest or interests in the Subsidiary paying such Dividends receives at least its proportionate share thereof (based upon its relative holdings of equity in interests in the Subsidiary paying such Dividends and taking into account the relative preferences, if any, of the various classes of equity interests in such Subsidiary); (ii) so long as there shall exist no Default or Event of Default (both before and after giving effect to the payment thereof), Holdings may repurchase outstanding shares of its stock (or options to purchase such stock) following the death, disability, retirement or termination of employment of employees of Holdings or any of its Subsidiaries, provided that (x) the only consideration paid by Holdings in respect of such repurchases shall be cash, forgiveness of debt owed by such employee to Holdings and/or Holdings Shareholder Subordinated Notes and (y) the sum of (1) the aggregate amount of cash paid by Holdings in respect of all such repurchases plus (2) the aggregate amount of all payments made on all Holdings Shareholder Subordinated Notes pursuant to Section 8.11(iv) plus ---------------- (3) the aggregate amount of all repurchases of all Holdings Junior Subordinated Notes pursuant to Section 8.11(iii)(x) shall not exceed -------------------- $350,000 in any fiscal year of Holdings, provided that any unused amount thereof may be carried forward and utilized for such purposes in the immediately succeeding fiscal year of Holdings; (iii) so long as no Default or Event of Default then exists or would result therefrom, the Borrower may pay cash Dividends to Holdings (x) so long as Holdings promptly uses such proceeds for the purposes described in clause (ii) of this Section 8.03, Section 8.11(iii)(x) or ----------- ------------ -------------------- Section 8.11(iv) and (y) at times, and in the amounts, necessary to allow ---------------- Holdings to make payments in respect of Holdings Junior Subordinated Notes (other than in respect of principal) to the extent permitted by Section ------- 8.11(iii)(y), provided that the aggregate amount of cash Dividends paid ------------ pursuant to this clause (iii)(y), when added to the aggregate amount of --------------- cash Dividends paid pursuant to clause (iv) of this Section 8.03, shall not ----------- ------------ exceed $1,250,000 in any fiscal year of Holdings; (iv) the Borrower may pay cash Dividends to Holdings so long as the proceeds thereof are promptly used by Holdings to pay operating expenses in the ordinary course of business (including, without limitation, outside directors and professional fees, expenses and indemnities) and other similar corporate overhead costs and expenses, provided that the -------- aggregate amount of cash Dividends paid pursuant to this clause (iv), when ----------- added to the aggregate amount of cash Dividends paid pursuant to clause ------ (iii)(y) of this Section 8.03, shall not exceed $1,250,000 in any fiscal -------- ------------ year of Holdings; -101- (v) Holdings may pay regularly scheduled Dividends on the Holdings Preferred Stock pursuant to the terms thereof solely through the issuance of additional shares of Holdings Preferred Stock, provided that in lieu of issuing additional shares of Holdings Preferred Stock as Dividends, Holdings may increase the liquidation preference of the shares of the Holdings Preferred Stock in respect of which such Dividends have accrued; (vi) so long as there shall exist no Default or Event of Default (both before and after giving effect to the payment thereof), Holdings may repurchase outstanding shares of its stock (or options to purchase such stock) with the net cash proceeds received by Holdings from the substantially concurrent sale of Holdings Common Stock, Holdings Preferred Stock and/or Holdings Junior Subordinated Notes to the extent that such proceeds are not used to redeem or repurchase outstanding Holdings Junior Subordinated Notes pursuant to the last sentence of Section 8.11; and ------------ (vii) the Borrower may pay cash Dividends to Holdings in connection with amounts owing by it under the Tax Sharing Agreement. 8.04 Indebtedness. Holdings will not, and will not permit any of ------------ its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness incurred pursuant to this Agreement and the other Loan Documents; (ii) existing Indebtedness (other than the Holdings Junior Subordinated Notes and the Borrower Senior Subordinated Notes) outstanding on the Restatement Effective Date and listed on Schedule 8.04, without ------------- giving effect to any subsequent extension, renewal or refinancing thereof except to the extent set forth on Schedule 8.04, provided that the ------------- aggregate principal amount of the Indebtedness to be extended, renewed or refinanced does not increase from that amount outstanding at the time of any such extension, renewal or refinancing; (iii) Indebtedness under Interest Rate Protection Agreements entered into with respect to other Indebtedness permitted under this Section 8.04; ------------ (iv) Indebtedness of the Borrower and its Subsidiaries evidenced by Capital Lease Obligations to the extent permitted pursuant to Section ------- 8.07, provided that in no event shall the aggregate principal amount of ----- -------- Capital Lease Obligations permitted by this clause (iv), when added to the ----------- aggregate principal amount of Indebtedness outstanding under clause (v) of ---------- this Section 8.04, exceed $2,000,000 at any time outstanding; ------------ (v) Indebtedness subject to Liens permitted under Sections -------- 8.01(vii); --------- (vi) (x) intercompany Indebtedness among the Borrower and its Subsidiaries to the extent permitted by Sections 8.05(xi) and 8.05(xii) and ----------------- --------- (y) Indebtedness of Holdings to the Borrower to the extent permitted by Section 8.05(xv); ---------------- -102- (vii) Indebtedness of the Borrower and the Subsidiary Guarantors incurred under the Borrower Senior Subordinated Note Documents in an aggregate principal amount not to exceed $95,000,000 (as reduced by any repayments of principal thereof); provided, however, from and after a -------- ------- Qualified Public Equity Offering, the Borrower Senior Subordinated Notes may be guaranteed on an unsecured senior subordinated basis by Holdings so long as (x) the subordination provisions are no less favorable to the Lenders than the subordination provisions applicable to the Subsidiary Guarantors and (y) the giving of such guaranty would allow Holdings and the Borrower to report one set of consolidated financial statements to the holders of the Borrower Senior Subordinated Notes and the Securities and Exchange Commission; (viii) unsecured subordinated Indebtedness of the Borrower and the Subsidiary Guarantors ("Refinancing Subordinated Indebtedness") the ------------------------------------- proceeds of which are used at the time of the incurrence thereof to refinance or redeem outstanding Borrower Senior Subordinated Notes so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) all of the terms and conditions of such Refinancing Subordinated Indebtedness (including, without limitation, subordination provisions, covenants, events of default, interest rates, remedies, amortizations and maturities) are reasonably acceptable to the Majority Lenders, it being understood that any such Refinancing Subordinated Indebtedness with terms no more restrictive than the Borrower Senior Subordinated Note Documents or less favorable to the Lenders than the Borrower Senior Subordinated Note Documents shall be deemed satisfactory to the Majority Lenders and that in any event such Refinancing Subordinated Indebtedness shall not have any scheduled maturity, amortization or sinking fund payment earlier than the final maturity of the Borrower Senior Subordinated Notes and (iii) the aggregate principal amount of such Refinancing Subordinated Indebtedness does not exceed the aggregate principal amount of the Borrower Senior Subordinated Notes to be redeemed or refinanced, together with any prepayment premium associated therewith and all costs and expenses incurred in connection therewith; provided, -------- however, from and after a Qualified Public Equity Offering, the Refinancing ------- Subordinated Indebtedness may be guaranteed on an unsecured senior subordinated basis by Holdings so long as (x) the subordination provisions are no less favorable to the Lenders than the subordination provisions applicable to the Subsidiary Guarantors and (y) the giving of such guaranty would allow Holdings and the Borrower to report one set of consolidated financial statements to the holders of the Refinancing Subordinated Indebtedness and the Securities and Exchange Commission; (ix) Indebtedness of Holdings under the Holdings Junior Subordinated Notes, provided that issuances of Holdings Junior Subordinated -------- Notes after the Restatement Effective Date may not be made other than in connection with a sale of equity made by Holdings in an aggregate principal amount not to exceed 150% of the cash price paid for such related equity and no such additional Holdings Junior Subordinated Notes may be issued after a Qualified Public Equity Offering; -103- (x) Indebtedness consisting of guaranties by the Borrower and its Subsidiaries of each other's Indebtedness and lease and other obligations permitted under this Agreement; (xi) Indebtedness of a Subsidiary acquired pursuant to a Permitted Acquisition or Indebtedness of the Borrower or a Subsidiary thereof assumed at the time of a Permitted Acquisition of an asset securing such Indebtedness, provided that (i) such Indebtedness was not incurred in -------- connection with or anticipation of such Permitted Acquisition, and (ii) such Indebtedness does not constitute debt for borrowed money (other than in connection with industrial revenue or industrial development bond financing), it being understood and agreed that Capital Lease Obligations and purchase money Indebtedness shall not constitute debt for borrowed money for purposes of this clause (xi); ----------- (xii) Qualified Seller Subordinated Debt issued as consideration pursuant to a Permitted Acquisition so long as such Qualified Seller Subordinated Debt is permitted to be issued at such time pursuant to Section 8.02(x) or (xi) and the aggregate principal amount of all Qualified --------------- ---- Seller Subordinated Debt does not exceed $10,000,000 at any time outstanding; (xiii) obligations of the Borrower or any of its Subsidiaries under incentive, earn-out or other similar arrangements incurred by it in connection with a Permitted Acquisition to the extent permitted under Sections 8.02(x) and (xi); ---------------- ---- (xiv) Indebtedness of Holdings under Holdings Shareholder Subordinated Notes in an aggregate principal amount not to exceed $2,500,000 at any time outstanding; (xv) Indebtedness in respect of Other Hedging Agreements to the extent permitted by Section 8.05(xiii); ------------------ (xvi) Indebtedness subject to Liens permitted under Section ------- 8.01(xii); and --------- (xvii) additional Indebtedness incurred by the Borrower or any of its Subsidiaries in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding. 8.05 Advances, Investments and Loans. Holdings will not, and will ------------------------------- not permit any of its Subsidiaries to, directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash or Cash Equivalents (each of the foregoing an "Investment" and, ---------- collectively, "Investments"), except that the following shall be permitted: ----------- -104- (i) the Borrower and its Subsidiaries may acquire and hold accounts receivables owing to any of them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms of the Borrower or such Subsidiary; (ii) the Borrower and its Subsidiaries may acquire and hold cash and Cash Equivalents, provided that during any time that Revolving Loans and Swingline Loans are outstanding the aggregate amount of cash and Cash Equivalents permitted to be held by the Borrower and its Subsidiaries shall not exceed $3,000,000 for any period of fifteen consecutive Business Days, it being understood and agreed, however, that so long as no Event of Default shall exist, the Borrower shall not be required to repay any Eurodollar Loan in the middle of an Interest Period as a result of complying with this clause (ii) and the failure to make such a payment will ----------- not give rise to an Event of Default; (iii) the Borrower and its Subsidiaries may hold the Investments held by them on the Restatement Effective Date and described on Schedule -------- 8.05, provided that any additional Investments made with respect thereto ---- shall be permitted only if independently justified under the other provisions of this Section 8.05; ------------ (iv) the Borrower and its Subsidiaries may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in good faith settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (v) the Borrower and its Subsidiaries may make loans and advances in the ordinary course of business to their respective employees so long as the aggregate principal amount thereof at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $500,000; (vi) Holdings may acquire and hold obligations of one or more officers or other employees of Holdings or any of its Subsidiaries in connection with such officers' or employees' acquisition of shares of capital stock of Holdings and/or Holdings Junior Subordinated Notes so long as no cash is paid by Holdings or any of its Subsidiaries to such officers or employees in connection with the acquisition of any such obligations; (vii) the Borrower and its Subsidiaries may acquire and hold promissory notes issued by the purchaser of assets in connection with a sale of such assets to the extent permitted by Section 8.02; ------------ (viii) the Borrower and its Wholly-Owned Subsidiaries may make Permitted Acquisitions to the extent permitted by Sections 8.02(x) and ---------------- (xi); ---- (ix) the Borrower and its Subsidiaries may enter into Interest Protection Agreements to the extent permitted by Section 8.04(iii); ----------------- -105- (x) Holdings may make cash contributions to the capital of the Borrower and the Borrower and the Subsidiary Guarantors may make cash contributions to the capital of their respective Subsidiaries which are Subsidiary Guarantors; (xi) the Borrower and the Subsidiary Guarantors may make intercompany loans and advances between or among one another (collectively, "Intercompany Loans"), so long as each Intercompany Loan shall be evidenced ------------------ by an Intercompany Note that is pledged to the Collateral Agent pursuant to the Pledge Agreement; (xii) the Borrower and the Subsidiary Guarantors may make additional loans and cash contributions to their respective Subsidiaries which are not Subsidiary Guarantors in an aggregate amount not to exceed $2,000,000 at any time outstanding (determined without regard to any write- downs or write-offs thereof); (xiii) the Borrower and its Subsidiaries may enter into Other Hedging Agreements in the ordinary course of business providing protection against fluctuations in currency values or commodity prices in connection with the Borrower's or any of its Subsidiaries' operations so long as management of the Borrower or such Subsidiary, as the case may be, has determined that the entering into of such Other Hedging Agreements are bona fide hedging activities; (xiv) Holdings and its Subsidiaries may hold additional investments in their respective Subsidiaries to the extent that such investments reflect an increase in the value of such Subsidiaries; (xv) to the extent that the Borrower may pay cash Dividends to Holdings pursuant to Sections 8.03(iii) and (iv), the Borrower may, in lieu ------------------ ---- of paying such cash Dividends, make an Intercompany Loan to Holdings for the purposes, and subject to the limitations, set forth in such Sections -------- 8.03(iii) and (iv), in each case so long as each Intercompany Loan shall be --------- ---- evidenced by an Intercompany Note that is pledged to the Collateral Agent pursuant to the Pledge Agreement; and (xvi) the Borrower and its Subsidiaries may make additional Investments in an aggregate amount not to exceed $1,000,000 in any fiscal year of the Borrower (determined without regard to any write-downs or write-offs thereof) plus the aggregate amount of such Investments made with cash equity contributions and the net cash proceeds from the sale of capital stock of Holdings and Holdings Junior Subordinated Notes, in each case which are received by Holdings after the Restatement Effective Date and are contributed to the Borrower to the extent that such proceeds are not used (1) to make Permitted Acquisitions pursuant to Section 8.02(xi), ---------------- (2) to make Capital Expenditures pursuant to Section 8.07(f), (3) to pay --------------- Dividends pursuant to Section 8.03(viii), (4) to repurchase or redeem ------------------ outstanding Borrower Senior Subordinated Notes pursuant to Section 8.11(i) --------------- or (5) to prepay the Loans pursuant to Section 2.07(c) or used to reduce --------------- the Aggregate Revolving Commitment pursuant to Section 2.05(c), it being --------------- understood and agreed, however, that Holdings may concurrently (or within ------- one Business Day thereafter) make any Investment pursuant to this clause ------ (xvi) with the proceeds ----- -106- received from any such equity contribution or sale of capital stock or Holdings Junior Subordinated Notes without any requirement to contribute the same to the Borrower. 8.06 Transactions with Affiliates. Holdings will not, and will not ---------------------------- permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of Holdings or any of its Subsidiaries, other than in the ordinary course of business and on terms and conditions substantially as favorable to Holdings or such Subsidiary as would reasonably be obtained by Holdings or such Subsidiary at that time in a comparable arm's-length transaction with a Person other than an Affiliate, except that the following in any event shall be permitted: (i) Dividends may be paid to the extent provided in Section ------- 8.03; - ---- (ii) loans may be made and other transactions may be entered into by Holdings and its Subsidiaries to the extent permitted by Sections 8.02, ------------- 8.04 and 8.05; ---- ---- (iii) customary fees may be paid to non-officer directors of Holdings and its Subsidiaries; (iv) so long as no Default under Section 7.01, 7.02(a), 9.01(a), ------------------------------- 9.01(f) or 9.01(g) shall exist and no Event of Default shall exist, the ------- ------- Borrower may pay management fees to CHS Management and its Affiliates monthly in arrears pursuant to, and in accordance with, the terms of the CHS Management Agreement (as in effect on the Original Effective Date) in an aggregate amount for all such Persons taken together not to exceed $62,500 per month plus the reasonable out-of-pocket expenses incurred by CHS Management and its Affiliates in performing management services for the Borrower pursuant to the CHS Management Agreement (it being understood and agreed that the reimbursement of such reasonable out-of-pocket expenses may be made whether or not any Default or Event of Default exists); (v) the Borrower may pay a transaction fee to CHS and its Affiliates on the Restatement Effective Date in the aggregate amount of up to $580,000 for all such Persons taken together plus the reasonable out-of- pocket expenses incurred by CHS and its Affiliates in connection with the Transaction; (vi) the Borrower may pay, in connection with any Permitted Acquisition, a transaction fee to CHS Management and its Affiliates in an aggregate amount for all such Persons taken together not to exceed 1% of the aggregate value of any such Permitted Acquisition; (vii) Holdings and its Subsidiaries may enter into and perform their obligations under the Holdings Tax Sharing Agreement; (viii) transactions entered into between or among the Borrower and its Subsidiaries to the extent otherwise expressly permitted by this Agreement; -107- (ix) Holdings and its Subsidiaries may enter into employment arrangements (including benefit compensation, bonuses and stock option and plans) with respect to the procurement of services with their respective officers and employees in the ordinary course of business; and (x) Holdings may issue and sell shares of its capital stock and Holdings Junior Subordinated Notes to its stockholders to the extent otherwise permitted by this Agreement. 8.07 Capital Expenditures. -------------------- (a) Holdings will not, and will not permit any of its Subsidiaries to, make any Capital Expenditures, except that during any fiscal year of the Borrower set forth below (taken as one accounting period), the Borrower and its Subsidiaries may make Capital Expenditures so long as the aggregate amount of all such Capital Expenditures does not exceed in any period set forth below the amount set forth opposite such period:
Period Amount ------ ------ Restatement Effective Date through December 31, 1999 $8,500,000 January 1, 2000 through December 31, 2000 $8,000,000 January 1, 2001 through December 31, 2001 $8,000,000 January 1, 2002 through December 31, 2002 $8,000,000 January 1, 2003 through December 31, 2003 $8,000,000 January 1, 2004 through December 31, 2004 $8,000,000
(b) In addition to the foregoing, in the event that the amount of Capital Expenditures permitted to be made by the Borrower and its Subsidiaries pursuant to clause (a) above in any period (before giving effect to any increase ---------- in such permitted Capital Expenditure amount pursuant to this clause (b)) is ---------- greater than the amount of Capital Expenditures actually made by the Borrower and its Subsidiaries during such period, such excess may be carried forward and utilized to make Capital Expenditures in the immediately succeeding fiscal year, provided that no amounts once carried forward pursuant to this Section 8.07(b) --------------- may be carried forward to any period thereafter and such amounts may only be utilized after the Borrower and its Subsidiaries have utilized in full the permitted Capital Expenditure amount for such period as set forth in the table in clause (a) above (without giving effect to any increase in such amount by ---------- operation of this clause (b)). ---------- (c) In addition to the foregoing, the Borrower and it Subsidiaries may make Capital Expenditures with the amount of Net Cash Proceeds received by the Borrower or any of its Subsidiaries from any Asset Sale so long as such Net Cash Proceeds are reinvested in replacement assets within 270 days following the date of such Asset Sale to the extent such Net Cash Proceeds are not otherwise required to be applied to prepay the Loans pursuant to -108- Section 2.07(d) or used to reduce the Aggregate Revolving Commitment pursuant to - --------------- Section 2.05(d). - --------------- (d) In addition to the foregoing, the Borrower and its Subsidiaries may make Capital Expenditures with the amount of Net Insurance Proceeds received by the Borrower or any of its Subsidiaries from any Recovery Event so long as such Net Insurance Proceeds are used to replace or restore any properties or assets in respect of which such Net Insurance Proceeds were paid within 365 days following the date of receipt of such Net Insurance Proceeds from such Recovery Event to the extent such Net Insurance Proceeds are not otherwise required to be applied to prepay the Loans pursuant to Section 2.07(e) or used to reduce the --------------- Aggregate Revolving Commitment pursuant to Section 2.05(e). --------------- (e) In addition to the foregoing, the Borrower and its Wholly-Owned Subsidiaries may consummate Permitted Acquisitions in accordance with Sections -------- 8.02(x) and (xi). - ------- ---- (f) In addition to the foregoing, the Borrower and its Subsidiaries may make additional Capital Expenditures with cash equity contributions and the net cash proceeds from the sale of capital stock of Holdings and Holdings Junior Subordinated Notes in each case which are received by Holdings after the Restatement Effective Date and are contributed to the Borrower to the extent that such proceeds are not used (1) to make Permitted Acquisitions pursuant to Section 8.02(xi), (2) to pay Dividends pursuant to Section 8.03(vii), (3) to - ---------------- ----------------- make Investments pursuant to Section 8.05(xvi), (4) to repurchase or redeem ----------------- Borrower Senior Subordinated Notes pursuant to Section 8.11(i) or (5) to prepay --------------- the Loans pursuant to Section 2.07(c) or reduce the Aggregate Revolving --------------- Commitment pursuant to Section 2.05(c). --------------- 8.08 Consolidated Coverage Ratios. ---------------------------- (a) Holdings and the Borrower will not permit the Consolidated Interest Coverage Ratio for any Measurement Period ending on the last day of any fiscal quarter of Holdings set forth below to be less than the ratio set forth below opposite such fiscal quarter:
Fiscal Quarter Ending On Ratio ------------------------ ----- March 31, 1999 1.75:1.00 June 30, 1999 1.75:1.00 September 30, 1999 1.75:1.00 December 31, 1999 1.85:1.00 March 31, 2000 1.85:1.00 June 30, 2000 1.85:1.00 September 30, 2000 1.85:1.00 December 31, 2000 2.10:1.00 March 31, 2001 2.10:1.00 June 30, 2001 2.10:1.00 September 30, 2001 2.10:1.00 December 31, 2001 2.35:1.00 March 31, 2002 2.35:1.00
-109- June 30, 2002 2.35:1.00 September 30, 2002 2.35:1.00 December 31, 2002 2.50:1.00 March 31, 2003 2.50:1.00 June 30, 2003 2.50:1.00 September 30, 2003 2.50:1.00 December 31, 2003 2.75:1.00 March 31, 2004 2.75:1.00
(b) Holdings and the Borrower will not permit the Consolidated Fixed Charge Coverage Ratio for any Measurement Period ending on the last day of any fiscal quarter of Holdings set forth below to be less than the ratio set forth below opposite such fiscal quarter:
Fiscal Quarter Ending On Ratio ------------------------ ----- March 31, 1999 1.05:1.00 June 30, 1999 1.05:1.00 September 30, 1999 1.05:1.00 December 31, 1999 1.05:1.00 March 31, 2000 1.05:1.00 June 30, 2000 1.05:1.00 September 30, 2000 1.05:1.00 December 31, 2000 1.15:1.00 March 31, 2001 1.15:1.00 June 30, 2001 1.15:1.00 September 30, 2001 1.15:1.00 December 31, 2001 1.25:1.00 March 31, 2002 1.25:1.00 June 30, 2002 1.25:1.00 September 30, 2002 1.25:1.00 December 31, 2002 1.35:1.00 March 31, 2003 1.35:1.00 June 30, 2003 1.35:1.00 September 30, 2003 1.35:1.00 December 31, 2003 1.50:1.00 March 31, 2004 1.50:1.00
8.09 Maximum Leverage Ratio. Holdings and the Borrower will not ---------------------- permit the Consolidated Leverage Ratio at any time during any period set forth below to be greater than the ratio set forth opposite such period below: Restatement Effective Date through and including June 29, 1999 5.85:1.00 June 30, 1999 through and -110- including December 30, 1999 5.75:1.00 December 31, 1999 through and including June 29, 2000 5.50:1.00 June 30, 2000 through and including December 30, 2000 5.25:1.00 December 31, 2000 through and including June 29, 2001 5.00:1.00 June 30, 2001 through and including December 30, 2001 4.75:1.00 December 31, 2001 through and including December 30, 2002 4.50:1.00 December 31, 2002 through and including December 30, 2003 4.00:1.00 December 31, 2003 and thereafter 3.50:1.00 8.10 Minimum Consolidated EBITDA. Holdings and the Borrower will --------------------------- not permit Consolidated EBITDA for any Measurement Period ending on the last day of any fiscal quarter of Holdings set forth below to be less than the amount set forth below opposite such fiscal quarter:
Fiscal Quarter Ending On Amount ------------------------ ------ March 31, 1999 $32,000,000 June 30, 1999 $32,000,000 September 30, 1999 $32,500,000 December 31, 1999 $33,000,000 March 31, 2000 $33,000,000 June 30, 2000 $34,000,000 September 30, 2000 $35,000,000 December 31, 2000 $36,000,000 March 31, 2001 $36,000,000 June 30, 2001 $37,000,000 September 30, 2001 $37,000,000 December 31, 2001 $38,000,000 March 31, 2002 $38,000,000 June 30, 2002 $39,000,000 September 30, 2002 $39,000,000 December 31, 2002 $40,000,000 March 31, 2003 $40,000,000
-111- June 30, 2003 $41,000,000 September 30, 2003 $41,000,000 December 31, 2003 $42,000,000 March 31, 2004 $42,000,000
8.11 Limitation on Voluntary Payments and Modification of ---------------------------------------------------- Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain - -------------------------------------------------------------------------------- Other Agreements; etc. Holdings will not, and will not permit any of its - ---------------------- Subsidiaries to: (i) make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due) any Borrower Senior Subordinated Note, provided -------- that so long as no Default or Event of Default then exists or would result therefrom, the Borrower may refinance or redeem outstanding Borrower Senior Subordinated Notes with the proceeds of Refinancing Subordinated Indebtedness and with cash equity contributions and the net cash proceeds from the sale of capital stock of Holdings and Holdings Junior Subordinated Notes, in each case which are received by Holdings after the Restatement Effective Date and are contributed to the Borrower to the extent that such proceeds are not used (1) to make Permitted Acquisitions pursuant to Section 8.02(xi), (2) to make Capital Expenditures pursuant to Section ---------------- ------- 8.07(f), (3) to pay Dividends pursuant to Section 8.03(vii), (4) to make ------- ----------------- Investments pursuant to Section 8.05(xvi) or (5) to prepay the Loans ----------------- pursuant to Section 2.07(c) or reduce the Aggregate Revolving Commitment --------------- pursuant to Section 2.05(c).; --------------- (ii) make (or give any notice in respect of) any prepayment or redemption of any Borrower Senior Subordinated Note as a result of any asset sale, change of control or similar event (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due any Borrower Senior Subordinated Note); (iii) make (or give any notice in respect of) any payment, prepayment, redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due) any Holdings Junior Subordinated Note (whether in respect of principal, interest or otherwise), provided that so long as no Default or Event of Default then exists or would result therefrom, (x) Holdings may purchase or redeem Holdings Junior Subordinated Notes held by employees of Holdings or any of its Subsidiaries following their death, disability, retirement or termination of employment so long as the aggregate amount expended pursuant to this clause (iii)(x), when added to the sum of the --------------- aggregate amount of all Dividends paid or made pursuant to Section 8.03(ii) ---------------- and the aggregate amount of all payments made in respect of all Holdings Shareholder Subordinated Notes pursuant to Section 8.11(iv), shall not ---------------- exceed $350,000 in any fiscal year of Holdings, provided that any unused amount thereof may be carried forward and utilized for such purposes in the immediately succeeding fiscal year of -112- Holdings, and (y) Holdings may make interest payments in respect of outstanding Holdings Junior Subordinated Notes (other than in respect of $571,752.80 in Holdings Bridge Junior Subordinated Notes) so long as (A) such payments are only made on or after March 15 of each year and before March 31 of such year to pay income taxes of the holders thereof which are payable as a result of interest income earned in the immediately preceding year in respect of such Holdings Junior Subordinated Notes (it being understood, however, that such payment may not be made in any year until the Compliance Certificate in respect of the Measurement Period ending on December 31 of the immediately preceding fiscal year has been delivered pursuant to Section 7.02(a)) and (B) the aggregate amount paid pursuant to --------------- this clause (iii)(y), when added to the aggregate amount of Dividends paid --------------- pursuant to Section 8.03(iv), shall not exceed $1,250,000 in any fiscal ---------------- year of Holdings; (iv) make (or give any notice in respect of) any payment, prepayment, redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due) any Holdings Shareholder Subordinated Note (whether in respect of principal, interest or otherwise), provided that so long as no Default or Event of Default then exists or would result therefrom, Holdings may make payments on Holdings Shareholder Subordinated Notes to the extent permitted by Section 8.03(ii); ---------------- (v) make (or give any notice in respect of) any payment, prepayment, redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due) any Qualified Seller Subordinated Debt (whether in respect of principal, interest or otherwise) at a time when any Default or Event of Default then exists; (vi) amend or modify, or permit the amendment or modification of, any provision of any Borrower Senior Subordinated Note Document (except as specified in clauses (i) and (ii) of the definition of Borrower Senior ----------- ---- Subordinated Note Indenture), any Refinancing Subordinated Indebtedness, any Holdings Junior Subordinated Note, any Holdings Shareholder Subordinated Notes, any Qualified Seller Subordinated Debt or any Transaction Document; (vii) amend, modify or change its certificate of incorporation (including, without limitation, by the filing or modification of any certificate of designation) or by-laws (or the equivalent organizational documents) or any agreement entered into by it with respect to its capital stock, or enter into any new agreement with respect to its capital stock, unless such amendment, modification, change or other action contemplated by this clause (vii) could not reasonably be adverse to the interests of the ------------ Lenders in any material respect; or -113- (viii) amend, modify or change any provision of the CHS Management Agreement or the Holdings Tax Sharing Agreement in a manner which is adverse to the Lenders. In addition to the payments permitted by clause (iv) of this Section 8.11, (i) ----------- ------------ so long as there shall exist no Default of Event of Default (both before and after giving effect to the payment thereof), Holdings may redeem or repurchase outstanding Holdings Junior Subordinated Notes with the net cash proceeds received by Holdings from the substantially concurrent sale of Holdings Common Stock, Holdings Preferred Stock and/or new Holdings Junior Subordinated Notes to the extent that such proceeds are not used to repurchase outstanding shares of capital stock of Holdings (or options to purchase such stock) pursuant to Section 8.03(vii) and (ii) Holdings may repay the Holdings Bridge Junior - ----------------- Subordinated Notes with the net cash proceeds received by Holdings from the concurrent sale of $571,752.80 of Holdings Common Stock and $857,629.20 of Holdings Junior Subordinated Notes as contemplated by Section 9.01(l) (or from --------------- the conversion of such Holdings Bridge Junior Subordinated Notes into shares of Holdings Common Stock and new Holdings Junior Subordinated Notes in accordance with the terms thereof). 8.12 Limitation on Certain Restrictions on Subsidiaries. Holdings -------------------------------------------------- will not, and will not permit any of its 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 such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by Holdings or any Subsidiary of Holdings, or pay any Indebtedness owed to Holdings or any Subsidiary of Holdings, (b) make loans or advances to Holdings or any Subsidiary of Holdings or (c) transfer any of its properties or assets to Holdings or any Subsidiary of Holdings, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Loan Documents, (iii) the Borrower Senior Subordinated Note Documents and any Refinancing Subordinated Indebtedness, (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of Holdings or any Subsidiary of Holdings, (v) customary provisions restricting assignment of any licensing agreement entered into by Holdings or any Subsidiary of Holdings in the ordinary course of business, (vi) restrictions on the transfer of any asset subject to a Lien permitted by Sections 8.01(vi), (vii) and (xiii), (vii) ----------------- ----- ------ restrictions which are imposed on any Subsidiary of the Borrower acquired pursuant to a Permitted Acquisition to the extent such restrictions are set forth in any Indebtedness assumed in connection with such Permitted Acquisition so long as such restrictions are not applicable to any Subsidiary of the Borrower other than the Subsidiary being acquired and such restrictions were not created or imposed in connection with or in contemplation of such Permitted Acquisition, (viii) restrictions on the transfer of any asset pending the close of the sale of such asset, (ix) restrictions which are imposed on any Foreign Subsidiary of the Borrower to the extent such restrictions are set forth in any Indebtedness incurred by such Foreign Subsidiary pursuant to Section 8.04(xvii) ------------------ so long as such restrictions are not applicable to any Subsidiary of the Borrower other than the Foreign Subsidiary that has incurred such Indebtedness and (x) customary restrictions set forth in any joint venture agreement entered in connection with an Investment made pursuant to Section 8.05(xvi). ----------------- -114- 8.13 Limitation on Issuance of Capital Stock. ----------------------------------------- (a) Holdings will not, and will not permit any of its Subsidiaries to, issue (i) any preferred stock other than Holdings Preferred Stock issued by Holdings or (ii) any redeemable common stock (other than common stock that is redeemable at the sole option of Holdings or such Subsidiary). (b) Holdings will not permit any of its Subsidiaries to issue any capital stock (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, capital stock, except (i) for transfers and replacements of then outstanding shares of capital stock, (ii) for stock splits, stock dividends and issuances which do not decrease the percentage ownership of Holdings or any of its Subsidiaries in any class of the capital stock of such Subsidiary, (iii) to qualify directors to the extent required by applicable law or (iv) for issuances by newly created or acquired Subsidiaries in accordance with the terms of this Agreement. 8.14 Business. -------- (a) Holdings and its Subsidiaries will not engage in any business other than the businesses engaged in by the Borrower and its Subsidiaries as of the Restatement Effective Date and reasonable extensions thereof and activities incidental thereto. (b) Notwithstanding the foregoing, Holdings will not engage in any business and will not own any significant assets or have any material liabilities other than its ownership of the capital stock of the Borrower and having those liabilities which it is responsible for under this Agreement and the other Transaction Documents to which it is a party, provided that Holdings -------- may engage in those activities that are incidental to (x) the maintenance of its corporate existence in compliance with applicable law, (y) legal, tax and accounting matters in connection with any of the foregoing activities and (z) the entering into, and performing its obligations under, this Agreement and the other Transaction Documents to which it is a party. 8.15 Limitation on Creation of Subsidiaries. Notwithstanding -------------------------------------- anything to the contrary contained in this Agreement, Holdings will not, and will not permit any of its Subsidiaries to, establish, create or acquire after the Restatement Effective Date any Subsidiary, provided that the Borrower and -------- its Wholly-Owned Subsidiaries shall be permitted to establish or create Wholly- Owned Subsidiaries and, to the extent permitted by Sections 8.02(x), 8.02(xi) ---------------- -------- and 8.05(xvi), acquire Wholly-Owned Subsidiaries and non-Wholly-Owned --------- Subsidiaries, so long as (i) the capital stock of each such new Domestic Subsidiary (and to the extent required by Section 7.12, each new Foreign ------------ Subsidiary) is pledged pursuant to, and to the extent required by, the Pledge Agreement and the certificates representing such stock, together with stock powers duly executed in blank, are delivered to the Collateral Agent for the benefit of the Lenders, and (ii) each such new Domestic Subsidiary, and to the extent required by Section 7.12, each such new Foreign Subsidiary, executes a ------------ Guarantor Supplement. In addition, each new Domestic Subsidiary, and to the extent required by Section 7.12, each such new Foreign Subsidiary, shall execute ------------ and deliver, or cause to be executed and delivered, all other relevant documentation of -115- the type described in Article V as such new Subsidiary would have had to deliver --------- if such new Subsidiary were a Credit Party on the Restatement Effective Date. ARTICLE IX EVENTS OF DEFAULT 9.01 Event of Default. Any of the following shall constitute an ---------------- "Event of Default": - ----------------- (a) Non-Payment. The Borrower fails to pay, (i) when and as ----------- required to be paid herein, any amount of principal of any Loan or any amount of any Letter of Credit Obligation, or (ii) within three Business Days after the same shall become due, any interest, fee or any other amount payable hereunder or pursuant to any other Loan Document; or (b) Representation or Warranty. Any representation or warranty by -------------------------- Holdings or any of its Subsidiaries made or deemed made herein or in any other Loan Document, or which is contained in any certificate, document or financial or other statement furnished by Holdings or any of its Subsidiaries at any time under this Agreement or under any other Loan Document, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) Specific Defaults. Holdings or any of its Subsidiaries fails to ----------------- perform or observe any term, covenant or agreement contained in Sections -------- 7.03(a), 7.10, 7.13, 7.14 or Article VIII; or ------- ---- ---- ---- ------------ (d) Other Defaults. Holdings or any of its Subsidiaries fails to -------------- perform or observe any other term or covenant contained in this Agreement or in any other Loan Document, and such default shall continue unremedied for a period of 30 days after the date upon which written notice thereof is given to the Borrower by the Administrative Agent or any Lender; or (e) Cross-Default. Holdings or any of its Subsidiaries (i) fails to ------------- make any payment in respect of any Indebtedness having an aggregate principal amount of $2,500,000 or more when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure; or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness, and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity; or -116- (f) Insolvency; Voluntary Proceedings. Holdings or any of its --------------------------------- Subsidiaries (i) generally fails to pay its debts as they become due; (ii) commences any Insolvency Proceeding with respect to itself; or (iii) takes any action to effectuate or authorize any of the foregoing; or (g) Involuntary Proceedings. (i) Any involuntary Insolvency ----------------------- Proceeding is commenced or filed against Holdings or any of its Subsidiaries, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of Holdings' or any of its Subsidiaries' properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) Holdings or any of its Subsidiaries admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) Holdings or any of its Subsidiaries acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or (h) ERISA. (a) Any Plan shall fail to satisfy the minimum funding ----- standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(i) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such Plan within the following 30 days, any Plan shall have had or is likely to have a trustee appointed to administer such Plan, any Plan is, shall have been or is likely to be terminated or the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made to a Plan has not been timely made, Holdings or any Subsidiary of Holdings or any ERISA Affiliate has incurred or is likely to incur a liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, or 4975 of the Code, or on account of a group health plan (as defined in Section 607(i) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or Holdings or any Subsidiary of Holdings has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) with respect to providing benefits to retired employees or other former employees (other than as required by Section 601 of ERISA or Section 4980B of the Code) or employee pension benefit plans (as defined in Section 3(2) of ERISA), a "default", within the meaning of Section 4219(c)(5) of ERISA, shall occur with respect to any Plan, any applicable law, rule or regulation is adopted, changed or interpreted, or the interpretation or administration thereof is changed, in each case after the date hereof, by any governmental authority or agency or by any court (a "Change in Law"), ------------- or, as a result -117- of a Change in Law, an event occurs following a Change in Law, with respect to or otherwise affecting any Plan; (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) which lien, security interest or liability, individually, and/or in the aggregate, which arises from such event or events could reasonably be expected to have a Material Adverse Effect; or (i) Judgments. One or more judgments or decrees shall be entered --------- against Holdings or any of its Subsidiaries involving a liability (not paid or not covered by a reputable and solvent insurance company) of $2,500,000 or more for all such judgments and decrees and all such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 30 days from the entry thereof; or (j) Change of Control. Any Change of Control shall occur; or ----------------- (k) Collateral; Guaranties. ---------------------- (i) Except in each case to the extent resulting from the failure of the Collateral Agent to retain possession of the applicable Pledge Agreement Collateral constituting certificated securities, any Collateral Document (other than the Guaranties) shall cease to be in full force and effect, or shall cease to give the Collateral Agent the Liens, rights, powers and privileges purported to be created thereby in favor of the Collateral Agent; or (ii) any Guaranty or any provision thereof shall cease to be in full force and effect, or any Guarantor or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under its Guaranty; or (l) Additional Financing. Holdings shall not have not received by -------------------- July 30, 1999 (i) an additional $571,752.80 of cash proceeds from the issuance of shares of Holdings Common Stock and (ii) an additional $857,629.20 of cash proceeds from the issuance of Holdings Junior Subordinated Notes, which proceeds (in each case) are concurrently used to repay in full the outstanding Holdings Bridge Junior Subordinated Notes, provided, however, in the event that less than -------- ------- $571,752.80 and $857,629.20 of cash proceeds are received as contemplated by preceeding clauses (i) and (ii), respectively, then no Event of Default shall occur under this clause (l) so long as the remaining outstanding Holdings Bridge ---------- Junior Subordinated Notes are converted by July 30, 1999 into shares of Holdings Common Stock and new Holdings Junior Subordinated Notes as contemplated by the definition of "Holdings Bridge Junior Subordinated Notes" contained in this Agreement. 9.02 Remedies. If any Event of Default occurs and is continuing, the ---------- Administrative Agent shall, at the request of, or may, with the consent of, the Majority Lenders, -118- (a) declare the Commitment of each Lender and any obligation of the Issuing Lenders to issue Letters of Credit to be terminated, whereupon such Commitments and obligation shall forthwith be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower and Holdings; (c) demand that the Borrower Cash Collateralize Letter of Credit Obligations to the extent of outstanding and wholly or partially undrawn Letters of Credit, whereupon the Borrower shall so Cash Collateralize; (d) exercise on behalf of itself, the Issuing Lenders and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law; and (e) apply any cash collateral as provided in Section 3.07 to the ------------ payment of outstanding Obligations; provided, however, that upon the occurrence of any event specified above in - -------- ------- paragraph (f) or (g) of Section 9.01 with respect to the Borrower, the - ------------- --- ------------ obligation of each Lender to make Loans and any obligation of the Issuing Lenders to issue Letters of Credit shall automatically terminate, and all reimbursement obligations under Letters of Credit and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act or notice by the Administrative Agent, the Issuing Lenders or any Lender, which are hereby expressly waived by the Borrower and Holdings. 9.03 Rights Not Exclusive. The rights provided for in this -------------------- Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE X THE GUARANTY 10.01 Guaranty from Holdings. ---------------------- (a) In order to induce the Lenders to make Loans to the Borrower under this Agreement and to induce the Issuing Lenders to issue Letters of Credit and to induce the Guaranteed Creditors to enter into the Interest Rate Protection Agreements and Other Hedging Agreements, Holdings hereby unconditionally and irrevocably guarantees the prompt payment and performance in full by the Borrower when due (whether at stated maturity, by acceleration or otherwise) of all Guaranteed Obligations of the Borrower. The obligations of Holdings hereunder are those of a primary obligor, and not merely a surety, and are independent of the -119- Guaranteed Obligations of the Borrower. A separate action or actions may be brought against Holdings whether or not an action is brought against the Borrower, any other guarantor or other obligor in respect of the Guaranteed Obligations or whether the Borrower, any other guarantor or any other obligor in respect of the Guaranteed Obligations is joined in any such action or actions. Holdings waives, to the fullest extent permitted by applicable law, the benefit of any statute of limitation affecting its liability hereunder and agrees that its liability hereunder shall not be subject to any right of set-off, counterclaim or recoupment (each of which rights is hereby waived to the fullest extent permitted by applicable law). (b) Holdings guarantees that the obligations guaranteed by it hereby will be paid and performed strictly in accordance with the terms of this Agreement, the other Loan Documents and the applicable Interest Rate Protection Agreements and Other Hedging Agreements 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 Administrative Agent, the Collateral Agent, the Issuing Lenders, the Lenders or the other Guaranteed Creditors with respect thereto. The liability of Holdings under this guaranty shall be absolute and unconditional irrespective of, and Holdings hereby irrevocably waives (to the fullest extent permitted by applicable law) any defenses it may now or hereafter have in any way relating to, any and all of the following: (i) any lack of genuineness, validity, legality or enforceability against the Borrower or any other guarantor of this Agreement, any other Loan Document, any Interest Rate Protection Agreement or Other Hedging Agreement or any document, agreement or instrument relating hereto or any assignment or transfer of this Agreement, any other Loan Document or any Interest Rate Protection Agreement or Other Hedging Agreement or any defense that the Borrower may have with respect to its liability hereunder or thereunder; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any waiver, indulgence, compromise, renewal, extension, assignment, amendment, modification of, or addition, consent, supplement to, or consent to departure from, or any other action or inaction under or in respect of, this Agreement, any other Loan Document, any Interest Rate Protection Agreement or Other Hedging Agreement or any document, instrument or agreement relating to the Guaranteed Obligations or any other instrument or agreement referred to herein or any assignment or transfer of this Agreement or any Interest Rate Protection Agreement or Other Hedging Agreement; (iii) any release or partial release of any other guarantor or other obligor in respect of the Guaranteed Obligations; (iv) any exchange, impairment, release or non-perfection of any collateral for all or any of the Guaranteed Obligations, or any release, or amendment or waiver of, or consent to departure from, any guaranty or security, for any or all of the Guaranteed Obligations; -120- (v) any furnishing of any additional security for any of the Guaranteed Obligations; (vi) the liquidation, bankruptcy, insolvency or reorganization of the Borrower, any other guarantor or other obligor in respect of the Guaranteed Obligations or any action taken with respect to this guaranty or otherwise by any trustee or receiver, or by any court, in any such proceeding; (vii) any modification or termination of any intercreditor or subordination agreement pursuant to which the claims of other creditors of the Borrower or any guarantor are subordinated to those of the Lenders, the Issuing Lenders, the Administrative Agent, the Collateral Agent or the other Guaranteed Creditors; or (viii) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower or Holdings. (c) This guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment or performance of the Guaranteed Obligations, or any part thereof, is, upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise pursuant to applicable law, rescinded or reduced in amount or must otherwise be restored or returned by any of the Administrative Agent, any Issuing Lender, any Lender, the Collateral Agent or any of the other Guaranteed Creditors, all as though such payment or performance had not been made. (d) If an event permitting the acceleration of any of the Guaranteed Obligations shall at any time have occurred and be continuing and such acceleration shall at such time be prevented by reason of the pendency against the Borrower of a case or proceeding under any bankruptcy or insolvency law, Holdings agrees that, for purposes of this guaranty and its obligations hereunder, the Guaranteed Obligations shall be deemed to have been accelerated and Holdings shall forthwith pay such Guaranteed Obligations (including interest which but for the filing of a petition in bankruptcy with respect to the Borrower would accrue on such Guaranteed Obligations, whether or not interest is an allowed claim under applicable law), and the other obligations hereunder, forthwith upon demand. (e) Holdings hereby waives (i) promptness, diligence, presentment, notice of nonperformance, protest or dishonor, notice of acceptance and any and all other notices with respect to any of the Guaranteed Obligations or this Agreement, any other Loan Document or any Interest Rate Protection Agreement or Other Hedging Agreement, and (ii) to the extent permitted by applicable law, any right to require that any Administrative Agent, the Collateral Agent, any Issuing Lender, any Lender or any other Guaranteed Creditor protect, secure, perfect or insure any Lien in or any Lien on any property subject thereto or exhaust any right or pursue any remedy or take any action against the Borrower, any other guarantor or any other Person or any collateral or security or to any balance of any deposit accounts or credit on the books of the Administrative Agent, the Collateral Agent, any Issuing Lender, any Lender or any other Guaranteed Creditor in favor of the Borrower. -121- (f) Holdings expressly waives until the Guaranteed Obligations are irrevocably paid in full in cash any and all rights of subrogation, reimbursement, contribution and indemnity (contractual, statutory or otherwise), including any claim or right of subrogation under the Bankruptcy Code or any successor statute, arising from the existence or performance of this guaranty and Holdings irrevocably waives until the Guaranteed Obligations are irrevocably paid in full in cash any right to enforce any remedy which the Administrative Agent, the Collateral Agent, the Issuing Lenders, the Lenders or the other Guaranteed Creditors now have or may hereafter have against the Borrower, and waives, to the fullest extent permitted by law, until the Guaranteed Obligations are irrevocably paid in full in cash any benefit of, and any right to participate in, any security now or hereafter held by the Administrative Agent, the Collateral Agent, any Issuing Lender, any Lender or any other Guaranteed Creditor. (g) If, in the exercise of any of its rights and remedies, the Administrative Agent, the Collateral Agent, any Issuing Lender, any Lender or any other Guaranteed Creditor shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against the Borrower or any other Person, whether because of any applicable laws pertaining to "election of remedies" or the like, Holdings hereby consents to such action and waives any claim based upon such action (to the extent permitted by applicable law). Any election of remedies which results in the denial or impairment of the right of the Administrative Agent, the Collateral Agent, any Issuing Lender, any Lender or any other Guaranteed Creditor to seek a deficiency judgment against any Credit Party shall not impair Holdings' obligation to pay the full amount of the Guaranteed Obligations. (h) This guaranty is a continuing guaranty and shall (i) remain in full force and effect until payment in full of the Guaranteed Obligations and all other amounts payable under this guaranty and the termination of the Commitments; (ii) be binding upon Holdings, its successors and assigns; and (iii) inure, together with the rights and remedies hereunder, to the benefit of the Guaranteed Creditors and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), any ------------ Guaranteed Creditor may, subject to the terms of this Agreement or the applicable Interest Rate Protection Agreement or Other Hedging Agreement, assign or otherwise transfer its rights and obligations under this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect hereof granted to such Lender or such other Guaranteed Creditor pursuant to this guaranty or otherwise, all as provided in, and to the extent set forth in, this Agreement. (i) Any obligations of the Borrower to Holdings, now or hereafter existing, are hereby subordinated to the Guaranteed Obligations. Such obligations of the Borrower to Holdings, if the Administrative Agent or the Majority Lenders so request, shall be enforced and amounts recovered shall be received by Holdings as trustee for the Guaranteed Creditors and the proceeds thereof shall be paid over to the Guaranteed Creditors on account of the Guaranteed Obligations, but without reducing or affecting in any manner the liability of Holdings under the provisions of this guaranty. (j) Upon failure of the Borrower to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration or otherwise, Holdings hereby -122- agrees immediately on demand by any of the Guaranteed Creditors to pay or cause to be paid in accordance with the terms hereof an amount equal to the full unpaid amount of the Guaranteed Obligations then due in Dollars. (k) All payments by Holdings hereunder shall be made free and clear of, and without deduction or withholding for or on account of, any Taxes, unless such deduction or withholding is required by law. If Holdings shall be required by law to make any such deduction or withholding, then Holdings shall pay such additional amounts as may be necessary in order that the net amount received by the applicable Lenders, the Issuing Lenders, the Administrative Agent or the other Guaranteed Creditors, as the case may be, after all deductions and withholdings, shall be equal to the full amount that such Person would have received, after all deductions and withholdings, had the Borrower discharged its obligations (including its tax gross-up obligations) pursuant to Section 4.01. ------------ Any amounts deducted or withheld by Holdings for or on account of Taxes shall be paid over to the government or taxing authority imposing such Taxes on a timely basis, and Holdings shall provide the applicable Lender, the Issuing Lenders, the Administrative Agent or the other Guaranteed Creditors, as the case may be, as soon as practicable with such tax receipts or other official documentation (and such other certificates, receipts and other documents as may reasonably be requested by such Person) with respect to the payment of such Taxes as may be available. ARTICLE XI THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT, THE ISSUING LENDERS AND THE ARRANGER 11.01 Appointment and Authorization. ----------------------------- (a) Each of the Lenders, the Issuing Lenders and the Swingline Lender hereby irrevocably appoints, designates and authorizes NationsBank as Administrative Agent and Bank of America as Collateral Agent (for purposes of this Article XI, the term "Agent" shall mean, collectively, NationsBank in its ---------- capacity as Administrative Agent and Bank of America in its capacity as Collateral Agent) to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender, any Issuing Lender or the Swingline Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. (b) Each Issuing Lender shall have all of the benefits and immunities (i) provided to the Agent in this Article XI with respect to any acts taken or ----------- omissions suffered by such -123- Issuing Lender in connection with Letters of Credit issued by it or proposed to be issued by it and the Letter of Credit Applications pertaining to the Letters of Credit as fully as if the term "Agent", as used in this Article XI, included ---------- such Issuing Lender with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to such Issuing Lender. 11.02 Delegation of Duties. The Agent may execute any of its duties -------------------- under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 11.03 Liability of Agent. None of the Agent, its Affiliates or any ------------------ of their officers, directors, employees, agents or attorneys-in-fact (collectively, the "Agent-Related Persons") shall (a) be liable for any action --------------------- taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document (except for their own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by Holdings, the Borrower or any Subsidiary or Affiliate thereof, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Borrower, Holdings or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower, Holdings or any of their respective Subsidiaries or Affiliates. 11.04 Reliance by Agent. ----------------- (a) The Lenders agree that the Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Borrower, Holdings or any Subsidiary Guarantor), independent accountants and other experts selected by the Agent. The Lenders agree that the Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders or, as required by Section 12.01, all the ------------- Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Lenders or, as required by -124- Section 12.01 all the Lenders, and such request and any action taken or failure - ------------- to act pursuant thereto shall be binding upon all of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 5.01 as it relates to the extensions of credit under this ------------ Agreement on the Restatement Effective Date, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter either sent by the Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Lender, unless an officer of the Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender prior to the Restatement Effective Date specifying in reasonable detail its objection thereto and either such objection shall not have been withdrawn by notice to the Agent to that effect or such Lender shall not have made available to the Agent such Lender's ratable portion of any Borrowing to be made on the Restatement Effective Date. 11.05 Notice of Default. The Agent shall not be deemed to have ----------------- knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Lenders or the Issuing Lenders, unless the Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Lenders and the Issuing Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be requested by the Majority Lenders in accordance with Article IX; provided, however, that unless ---------- -------- ------- and until the Agent shall have received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. 11.06 Credit Decision. Each Lender expressly acknowledges that --------------- none of the Agent-Related Persons has made any representation or warranty to it and that no act by the Agent hereinafter taken, including any review of the affairs of Holdings and its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Holdings and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated thereby, and made its own decision to enter into this Agreement and extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Holdings and its Subsidiaries. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall not have any duty or -125- responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Borrower, Holdings and their Subsidiaries which may come into the possession of any of the Agent-Related Persons. 11.07 Indemnification. Whether or not the transactions contemplated --------------- hereby shall be consummated, the Lenders shall indemnify, upon demand, each of the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Borrower and without limiting the obligation of the Borrower to do so), ratably from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind whatsoever which may at any time (including at any time following the expiration of the Letters of Credit and the repayment of the Loans and the termination or resignation of the Agent) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement, any other Loan Document or any document contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any such Person under or in connection with any of the foregoing; provided, however, that no Lender shall be liable for the payment to any of the - -------- ------- Agent-Related Persons of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrower. Without limiting the generality of the foregoing, if the Internal Revenue Service or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Agent fully for all amounts paid as a result thereof, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section 11.07, together with all costs and expenses ------------- (including Attorney Costs). The obligation of the Lenders in this Section shall survive the payment of all Obligations hereunder. 11.08 Agent in Individual Capacity. NationsBank, Bank of America and ---------------------------- their Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory or other business with Holdings and its Subsidiaries and Affiliates as though NationsBank and Bank of America were not the Agent or an Issuing Lender hereunder and without notice to or consent of the Lenders. With respect to its Loans and participation in Letters of Credit, NationsBank shall have the same rights and powers under this Agreement and the other Loan -126- Documents as any other Lender and may exercise the same as though it were not the Agent or an Issuing Lender, and the terms "Lender" and "Lenders" shall include NationsBank in its individual capacity. 11.09 Successor Agent. The Agent may resign as Agent upon 30 days' --------------- notice to the Lenders and the Borrower. If the Agent shall resign as Agent under this Agreement and under the other Loan Documents, the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders which successor agent shall be subject to the approval of the Borrower if no Event of Default has occurred and is continuing, such approval not to be unreasonably withheld or delayed. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and subject to the approval of the Borrower if no Event of Default has occurred and is continuing, such approval not to be unreasonably withheld or delayed, a successor agent from among the Lenders or any Lender Affiliate. Any successor Agent appointed under this Section 11.09 shall be 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. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article XI and Sections 12.04 and ---------- -------------- 12.05 shall inure to its benefit as to any actions taken or omitted to be taken - ----- by it while it was Agent under this Agreement and under the other Loan Documents. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Lenders appoint a successor agent as provided for above. 11.10 The Arranger and the Syndication Agent. Neither the Arranger -------------------------------------- nor the Syndication Agent, in their capacity as such, shall have any duties or responsibilities, and shall incur no obligations or liabilities, under this Agreement. Each Lender acknowledges that it has not relied, and will not rely, on the Arranger or the Syndication Agent in deciding to enter into this Agreement. ARTICLE XII MISCELLANEOUS 12.01 Amendments and Waivers. ---------------------- (a) No amendment or waiver of any provision of this Agreement or any other Loan Document and no consent with respect to any departure by the Borrower, Holdings or any Subsidiary Guarantor therefrom, shall be effective unless the same shall be in writing and signed by Holdings, the Borrower and the Majority Lenders and acknowledged by the Administrative Agent, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such -------- ------- waiver, -127- amendment or consent shall, unless in writing and signed by all the Lenders directly affected thereby and acknowledged by the Administrative Agent, do any of the following: (i) increase or extend the Revolving Commitment or any Term Commitment of such Lender (or reinstate any such Commitment terminated pursuant to Section 9.02(a)) (except as provided in Section 12.07); --------------- ------------- (ii) postpone or delay any date for any scheduled Term Loan principal payment provided in Section 2.08(c) (i) or (ii), as the case may be, or any --------------- - -- payment of interest or fees due to the Lenders (or any of them) hereunder or under any other Loan Document, or extend the applicable Termination Date; (iii) reduce the principal of, or the rate of interest specified herein on any Loan or Letter of Credit Borrowing (other than with respect to post-default rates), or of any fees or other amounts payable hereunder or under any other Loan Document or reduce the Applicable Margin provided for herein (it being understood that any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in the rate of interest or fees for the purposes of this clause (iii)); ------------ (iv) reduce the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which shall be required for the Lenders or any of them to take any action hereunder; (v) amend this Section 12.01, the definition of the term "Majority ------------- Lenders" or any provision of this Agreement expressly requiring the consent of all the Lenders in order to take or refrain from taking any action; (vi) release the guaranty of Holdings under its guaranty pursuant to Article X or discharge any Subsidiary Guarantor from its obligations under --------- any Subsidiary Guaranty, or release all or substantially all of the Collateral except, in all such cases, in accordance with the express provisions thereof; or (vii) provide for an Interest Period in excess of 6 months. and, provided further, that (A) no amendment, waiver or consent shall, unless in ---------------- writing and signed by each Issuing Lender in addition to the Majority Lenders or all the Lenders, as the case may be, affect the rights or duties of the Issuing Lenders under this Agreement or any Letter of Credit Related Document to which such Issuing Lender is a party, (B) no amendment, waiver or consent shall, unless in writing and signed by the Swingline Lender in addition to the Majority Lenders or all the Lenders, as the case may be, affect the rights and duties of the Swingline Lender under this Agreement, (C) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent or the Collateral Agent in addition to the Majority Lenders or all the Lenders, as the case may be, affect the rights or duties of the Administrative Agent or the Collateral Agent, as the case may be, under this Agreement or any other Loan Document and (D) in addition to the consent of the Majority Lenders, without the consent of the Requisite Lenders of each Tranche of Loans which is being allocated a lesser prepayment, repayment or -128- commitment reduction as a result of the actions described below or without the consent of the Requisite Lenders of each Tranche of Loans in the case of an amendment to the definition of Requisite Lenders, amend the definition of Requisite Lenders or alter the required application of any prepayments or repayments (or commitment reduction), as between the various Tranches of Loans, pursuant to Section 2.06(c) or Section 2.07(h) (although the Majority Lenders --------------- --------------- may waive, in whole or in part, any such prepayment, repayment or commitment reduction, so long as the application, as amongst the various Tranches of Loans, of any such prepayment, repayment or commitment reduction which is still required to be made is not altered). (b) If, in connection with any proposed change, waiver, discharge or any termination to any of the provisions of this Agreement as contemplated by clauses (ii) through (vi), inclusive, of the first proviso to Section 12.01(a), - ------------ ---- ---------------- the consent of the Majority Lenders is obtained but the consent of one or more other Lenders whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated the same, to replace each such non-consenting Lender or Lenders with one or more Replacement Lenders pursuant to Section 4.08(b) so long --------------- as at such time of such replacement, each such Replacement Lender consents to the proposed change, waiver, discharge or termination. 12.02 Notices. ------- (a) All notices, requests and other communications provided for hereunder shall be in writing (including, unless the context expressly otherwise provides, facsimile transmission) and mailed, transmitted by facsimile or delivered, (A) if to the Borrower, Holdings, the Administrative Agent, an Issuing Lender or the Swingline Lender, to the address or facsimile number specified for notices on the applicable signature page hereof; (B) if to any Lender, to the notice address of such Lender set forth on Schedule 1.01(a); or ---------------- (C) as directed to the Borrower or the Administrative Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent. (b) All such notices, requests and communications shall be effective when delivered or transmitted by facsimile machine, respectively, provided that -------- any matter transmitted by the Borrower by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on the applicable signature page hereof or on Schedule 1.01(a), and (ii) shall be ---------------- followed promptly by a hard copy original thereof; except that notices to the Administrative Agent shall not be effective until actually received by the Administrative Agent, notices to the Swingline Lender pursuant to Section 2.03 ------------ shall not be effective until received by the Swingline Lender, and notices pursuant to Article III to each Issuing Lender shall not be effective until ----------- actually received by such Issuing Lender. (c) The Borrower acknowledges and agrees that any agreement of the Administrative Agent, the Issuing Lenders, the Swingline Lender and the Lenders in Articles II and III herein to receive certain notices by telephone and ----------- --- facsimile is solely for the convenience and at the request of the Borrower. The Administrative Agent, the Issuing Lenders, the -129- Swingline Lender and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower to give such notice and the Administrative Agent, the Issuing Lenders, the Swingline Lender and the Lenders shall not have any liability to such Borrower or any other Person on account of any action taken or not taken by the Administrative Agent, the Issuing Lenders, the Swingline Lender or the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Borrower to repay the Loans and drawings under Letters of Credit shall not be affected in any way or to any extent by any failure by the Administrative Agent, the Issuing Lenders, the Swingline Lender and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent, the Issuing Lenders, the Swingline Lender and the Lenders of a confirmation which is at variance with the terms understood by the Agent, the Issuing Lenders, the Swingline Lender or the Lenders to be contained in the telephonic or facsimile notice. 12.03 No Waiver; Cumulative Remedies. No failure to exercise and no ------------------------------ delay in exercising, on the part of the Administrative Agent, any Issuing Lender, the Swingline Lender or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 12.04 Costs and Expenses. The Borrower shall, whether or not the ------------------ transactions contemplated hereby shall be consummated: (a) pay or reimburse on demand for all reasonable costs and expenses incurred by the Administrative Agent, the Collateral Agent, the Arranger and the Syndication Agent in connection with the development, preparation, delivery, administration, syndication of the Commitments and Loans under and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any other Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including the Attorney Costs incurred by the Administrative Agent, the Collateral Agent, the Arranger and the Syndication Agent with respect thereto; (b) pay or reimburse each Lender, each Issuing Lender, the Administrative Agent and the Collateral Agent on demand for all reasonable costs and expenses incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding) under this Agreement (including the guaranty contained in Article X), any other Loan Document, and any such --------- other documents, including Attorney Costs incurred by the Administrative Agent, the Collateral Agent, any Issuing Lender and any Lender and any cost of any consultants retained by the Administrative Agent; and (c) pay or reimburse the Administrative Agent and each Issuing Lender on demand for all appraisal (including, without duplication, the allocated cost of internal -130- appraisal services), audit, environmental inspection and review (but, in the case of any such environmental inspection or review, only to the extent that a notice has been delivered pursuant to Section 7.03(c) or Holdings or --------------- any of its Subsidiaries shall be in violation of Section 7.07 to the extent ------------ that such violation relates to any Environmental Law or Environmental Claim) (including, without duplication, the allocated cost of such internal services), search and filing costs, fees and expenses, incurred or sustained by the Administrative Agent in connection with the matters referred to under paragraph (b) of this Section 12.04. ------------- ------------- 12.05 Indemnity. Whether or not the transactions contemplated hereby --------- shall be consummated, the Borrower shall pay, indemnify, and hold each Lender, each Issuing Lender, the Swingline Lender, the Administrative Agent, the Arranger, the Syndication Agent, the Collateral Agent and each of their respective officers, directors, trustees, employees, counsel, agents, affiliates and attorneys- in-fact (each, an "Indemnified Person") harmless from and against ------------------ any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including Attorney Costs) of any kind or nature whatsoever (including settlement costs) with respect to (a) any investigation, litigation or proceeding (including any Insolvency Proceeding) related to the Transaction, this Agreement or the Loan Documents or the Loans or the Letters of Credit, or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto and (b) the actual or alleged presence of Hazardous Materials in the air, surface water or groundwater or on the surface or subsurface of any property owned or at any time operated by Holdings or any of its Subsidiaries, the generation, storage, transportation, handling or disposal of Hazardous Materials at any location by Holdings or any of its Subsidiaries, whether or not owned or operated by Holdings or any of its Subsidiaries, the noncompliance of any property owned or operated by Holdings or any of its Subsidiaries with Environmental Laws (including applicable permits thereunder) applicable to any such property, or any Environmental Claim asserted against Holdings, any of its Subsidiaries or any property owned or at any time operated by Holdings or any of its Subsidiaries, (all the foregoing described in (a) and (b) above, collectively, the "Indemnified Liabilities"); provided, however, that the Borrower shall have ----------------------- -------- ------- no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of such Indemnified Person as the same is determined by a final judgment of a court of competent jurisdiction. The obligations in this Section 12.05 shall survive ------------- payment of all other Obligations. 12.06 Successors and Assigns. The provisions of this Agreement shall ---------------------- be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither the Borrower nor Holdings may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent and each Lender. 12.07 Assignments, Participations, etc. --------------------------------- (a) Any Lender may, with the written consent of the Borrower, the Administrative Agent, the Swingline Lender and each Issuing Lender, which consents shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees -131- (provided that (x) no written consent of the Borrower shall be required either in connection with any assignment and delegation by a Lender to another Lender or to an Eligible Assignee that is a Lender Affiliate of such Lender or at any time that an Event of Default shall exist and (y) no written consent of any Issuing Lender or the Swingline Lender shall be required in connection with any assignment of Term Loans) (each an "Assignee") all, or any ratable part of all, -------- of the Loans, Commitments and the other rights and obligations of such Lender hereunder; provided, however, that any such assignment to an Eligible Assignee -------- ------- which is not a Lender or a Lender Affiliate shall be in a minimum amount equal to the lesser of $5,000,000 or the full amount of the assignor Lender's Commitments and/or outstanding Loans; and provided, still further, that the -------- ----- ------- Borrower, the Issuing Lenders, the Swingline Lender and the Administrative Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Borrower and the Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered to the Borrower and the Agent an Assignment and Acceptance in the form of Exhibit L ("Assignment and Acceptance"); and (iii) in the case of any --------- ------------------------- assignment to an Assignee which is not already a Lender, the assignor Lender or Assignee has paid to the Administrative Agent a processing fee in the amount of $3,500; and provided, still further, that any assignment hereunder of a Lender's -------- ------------- Revolving Commitment must include an equal percentage of such assignor Lender's Revolving Loans and Letter of Credit Obligations. (b) From and after the date that the Administrative Agent notifies the assignor Lender that the requirements of paragraph (a) above are satisfied, ------------- (i) 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, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. Anything herein or in the relevant Assignment and Acceptance to the contrary notwithstanding, any Lender assigning all of its Loans, Commitments and other rights and obligations hereunder to an Assignee shall continue to have the benefit of all indemnities hereunder following such assignment. (c) Immediately upon each Assignee's making its payment under the Assignment and Acceptance and the recordation of such assignment by the Administrative Agent in the Register pursuant to Section 2.02, this Agreement, shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Aggregate Revolving Commitment and the outstanding Term Loans arising therefrom. (d) Any Lender may at any time sell to one or more banks or other Persons not Affiliates of the Borrower (a "Participant") participating interests ----------- in any Loans, any of the Commitments of such Lender and the other interests of such Lender (the "Originating Lender") hereunder and under the other Loan ------------------ Documents; provided, however, that (i) the Originating Lender's obligations -------- ------- under this Agreement shall remain unchanged, (ii) the Originating Lender -132- shall remain solely responsible for the performance of such obligations, (iii) the Borrower, the Issuing Lenders, the Swingline Lender and the Administrative Agent shall continue to deal solely and directly with the Originating Lender in connection with the Originating Lender's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which the Participant shall have rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, provided that such Participant shall have -------- the right to approve any amendment, consent or waiver described in clauses (ii), ------------ (iii) and (vi) of the first proviso to Section 12.01. In the case of any such - ----- ----- ------- ------------- participation, the Participant shall be entitled to the benefit of Sections -------- 4.01, 4.03 and 12.05, subject to the same limitations, as though it were also a ---- ----- Lender hereunder, subject to clause (f) below, and if amounts outstanding under ---------- this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the extent permitted under applicable law, be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. (e) Notwithstanding any other provision contained in this Agreement or any other Loan Document to the contrary, (x) any Lender may assign, as collateral security, all or any portion of the Loans held by it to (i) any Federal Reserve Bank or the United States Treasury pursuant to Regulation A of the Federal Reserve Board and any Operating Circular issued by such Federal Reserve Bank or (ii) any non-Federal Reserve Bank in support of borrowings incurred by such Lender from such entity and (y) with the consent of the Administrative Agent, any Lender which is a fund may pledge all or any portion of its Loans to its trustee in support of its obligations to its trustee, provided that any payment in respect of such assigned Loans made by the Borrower - -------- or Holdings to or for the account of the assigning or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's or Holdings' obligations hereunder in respect to such assigned Loans to the extent of such payment. No such assignment or pledge pursuant to this clause (e) shall ---------- release the assigning Lender from its obligations hereunder. (f) No Participant shall be entitled to receive any greater payment under Sections 4.01 or 4.03 than such Originating Lender would have been ------------- ---- entitled to receive with respect to the rights transferred unless such transfer is made with the Borrower's prior written consent. 12.08 Confidentiality. Each Lender agrees to take normal and --------------- reasonable precautions and exercise due care to maintain the confidentiality of all information provided to it by Holdings, the Borrower or any Subsidiary of Holdings, or by the Administrative Agent on Holdings', the Borrower's or such Subsidiary's behalf, in connection with this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement; except to the extent such information (a) was or becomes generally available to the public other than as a result of a disclosure by the Lender, or (b) was or becomes available on a non-confidential basis from a source other than the Borrower or Holdings, provided that such source is not -------- bound by a confidentiality agreement with the Borrower or Holdings, known to the -133- Lender; provided further, however, that any Lender may disclose such information ---------------- ------- (i) at the request or pursuant to any requirement of any Governmental Authority to which the Lender is subject or in connection with an examination of such Lender by any such authority; (ii) pursuant to subpoena or other court process; (iii) when required to do so in accordance with the provisions of any applicable Requirement of Law; (iv) to the extent reasonably required in connection with any litigation or proceeding to which the Administrative Agent, the Collateral Agent, such Lender or their respective Affiliates may be party; (v) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; and (vi) to such Lender's independent auditors, other professional advisors and employees of such Lender's Lender Affiliates (or any Affiliate of such Lender engaged in capital market transactions generally) retained by such Lender in connection with this Agreement so long as such Persons agree to maintain the confidentiality of all such information disclosed to them. Notwithstanding the foregoing, the Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and to any prospective Transferee, such financial and other ---------- information in such Lender's possession concerning the Borrower or its Subsidiaries or Holdings which has been delivered to Administrative Agent, the Collateral Agent or the Lenders pursuant to this Agreement or which has been delivered to the Administrative Agent, the Collateral Agent or the Lenders by the Borrower or Holdings in connection with the Lenders' credit evaluation of the Borrower prior to entering into this Agreement; provided that, unless -------- otherwise agreed by the Borrower or Holdings, such Transferee agrees in writing to such Lender to keep such information confidential to the same extent required of the Lenders hereunder. 12.09 Set-off. In addition to any rights and remedies of the Lenders -------- provided by law, if an Event of Default occurs and is continuing, each Lender is authorized at any time and from time to time, without prior notice to the Borrower or Holdings, any such notice being waived by the Borrower and Holdings to the fullest extent permitted by law, to set off and apply, to the extent permitted by applicable law, any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing to, such Lender to or for the credit or the account of the Borrower or Holdings against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Administrative Agent, the Collateral Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Borrower or Holdings and the Administrative Agent after any such set-off and application made by such Lender; 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 under this Section 12.09 are in addition to the other rights and remedies (including ------------- other rights of set-off) which the Lender may have. 12.10 Notification of Addresses, Lending Offices, etc. Each Lender -------------------------------------------------- shall notify the Administrative Agent in writing of any changes in the address to which notices to the Lender should be directed, of addresses of its Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Administrative Agent shall reasonably request. -134- 12.11 Counterparts. This Agreement may be executed by one or more ------------ of the parties to this Agreement in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 12.12 Severability. The illegality or unenforceability of any ------------ provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 12.13 No Third Parties Benefited. This Agreement is made and entered --------------------------- into for the sole protection and legal benefit of the parties hereto and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. None of the Administrative Agent, the Collateral Agent, any Issuing Lender, the Swingline Lender or any Lender shall have any obligation to any Person not a party to this Agreement or any other Loan Document. 12.14 Governing Law and Jurisdiction. ------------------------------ THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH COURTS LACK JURISDICTION OVER IT, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY SUCH LEGAL ACTION OR PROCEEDING WHICH IS BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURTS LACKS JURISDICTION OVER IT. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM ----- NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION - -------------- OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE PARTIES HERETO EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW. 12.15 Waiver of Jury Trial. THE PARTIES HERETO EACH WAIVE THEIR -------------------- RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION -135- BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE PARTIES HERETO EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION 12.15 AS TO ANY ACTION, COUNTERCLAIM ------------- OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 12.16 Domicile of Loans. Each Lender may transfer and carry its ----------------- Loans at, to or for the account of any office, Subsidiary or Affiliate of such Lender. Notwithstanding anything to the contrary contained herein, to the extent that a transfer of Loans pursuant to this Section 12.16 would, at the time of ------------- such transfer, result in increased costs under Sections 4.01, 4.03 or 4.06 from ------------- ---- ---- those being charged by the respective Lender prior to such transfer, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective transfer). 12.17 Certain Assignments. On the Restatement Effective Date and ------------------- concurrently with the incurrence of the Loans on such date, each of NationsBank, Antares Capital Corporation ("Antares") and Bank Austria Creditanstalt Corporate ------- Finance, Inc. ("Creditanstalt") hereby agree as follows: ------------- (i) Creditanstalt shall purchase and assume (and hereby purchases and assumes) from NationsBank, and NationsBank shall sell and assign (and hereby sells and assigns) to Creditanstalt, $2,275,862 in aggregate principal amount of outstanding Tranche A Term Loans and $1,724,138 in Revolving Commitments (including the related assigned share of any outstanding Revolving Loans and Letters of Credit); (ii) Creditanstalt shall purchase and assume (and hereby purchases and assumes) from Antares, and Antares shall sell and assign (and hereby sells and assigns) to Creditanstalt, $1,706,897 in aggregate principal amount of outstanding Tranche A Term Loans and $1,293,103 in Revolving Commitments (including the related assigned share of any outstanding Revolving Loans and Letters of Credit); -136- (iii) Creditanstalt shall deliver to NationsBank, by wire transfer in Dollars and in immediately available funds, the sum of (x) $2,275,862 and (y) its assigned share of any outstanding Revolving Loans, in consideration of the assignments effected pursuant to paragraph (i) of this Section 12.17; ------------- ------------- (iv) Creditanstalt shall deliver to Antares, by wire transfer in Dollars and in immediately available funds, the sum of (x) $1,706,897 and (y) its assigned share of any outstanding Revolving Loans, in consideration of the assignments effected pursuant paragraph (ii) of to this Section 12.17; -------------- ------------- (v) each of NationsBank and Antares shall be entitled to receive (x) all interest that has accrued and remains unpaid on the Tranche A Term Loans and Revolving Loans assigned pursuant to this Section 12.17 for periods prior to the Restatement Effective ------------- Date (including under the Original Credit Agreement) and (y) all letter of credit fees and commitment fees that have accrued and remain unpaid on the Revolving Commitment assigned pursuant to this Section 12.17 for periods prior to the Restatement ------- ----- Effective Date (including under the Original Credit Agreement); and (vi) each of NationsBank and Antares represents and warrants that it is the legal and beneficial owner of the interest being assigned by it pursuant to this Section 12.17 and that such interest is ------- ----- free and clear of any adverse claim. * * * * -137- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. CII TECHNOLOGIES, INC. By: _____________________________ Name: Title: Address for notices: 1396 Charlotte Highway Fairview, North Carolina 29730 Attn: Richard Heggelund Facsimile: (704) 628-1439 Tel: (704) 628-1711 COMMUNICATIONS INSTRUMENTS, INC. By: _____________________________ Name: Title: Address for notices: 1396 Charlotte Highway Fairview, North Carolina 29730 Attn: Richard Heggelund Facsimile: (704) 628-1439 Tel: (704) 628-1711 NATIONSBANK, N.A., as the Administrative Agent By: _____________________________ Name: Title: Address for notices of borrowing, prepayments and other administrative matters and notices: NationsBank Corporate Center 100 North Tryon Street Charlotte, North Carolina 28255 Attn: John O'Neill Facsimile: (704) 386-9607 Tel: (704) 388-5045 NATIONSBANK, N.A., as an Issuing Lender By: _____________________________ Name: Title: Address for notices: NationsBank Corporate Center 100 North Tryon Street Charlotte, North Carolina 28255 Attn: John O'Neill Facsimile: (704) 386-9607 Tel: (704) 388-5045 NATIONSBANK, N.A., as the Swingline Lender By: _____________________________ Name: Title: Address for notices: NationsBank Corporate Center 100 North Tryon Stret Charlotte, North Carolina 28255 Attn: John O'Neill Facsimile: (704) 386-9607 Tel: (704) 388-5045 NATIONSBANK, N.A., as a Lender By: _____________________________ Name: Title: Address for notices: NationsBank Corporate Center 100 North Tryon Street Charlotte, North Carolina 28255 Attn: John O'Neill Facsimile: (704) 386-9607 Tel: (704) 388-5045 ANTARES CAPITAL CORPORATION, as a Lender By: _____________________________ Name: Title: Address for notices: 311 South Wacker Drive Suite 2725 Chicago, Illinois 60606 Attn: Stefano Robertson Facsimile: (312) 697-3998 Tel: (312) 697-3967 FIRST SOURCE FINANCIAL LLP By: FIRST SOURCE FINANCIAL, INC., its Agent/Manager By: _____________________________ Name: Title: Addresses for notices: 2850 West Golf Road 5th Floor Rolling Meadows, Illinois 60008 Attn: Robert Mangers Facsimile: 847-734-7910 Tel: 847-734-2068 PNC BANK, NATIONAL ASSOCIATION By: _____________________________ Name: Title: Addresses for notices: 249 Fifth Avenue, 2nd Floor Pittsburgh, Pennsylvania 15222-2707 Attn: James A. Fink Facsimile: 412-705-0984 Tel: 412-762-8746 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. By: _____________________________ Name: Title: By: _____________________________ Name: Title: Addresses for notices: Two Ravinia Drive, Suite 1680 Atlanta, Georgia 30346 Attn: Gary W. Andresen Facsimile: 770-390-1851 Tel: 770-390-1850 MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST By: _____________________________ Name: Title: Addresses for notices: Two World Trade Center, 72nd Floor New York, NY 10048 Attn: Peter Gewirtz Facsimile: 212-392-5345 Tel: 212-392-9034 JACKSON NATIONAL LIFE INSURANCE COMPANY By: PPM America, Inc., as attorney-in-fact, on behalf of Jackson National Life Insurance Company By: _____________________________ Name: Title: Addresses for notices: 225 West Wacker Drive, Suite 1200 Chicago, IL 60606 Attn: Michael Di Re Facsimile: 312-634-0054 Tel: 312-634-2509 VAN KAMPEN PRIME RATE INCOME TRUST By: _____________________________ Name: Title: Addresses for notices: One Parkview Plaza Oakbrook Terrace, IL 60181 Attn: Jeffrey Maillet Facsimile: 630-684-6740 Tel: 630-684-6438 SCHEDULE 1.01(a) ---------------- LENDING OFFICES --------------- NationsBank Corporate Center 100 North Tryon Street Charlotte, North Carolina 28255 Attn: John O'Neill Facsimile: (704) 386-9607 Tel: (704) 388-5045 Antares Capital Corporation 311 South Wacker Drive Suite 2725 Chicago, Illinois 60606 Attn: Stefano Robertson Facsimile: 312-697-7398 Tel: 312-697-3967 First Source Financial LLP 2850 West Golf Road 5th Floor Rolling Meadows, Illinois 60008 Attn: Robert Mangers Facsimile: 847-734-7910 Tel: 847-734-2068 PNC Bank, National Association 249 Fifth Avenue, 2nd Floor Pittsburgh, Pennsylvania 15222 Attn: James A. Fink Facsimile: 412-705-0984 Tel: 412-762-8746 Bank Austria Creditanstalt Corporate Finance, Inc. Two Ravinia Drive, Suite 1680 Atlanta, Georgia 30346 Attn: Gary W. Andresen Facsimile: (770) 390-1851 Tel: (770) 390-1850 SCHEDULE 1.01(a) ---------------- Page 2 Morgan Stanley Dean Witter Prime Income Trust Two World Trade Center, 72nd Floor New York, NY 10048 Attn: Peter Gewirtz Facsimile: (212) 392-5345 Tel: (212) 392-9034 Jackson National Life Insurance Company c/o PPM America, Inc. 225 West Wacker Drive, Suite 1200 Chicago, IL 60606 Attn: Michael Di Re Facsimile: (312) 634-0054 Tel: (312) 634-2509 Van Kampen Prime Rate Income Trust One Parkview Plaza Oakbrook Terrace, IL 60181 Attn: Jeffrey Maillet Facsimile: (630) 684-6740 Tel: (630) 684-6438 SCHEDULE 1.01(b) ---------------- COMMITMENTS ----------- Lender Outstanding - ---------------------------- Revolving Tranche A Term Tranche B Term Commitment Loans Commitment -------------- -------------- -------------- NationsBank, N.A. $ 6,609,195.00 $ 8,724,138.00 $24,000,000.00 Antares Capital Corporation $ 4,956,897.00 $ 6,543,103.00 $ 3,000,000.00 First Source Financial LLP $ 6,250,000.00 $ 8,250,000.00 $ 0 PNC Bank, National $ 4,166,667.00 $ 5,500,000.00 $ 0 Association Bank Austria Creditanstalt $ 3,017,241.00 $ 3,982,759.00 $ 8,000,000.00 Corporate Finance, Inc. Morgan Stanley Dean Witter $ 0 $ 0 $ 7,500,000.00 Prime Income Trust Jackson National Life $ 0 $ 0 $ 5,500,000.00 Insurance Company Van Kampen Prime Rate $ 0 $ 0 $ 7,000,000.00 Income Trust Total: $25,000,000.00 $33,000,000.00 $55,000,000.00 SCHEDULE 1.01(d) ---------------- PRE-CLOSING EBITDA ADJUSTMENTS PART A PART B ADD BACKS SUBTRACTIONS ______________________________ _________________________________ Rent Expense for PU facilities Consulting Fee for Gary Schreiner Raises for PU managers Wage Addbacks (a) Accounting Department Costs Audits and Tax Cost Roger Colmark's Accounting Fee (a) Gary Schreiner, Gary's wife and Al Wade. (b) to the extent they were account for below EBITDA. EX-10.3 4 AMENDED AND RESTATED SUBSIDIARY GUARANTY EXHIBIT 10.3 AMENDED AND RESTATED SUBSIDIARY GUARANTY ---------------------------------------- AMENDED AND RESTATED GUARANTY, dated as of June 19, 1998, and amended and restated as of March 19, 1999 (as amended, restated, modified or supplemented from time to time, this "Guaranty"), made by each of the undersigned guarantors (each, a "Guarantor" and, together with any other entity that becomes a party hereto pursuant to Section 27 hereof, the "Guarantors"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H: ------------------- WHEREAS, CII Technologies, Inc., Communications Instruments, Inc. (the "Borrower"), the several financial institutions from time to time party thereto (the "Lenders"), NationsBank, N.A., as an Issuing Lender and the Swingline Lender, and NationsBank, N.A., as Administrative Agent (together with any successor administrative agent, the "Administrative Agent"), have entered into a Credit Agreement, dated as of June 19, 1998, and amended and restated as of March 19, 1999 (as amended, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein (the Lenders, the Issuing Lenders, the Swingline Lender, the Administrative Agent and the Collateral Agent are herein called the "Lender Creditors"); WHEREAS, the Borrower may from time to time be party to one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Lenders or with an affiliate of a Lender (each such Lender or affiliate, even if the respective Lender subsequently ceases to be a Lender under the Credit Agreement for any reason, together with such Lender's or affiliate's successors and assigns, collectively, the "Other Creditors," and together with the Lender Creditors, are herein called the "Creditors"); WHEREAS, each Guarantor is a Subsidiary of the Borrower; WHEREAS, the Guarantors (other than Products Unlimited and its Domestic Subsidiaries) entered into the Subsidiary Guaranty, dated as of June 19, 1998 (the "Original Subsidiary Guaranty"), in connection with the Original Credit Agreement; WHEREAS, the parties hereto wish to amend and restate the Original Subsidiary Guaranty in its entirety in the form of this Guaranty; WHEREAS, it is a condition to the Restatement Effective Date and to the making of Loans and the issuance of Letters of Credit for the account of the Borrower under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty; and WHEREAS, each Guarantor will obtain benefits from the incurrence of Loans by, and the issuance of Letter of Credit for account of, the Borrower under the Credit Agreement and the entering into of Interest Rate Protection Agreements or Other Hedging Agreements and, accordingly, desires to execute this Guaranty in order to satisfy the condition described in the preceding paragraph and to induce the Lenders to make Loans to, and issue (and/or participate in) Letters of Credit for the account of, the Borrower and Other Creditors to enter into Interest Rate Protection Agreements or Other Hedging Agreements with the Borrower; NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Guarantor, the receipt and sufficiency of which are hereby acknowledged, (i) the parties hereto hereby acknowledge and agree that the Original Subsidiary Guaranty shall be, and hereby is, amended and restated in its entirety in the form of this Guaranty and (ii) each Guarantor hereby makes the following representations and warranties to the Creditors and hereby covenants and agrees with each Creditor as follows: 1. Each Guarantor, jointly and severally, irrevocably and unconditionally guarantees: (i) to the Lender Creditors the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of (x) the principal of and interest on the promissory notes issued by, and the Loans made to, the Borrower under the Credit Agreement and all reimbursement obligations and unpaid drawings with respect to Letters of Credit and (y) all other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower to the Lender Creditors under the Credit Agreement (including, without limitation, indemnities, fees, interest and other "Obligations" under and as defined in the Credit Agreement) and the other Loan Documents to which the Borrower is a party, whether now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement and any such other Loan Document and the due performance and compliance by the Borrower with the terms of the Loan Documents (all such principal, interest, liabilities and obligations under this clause (i), except to the extent consisting of obligations or liabilities with respect to Interest Rate Protection Agreements or Other Hedging Agreements, being herein collectively called the "Loan Document Obligations"); and (ii) to each Other Creditor the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower under any Interest Rate Protection Agreements or Other Hedging Agreements, whether now in existence or hereafter arising, and the due performance and compliance by the Borrower with all terms, conditions and agreements contained therein (all such obligations and liabilities being herein collectively called the "Other Obligations", and together with the Loan Document Obligations are herein collectively called the "Guaranteed Obligations"). Each Guarantor understands, agrees and confirms that the Creditors may enforce this Guaranty up to the full amount of the Guaranteed Obligations against each Guarantor without proceeding against any other Guarantor, the Borrower, against any security for the Guaranteed Obligations, or under any other guaranty covering all or a portion of the Guaranteed Obligations. All payments by each Guarantor under this Guaranty shall be made on the same basis as payments by the Borrower are made under the Credit Agreement. -2- 2. Additionally, each Guarantor, jointly and severally, unconditionally and irrevocably, guarantees the payment of any and all Guaranteed Obligations of the Borrower to the Creditors whether or not due or payable by the Borrower upon the occurrence in respect of the Borrower of any of the events specified in Sections 9.01(f) and 9.01(g) of the Credit Agreement, and unconditionally and irrevocably, jointly and severally, promises to pay such Guaranteed Obligations to the Creditors, or order, on demand, in lawful money of the United States. 3. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations of the Borrower whether executed by such Guarantor, any other Guarantor, any other guarantor or by any other party, and the liability of each Guarantor hereunder shall not be affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed Obligations of the Borrower, (c) any payment on or in reduction of any such other guaranty or undertaking, (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower or (e) any payment made to any Creditor on the Guaranteed Obligations which any Creditor repays to the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. 4. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor, any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other Guarantor, any other guarantor or the Borrower and whether or not any other Guarantor, any other guarantor of the Borrower or the Borrower be joined in any such action or actions. Each Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to each Guarantor. 5. Each Guarantor hereby waives (to the fullest extent permitted by applicable law) notice of acceptance of this Guaranty and notice of any liability to which it may apply, and waives promptness, diligence, presentment, demand of payment, protest, notice of dishonor or nonpayment of any such liabilities, suit or taking of other action by the Administrative Agent or any other Creditor against, and any other notice to, any party liable thereon (including such Guarantor or any other guarantor or the Borrower). 6. Any Creditor may (except as shall be required by applicable statute and cannot be waived) at any time and from time to time without the consent of, or notice to, any Guarantor, without incurring responsibility to such Guarantor, without impairing or releasing the obligations of such Guarantor hereunder, upon or without any terms or conditions and in whole or in part: -3- (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate, alter, sell, assign or participate any of the Guaranteed Obligations, any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed, altered, sold, assigned or participated; (b) sell, exchange, release, impair, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (c) exercise or refrain from exercising any rights against the Borrower or others or otherwise act or refrain from acting; (d) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to creditors of the Borrower; (e) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Creditors regardless of what liabilities of the Borrower remain unpaid; (f) consent to or waive any breach of, or any act, omission or default under, any of the Interest Rate Protection Agreements or Other Hedging Agreements, the Loan Documents or any of the instruments or agreements referred to therein, or otherwise amend, modify or supplement any of the Interest Rate Protection Agreements or Other Hedging Agreements, the Loan Documents or any of such other instruments or agreements; and/or (g) act or fail to act in any manner referred to in this Guaranty which may deprive such Guarantor of its right to subrogation against the Borrower to recover full indemnity for any payments made pursuant to this Guaranty. 7. No invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations or of any security therefor shall affect, impair or be a defense to this Guaranty, and this Guaranty shall be primary, absolute and unconditional notwithstanding the occurrence of any event or the existence of any other circumstances which might constitute a legal or equitable discharge of a surety or guarantor except payment in full of the Guaranteed Obligations. 8. This Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. No failure or delay on the part of any Creditor in exercising any right, power or -4- privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly specified are cumulative and not exclusive of any rights or remedies which any Creditor would otherwise have. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Creditor to any other or further action in any circumstances without notice or demand. It is not necessary for any Creditor to inquire into the capacity or powers of the Borrower or any of its Subsidiaries or the officers, directors, partners or agents acting or purporting to act on its behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 9. Any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated to the indebtedness of the Borrower to the Creditors; and such indebtedness of the Borrower to any Guarantor, if the Administrative Agent, after an Event of Default has occurred and is continuing, so requests, shall be collected, enforced and received by such Guarantor as trustee for the Creditors and be paid over to the Creditors on account of the indebtedness of the Borrower to the Creditors, but without affecting or impairing in any manner the liability of such Guarantor under the other provisions of this Guaranty. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, each Guarantor hereby agrees with the Guaranteed Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full in cash. 10. (a) Each Guarantor waives any right (except as shall be required by applicable statute or law and cannot be waived) to require the Creditors to: (i) proceed against the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party; (ii) proceed against or exhaust any security held from the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party; or (iii) pursue any other remedy in the Creditors' power whatsoever. Each Guarantor waives (to the fullest extent permitted by applicable law) any defense based on or arising out of any defense of the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party other than payment in full of the Guaranteed Obligations, including, without limitation, any defense based on or arising out of the disability of the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. The Creditors may, at their election, foreclose on any security held by the Administrative Agent, the Collateral Agent or the other Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed -5- Obligations have been paid in full. Each Guarantor waives any defense arising out of any such election by the Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other party or any security. (b) Each Guarantor waives all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that the Creditors shall have no duty to advise any Guarantor of information known to them regarding such circumstances or risks. 11. The Creditors agree that this Guaranty may be enforced only by the action of the Administrative Agent or the Collateral Agent, in each case acting upon the instructions, or with the consent, of the Majority Lenders (or, after the date on which all Loan Document Obligations have been paid in full and the Aggregate Commitment has been terminated, the holders of at least a majority of the outstanding Other Obligations) and that no other Creditor shall have any right individually to seek to enforce or to enforce this Guaranty or to realize upon the security to be granted by the Collateral Documents, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Collateral Agent or the holders of at least a majority of the outstanding Other Obligations, as the case may be, for the benefit of the Creditors upon the terms of this Guaranty and the Collateral Documents. The Creditors further agree that this Guaranty may not be enforced against any director, officer, employee or stockholder of any Guarantor (except to the extent such stockholder is also a Guarantor hereunder). 12. In order to induce the Lenders to make Loans and issue Letters of Credit pursuant to the Credit Agreement, and in order to induce the Other Creditors to execute, deliver and perform the Interest Rate Protection Agreements or Other Hedging Agreements, each Guarantor represents, warrants and covenants that: (a) Such Guarantor (i) is a duly organized and validly existing corporation and is in good standing (to the extent such concept is relevant in such jurisdiction) under the laws of the jurisdiction of its organization, and has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (ii) is duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified and where the failure to be so qualified could reasonably be expected to have a Material Adverse Effect. (b) Such Guarantor has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Guaranty and each other Loan Document to which it is a party and has taken all necessary corporate action to authorize the execution, -6- delivery and performance by it of each such Loan Document. Such Guarantor has duly executed and delivered this Guaranty and each other Loan Document to which it is a party and each such Loan Document constitutes the legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except to the extent that the enforceability hereof or thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law). (c) Neither the execution, delivery or performance by such Guarantor of this Guaranty or any other Loan Document to which it is a party, nor compliance by it with the terms and provisions hereof or thereof (i) will contravene any applicable provision of any law, or any order, writ, injunction or decree of any court or Governmental Authority, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or (other than pursuant to the Collateral Documents) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of such Guarantor or any of its Subsidiaries pursuant to the terms of any Contractual Obligation to which such Guarantor or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the articles or certificate of incorporation, by-laws or any other organizational document of such Guarantor or any of its Subsidiaries. (d) No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of this Guaranty or any other Loan Document to which such Guarantor is a party, or (ii) the legality, validity, binding effect or enforceability of this Guaranty or any other Loan Document to which such Guarantor is a party. (e) There are no actions, suits or proceedings pending or to the knowledge of such Guarantor, threatened with respect to such Guarantor (i) that could reasonably be expected to have a Material Adverse Effect or (ii) that could reasonably be expected to have a material adverse effect on the rights or remedies of the Creditors or on the ability of such Guarantor to perform its respective obligations to the Creditors hereunder and under the other Loan Documents to which it is a party. 13. Each Guarantor covenants and agrees that on and after the date hereof and until the termination of the Aggregate Commitment and all Interest Rate Protection Agreements and Other Hedging Agreements and when no promissory note or Letter of Credit under the Credit Agreement remains outstanding (other than Letters of Credit, together with all fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been secured in a manner satisfactory to the respective Issuing Lenders in its sole and absolute discretion) and all Guaranteed Obligations have been paid in full (other than indemnities described in Section 12.05 of the Credit Agreement and analogous provisions in the Collateral Documents which are not then due and payable), such Guarantor shall take, or will -7- refrain from taking, as the case may be, all actions that are necessary to be taken or not taken so that no violation of any provision, covenant or agreement contained in Article VII or VIII of the Credit Agreement, and so that no Default or Event of Default, is caused by the actions of such Guarantor or any of its Subsidiaries. 14. The Guarantors hereby jointly and severally agree to pay all reasonable out-of-pocket costs and expenses of each Creditor 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 (including in-house counsel) employed by any of the Creditors). 15. This Guaranty shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the Creditors and their successors and assigns. 16. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated except with the written consent of each Guarantor directly affected thereby and either (x) the Majority Lenders (or to the extent required by Section 12.01 of the Credit Agreement, with the written consent of each Lender) at all times prior to the time on which all Loan Document Obligations have been paid in full and the Aggregate Commitment has been terminated or (y) the holders of at least a majority of the outstanding Other Obligations at all times after the time on which all Loan Document Obligations have been paid in full and the Aggregate Commitment has been terminated; provided, that any change, waiver, modification or variance -------- affecting the rights and benefits of a single Class (as defined below) of Creditors (and not all Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such Class of Creditors (it being understood that the addition or release of any Guarantor hereunder shall not constitute a change, waiver, discharge or termination affecting any Guarantor other than the Guarantor so added or released). For the purpose of this Guaranty the term "Class" shall mean each class of Creditors, i.e., whether (x) the Lender Creditors as holders of the Loan Document - ---- Obligations or (y) the Other Creditors as the holders of the Other Obligations. For the purpose of this Guaranty, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Loan Document Obligations, the Majority Lenders and (y) with respect to the Other Obligations, the holders of at least a majority of the Other Obligations. 17. Each Guarantor acknowledges that an executed (or conformed) copy of each of the Loan Documents and Interest Rate Protection Agreements or Other Hedging Agreements has been made available to its principal executive officers and such officers are familiar with the contents thereof. 18. In addition to any rights now or hereafter granted under applicable law, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default (such term to mean and include any "Event of Default" as defined in the Credit Agreement or any payment default under any Interest Rate Protection Agreement or Other Hedging Agreement continuing after any applicable grace period), each Creditor is hereby authorized at any time or from time to time, without notice to any Guarantor or to any other -8- Person, any such notice being expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Creditor to or for the credit or the account of such Guarantor, against and on account of the obligations and liabilities of such Guarantor to such Creditor under this Guaranty, irrespective of whether or not such Creditor shall have made any demand hereunder and although said obligations, liabilities, deposits or claims, or any of them, shall be contingent or unmatured. 19. All notices, requests, demands or other communications pursuant hereto shall be deemed to have been duly given or made when delivered to the Person to which such notice, request, demand or other communication is required or permitted to be given or made under this Guaranty, addressed to such party at (i) in the case of any Lender Creditor, as provided in the Credit Agreement, (ii) in the case of any Guarantor, at: c/o CII Technologies, Inc., 1396 Charlotte Highway, Fairview, N.C. 29730, Attention: Richard Heggelund, Telephone No.: (704) 628-1711, Telecopier No.: (704) 628-1439, and (iii) in the case of any Other Creditor, at such address as such Other Creditor shall have specified in writing to the Guarantor; or in any case at such other address as any of the Persons listed above may hereafter notify the others in writing. 20. If claim is ever made upon any Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including, without limitation, the Borrower or any Guarantor), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any revocation hereof or other instrument evidencing any liability of the Borrower, and such Guarantor shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. 21. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. (b) Any legal action or proceeding with respect to this Guaranty or any other Loan Document to which such Guarantor is a party 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 Guaranty, each Guarantor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby further irrevocably waives any claim that any such courts lack jurisdiction over such Guarantor, and agrees not to plead or claim, in any legal action or proceeding with respect to this Guaranty or any other Loan Document to which such Guarantor is a party brought in any of the aforesaid courts, that any such court lacks jurisdiction over such Guarantor. Each Guarantor 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 -9- registered or certified mail, postage prepaid, to each Guarantor at its address set forth opposite its signature below, such service to become effective 30 days after such mailing. Each Guarantor 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 Loan Document to which such Guarantor is a party that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of any of the Creditors to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against each Guarantor in any other jurisdiction. (c) Each Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty or any other Loan Document to which it is a party brought in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that such action or proceeding brought in any such court has been brought in an inconvenient forum. 22. In the event that all of the capital stock of one or more Guarantors is sold or otherwise disposed of or liquidated in compliance with the requirements of Section 8.02 of the Credit Agreement (or such sale or other disposition or liquidation has been approved in writing by the Majority Lenders (or all Lenders if required by Section 12.01 of the Credit Agreement)) and the proceeds of such sale, disposition or liquidation are applied in accordance with the provisions of the Credit Agreement, to the extent applicable, such Guarantor shall be released from this Guaranty and this Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no further force or effect (it being understood and agreed that the sale of one or more Persons that own, directly or indirectly, all of the equity interests of any Guarantor shall be deemed to be a sale of such Guarantor for the purposes of this Section 22). 23. 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 Borrower and the Administrative Agent. 24. EACH GUARANTOR AND EACH OF THE CREDITORS HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 25. All payments made by any Guarantor hereunder will be made without setoff, counterclaim or other defense. 26. Each Guarantor and each Creditor (by its acceptance of the benefits of this Guaranty) hereby confirms that it is its intention that this Guaranty not constitute fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act of any similar Federal or state law. To effectuate the foregoing intention, each -10- Guarantor and each Creditor (by its acceptance of the benefits of this Guaranty) hereby irrevocably agrees that the Guaranteed Obligations guaranteed by such Guarantor shall be limited to such amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws, and after giving effect to any rights to contribution pursuant to any agreement providing for an equitable contribution among such Guarantor and the other Guarantors, result in the Guaranteed Obligations of such Guarantor in respect of such maximum amount not constituting a fraudulent transfer or conveyance. 27. It is understood and agreed that any Subsidiary of Holdings that is required to execute a counterpart of this Guaranty after the date hereof pursuant to Sections 7.12 and/or 8.15 of the Credit Agreement shall automatically become a Guarantor hereunder by executing a counterpart hereof (or a Guarantor Supplement) and delivering the same to the Administrative Agent. * * * -11- IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. KILOVAC CORPORATION, as a Guarantor By:_____________________________ Name:________________________ Title:_______________________ KILOVAC INTERNATIONAL, INC., as a Guarantor By:_____________________________ Name:________________________ Title:_______________________ CORCOM, INC., as a Guarantor By:_____________________________ Name:________________________ Title:_______________________ PRODUCTS UNLIMITED CORPORATION, as a Guarantor By:_____________________________ Name:________________________ Title:_______________________ MARC INDUSTRIES, INC., as a Guarantor By:_____________________________ Name:________________________ Title:_______________________ SOL INDUSTRIES, INC., as a Guarantor By:_____________________________ Name:________________________ Title:_______________________ GW INDUSTRIES, INC., as a Guarantor By:_____________________________ Name:________________________ Title:_______________________ NATIONSBANK, N.A., as Administrative Agent for the Lenders By:_____________________________ Name:________________________ Title:_______________________ EX-10.4 5 AMENDED AND RESTATED SECURITY AGREEMENT EXHIBIT 10.4 ================================================================================ AMENDED AND RESTATED SECURITY AGREEMENT among CII TECHNOLOGIES, INC., COMMUNICATIONS INSTRUMENTS, INC., CERTAIN SUBSIDIARIES OF COMMUNICATIONS INSTRUMENTS, INC. and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Collateral Agent Dated as of June 19, 1998 and Amended and Restated as of March 19, 1999 ================================================================================ TABLE OF CONTENTS -----------------
Page ---- ARTICLE I SECURITY INTERESTS.................................................................... 2 1.1. Grant of Security Interests........................................................... 2 1.2. Power of Attorney..................................................................... 2 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS..................................... 3 2.1. Necessary Filings..................................................................... 3 2.2. No Liens.............................................................................. 3 2.3. Other Financing Statements............................................................ 3 2.4. Chief Executive Office; Records....................................................... 4 2.5. Location of Inventory and Equipment................................................... 4 2.6. Recourse.............................................................................. 4 2.7. Trade Names; Change of Name........................................................... 5 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS............... 5 3.1. Additional Representations and Warranties............................................. 5 3.2. Maintenance of Records................................................................ 5 3.3. Direction to Account Debtors; Contracting Parties; etc................................ 6 3.4. Modification of Terms; etc............................................................ 6 3.5. Collection............................................................................ 6 3.6. Instruments........................................................................... 7 3.7. Further Actions....................................................................... 7 ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS.............................................. 7 4.1. Additional Representations and Warranties............................................. 7 4.2. Licenses and Assignments.............................................................. 8 4.3. Infringements......................................................................... 8 4.4. Preservation of Marks................................................................. 8 4.5. Maintenance of Registration........................................................... 8 4.6. Future Registered Marks............................................................... 8 4.7. Remedies.............................................................................. 9
(i)
Page ---- ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS................. 9 5.1. Additional Representations and Warranties........................................... 9 5.2. Licenses and Assignments............................................................ 10 5.3. Infringements....................................................................... 10 5.4. Maintenance of Patents.............................................................. 10 5.5. Prosecution of Patent Application................................................... 10 5.6. Other Patents and Copyrights........................................................ 11 5.7. Remedies............................................................................ 11 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL................................................ 11 6.1. Protection of Collateral Agent's Security........................................... 11 6.2. Warehouse Receipts Non-Negotiable................................................... 12 6.3. Further Actions..................................................................... 12 6.4. Financing Statements................................................................ 12 ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT........................................ 13 7.1. Remedies; Obtaining the Collateral Upon Default..................................... 13 7.2. Remedies; Disposition of the Collateral............................................. 14 7.3. Waiver of Claims.................................................................... 15 7.4. Application of Proceeds............................................................. 15 7.5. Remedies Cumulative................................................................. 16 7.6. Discontinuance of Proceedings....................................................... 17 ARTICLE VIII.. INDEMNITY........................................................................... 17 8.1. Indemnity........................................................................... 17 8.2. Indemnity Obligations Secured by Collateral; Survival............................... 18 ARTICLE IX DEFINITIONS......................................................................... 19 ARTICLE X..... MISCELLANEOUS....................................................................... 23 10.1. Notices............................................................................. 23 10.2. Waiver; Amendment................................................................... 24 10.3. Obligations Absolute................................................................ 24 10.4. Successors and Assigns.............................................................. 24 10.5. Headings Descriptive................................................................ 24 (ii)
Page ---- 10.6. Governing Law.......................................... 24 10.7. Assignor's Duties...................................... 25 10.8. Termination; Release................................... 25 10.9. Counterparts........................................... 25 10.10. The Collateral Agent................................... 26 10.11. Additional Assignors................................... 26
ANNEX A Schedule of Chief Executive Offices and other Record Locations ANNEX B Schedule of Inventory and Equipment Locations ANNEX C Trade and Fictitious Names ANNEX D List of Marks ANNEX E List of Patents and Applications ANNEX F List of Copyrights and Applications ANNEX G Grant of Security Interest in United States Trademarks and Patents ANNEX H Grant of Security Interest in United States Copyrights (iii) AMENDED AND RESTATED SECURITY AGREEMENT --------------------------------------- AMENDED AND RESTATED SECURITY AGREEMENT, dated as of June 19, 1998, and amended and restated as of March 19, 1999, among each of the undersigned assignors (each, an "Assignor" and, together with any other entity that becomes a party hereto pursuant to Section 10.11 hereof, the "Assignors") and Bank of America National Trust and Savings Association, as Collateral Agent (together with its successors and assigns, the "Collateral Agent"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H : --------------------- WHEREAS, CII Technologies, Inc. ("Holdings"), Communications Instruments, Inc. (the "Borrower"), the several financial institutions from time to time party thereto (the "Lenders"), NationsBank, N.A., as an Issuing Lender and the Swingline Lender, and NationsBank, N.A., as Administrative Agent (together with any successor administrative agent, the "Administrative Agent," and together with the Collateral Agent, the Issuing Lenders, the Swingline Lender and the Lenders, the "Lender Creditors"), have entered into a Credit Agreement, dated as of June 19, 1998, and amended and restated as of March 19, 1999 (as amended, restated, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein; WHEREAS, the Borrower may from time to time be party to one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Lenders or with an affiliate of a Lender (each such Lender or affiliate, even if the respective Lender subsequently ceases to be a Lender under the Credit Agreement for any reason, together with such Lender's or affiliate's successors and assigns, collectively, the "Other Creditors", and together with the Lender Creditors, the "Secured Creditors"); WHEREAS, pursuant to Article X of the Credit Agreement, Holdings has --------- guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Loan Documents and the Interest Rate Protection Agreements and Other Hedging Agreements; WHEREAS, pursuant to the Subsidiary Guaranty, each Assignor (other than Holdings and the Borrower) has jointly and severally guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Loan Documents and the Interest Rate Protection Agreements and Other Hedging Agreements; WHEREAS, the Collateral Agent and the Assignors (other than Products Unlimited and its Domestic Subsidiaries) entered into a Security Agreement, dated as of June 19, 1998 (the "Original Security Agreement"), in connection with the Original Credit Agreement; WHEREAS, the parties hereto wish to amend and restate the Original Security Agreement in its entirety in the form of this Agreement; WHEREAS, it is a condition precedent to the Restatement Effective Date and to the making of Loans to the Borrower and the issuance of Letters of Credit for the account of the Borrower under the Credit Agreement that the Assignors shall have executed and delivered to the Collateral Agent this Agreement; and WHEREAS, each Assignor desires to execute this Agreement to satisfy the condition described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Assignor, the receipt and sufficiency of which are hereby acknowledged, (i) the parties hereto hereby acknowledge and agree that the Original Security Agreement shall be, and hereby is, amended and restated in its entirety in the form of this Agreement and (ii) each Assignor hereby makes the following representations and warranties to the Collateral Agent and hereby covenants and agrees with the Collateral Agent as follows: ARTICLE I SECURITY INTERESTS 1.1. Grant of Security Interests. (a) As security for the prompt --------------------------- and complete payment and performance when due of all of its Obligations, each Assignor does hereby assign and transfer unto the Collateral Agent (and hereby reconfirms its assignment under the Original Security Agreement), and does hereby pledge and grant to the Collateral Agent for the benefit of the Secured Creditors (and hereby reconfirms its pledge and grant under the Original Security Agreement), a continuing security interest of first priority in, all of the right, title and interest of such Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired: (i) each and every Receivable, (ii) all Contracts, together with all Contract Rights arising thereunder (other than Contracts which by their terms cannot be pledged (although the right to receive payments of money due or to become due thereunder shall not be excluded from the security interest created hereunder)), (iii) all Inventory, (iv) all Equipment, (v) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of such Assignor symbolized by the Marks, (vi) all Patents and Copyrights, (vii) all computer programs of such Assignor and all intellectual property rights therein (other than such programs and rights which by their terms cannot be pledged) and all other proprietary information of such Assignor, including, but not limited to, trade secrets, (viii) all other Goods, General Intangibles, Chattel Paper, Documents and Instruments, (ix) the Cash Collateral Account and all monies, securities and instruments deposited or required to be deposited in such Cash Collateral Account, and (x) all Proceeds and products of any and all of the foregoing (all of the above, collectively, the "Collateral"). Notwithstanding anything to the contrary contained in the immediately preceding sentence, the term Collateral shall not include motor vehicles. -2- (b) The security interest of the Collateral Agent under this Agreement extends to all Collateral of the kind which is the subject of this Agreement which any Assignor may acquire at any time during the continuation of this Agreement. (c) The parties hereto hereby confirm that the security interests created under the Original Security Agreement shall continue uninterrupted pursuant to this Agreement. 1.2. Power of Attorney. Each Assignor hereby constitutes and ----------------- appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of such Assignor or otherwise) to act, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due or to become due to such Assignor under or arising out of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Collateral Agent may deem to be reasonably necessary or advisable to protect the interests of the Secured Creditors, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS Each Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1. Necessary Filings. All filings, registrations and recordings ----------------- necessary or appropriate to create, preserve and perfect the security interest granted by such Assignor to the Collateral Agent hereby in respect of the Collateral have been accomplished (or, in the case of Collateral acquired pursuant to the Acquisition, will have been accomplished on the Business Day immediately following the Restatement Effective Date) and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral creates a perfected security interest therein prior to the rights of all other Persons therein and subject to no other Liens (other than Permitted Liens) and is entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests, in each case to the extent that the Collateral consists of the type of property in which a security interest may be perfected by filing a financing statement under the Uniform Commercial Code as enacted in any relevant jurisdiction or by filing a security agreement in the United States Patent and Trademark Office or United States Copyright Office or, to the extent provided in Section 6.3(b) hereof, in any foreign equivalent office of the United States Patent and Trademark or United States Copyright Office. 2.2. No Liens. Such Assignor is, and as to Collateral acquired by it -------- from time to time after the date hereof such Assignor will be, the owner of, or has rights in, all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Permitted Liens), and such Assignor shall defend the Collateral to the extent of its -3- rights therein against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 2.3. Other Financing Statements. As of the date hereof, there is no -------------------------- financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral (other than financing statements filed in respect of Permitted Liens), and so long as the Aggregate Commitment has not been terminated or any promissory note issued under the Credit Agreement remains unpaid or any of the Obligations remain unpaid or any Interest Rate Protection Agreement or Other Hedging Agreement or Letter of Credit remains in effect (other than Letters of Credit, together with all fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been secured in a manner satisfactory to the applicable Issuing Lenders in their sole and absolute discretion) or any Obligations are owed with respect thereto, such Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except (a) financing statements and other perfection instruments filed or to be filed in respect of and covering the security interests granted hereby by such Assignor or as permitted by the Credit Agreement and (b) financing statements with respect to Permitted Liens. 2.4. Chief Executive Office; Records. The chief executive office of ------------------------------- such Assignor is located at the address or addresses indicated on Annex A hereto for such Assignor. Such Assignor will not move its chief executive office except to such new location as such Assignor may establish in accordance with the last sentence of this Section 2.4. The originals of all documents evidencing all Receivables and Contract Rights of such Assignor and the only original books of account and records of such Assignor relating thereto are, and will continue to be, kept at such chief executive office, at one or more of the locations set forth on Annex A hereto or at such new locations as such Assignor may establish in accordance with the last sentence of this Section 2.4. All Receivables and Contract Rights of such Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above or such new location established in accordance with the last sentence of this Section 2.4. No Assignor shall establish new locations for such offices until it shall have given to the Collateral Agent notice of its intention to do so unless (i) such Assignor shall give to the Collateral Agent written notice of any such relocation of its chief executive office within 10 days following such relocation, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request and (ii) with respect to such new location, it shall take all action, reasonably satisfactory to the Collateral Agent, to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 2.5. Location of Inventory and Equipment. All Inventory and ----------------------------------- Equipment held on the date hereof by each Assignor is located at one of the locations shown on Annex B hereto for such Assignor (other than (i) immaterial portions of Inventory (x) sold on consignment or held on display for demonstration purposes or (y) transferred to another location in connection -4- with a sale of such Inventory in the ordinary course of business, so long as such sale occurs within 60 days from the date of such transfer and (ii) various spare parts held for maintenance or repair of Equipment). Each Assignor agrees that all Inventory and Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) any one of the locations shown on Annex B hereto, or such new location as such Assignor may establish in accordance with the last sentence of this Section 2.5 (other than (i) immaterial portions of Inventory (x) sold on consignment or held on display for demonstration purposes or (y) may be transferred to another location in connection with a sale of such Inventory in the ordinary course of business, so long as such sale occurs within 60 days from the date of such transfer and (ii) various spare parts held for maintenance or repair of Equipment). Any Assignor may establish a new location for Inventory and Equipment only if (i) it shall have given to the Collateral Agent written notice within 10 days following any such relocation clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may request and (ii) with respect to such new location, it shall have taken all action reasonably satisfactory to the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 2.6. Recourse. This Agreement is made with full recourse to each -------- Assignor and pursuant to and upon all the warranties, representations, covenants and agreements on the part of such Assignor contained herein, in the other Loan Documents, in the Interest Rate Protection Agreements or Other Hedging Agreements and otherwise in writing in connection herewith or therewith. 2.7. Trade Names; Change of Name. No Assignor has or operates in any --------------------------- jurisdiction under, or in the preceding 12 months has had or has operated in any jurisdiction under, any trade names, fictitious names or other names except its legal name and such other trade or fictitious names as are listed on Annex C hereto. No Assignor shall change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed on Annex C hereto and new names established in accordance with the last sentence of this Section 2.7. No Assignor shall assume or operate in any jurisdiction under any new trade, fictitious or other name unless (i) it shall have given to the Collateral Agent written notice within 10 days following any assumption of, or operation under, such new name clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request and (ii) with respect to such new name, it shall have taken all action requested by the Collateral Agent, to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS 3.1. Additional Representations and Warranties. As of the time when ----------------------------------------- each of its Receivables arises, each Assignor shall be deemed to have represented and warranted that -5- such Receivable, and all records, papers and documents relating thereto (if any) are what they purport to be, and that all papers and documents (if any) relating thereto will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes). 3.2. Maintenance of Records. Each Assignor will keep and maintain at ---------------------- its own cost and expense accurate records of its Receivables and Contracts, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and such Assignor will make the same available on such Assignor's premises to the Collateral Agent for inspection, at such Assignor's own cost and expense, at any and all reasonable times upon prior notice to a Responsible Officer of such Assignor. Upon the occurrence and during the continuance of an Event of Default and at the request of the Collateral Agent, such Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Assignor). Upon the occurrence and during the continuance of an Event of Default and if the Collateral Agent so directs, such Assignor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, the Receivables and the Contracts, as well as books, records and documents (if any) of such Assignor evidencing or pertaining to such Receivables and Contracts with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. 3.3. Direction to Account Debtors; Contracting Parties; etc. Upon ------------------------------------------------------- the occurrence and during the continuance of an Event of Default, and if the Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in the preceding clause (x) and (z) that the Collateral Agent may enforce collection of any such Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent as such Assignor. Without notice to or assent by any Assignor, the Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account which application shall be effected in the manner provided in Section 7.4 of this Agreement. The costs and expenses (including reasonable attorneys' fees) of collection, whether incurred by the relevant Assignor or the Collateral Agent, shall be borne by the relevant Assignor. The Collateral Agent shall deliver a copy of each notice referred to in the preceding clause (y) to the relevant Assignor; provided, that the failure by the Collateral Agent to so -------- notify such Assignor shall not affect the effectiveness of such notice or the other rights of the Collateral Agent created by this Section 3.3. The Collateral Agent's rights and the Assignor's Obligations under this Section 3.3 shall be in addition to, and not in lieu of, their respective rights and obligations under Section 7.11 of the Credit Agreement. 3.4. Modification of Terms; etc. No Assignor shall rescind or cancel --------------------------- any indebtedness evidenced by any Receivable or under any Contract, or modify in any material -6- respect any term thereof or make any material adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent, except as permitted by Section 3.5 hereof or in the Credit Agreement. Each Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to impair the rights of the Collateral Agent in the Receivables or Contracts. 3.5. Collection. Each Assignor shall endeavor in accordance with ---------- reasonable business practices to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, prior to the occurrence of an Event of Default, any Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such Assignor finds appropriate in accordance with reasonable business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services or for other reasons which such Assignor finds appropriate in accordance with reasonable business judgment. The reasonable costs and expenses (including, without limitation, attorneys' fees) of collection, whether incurred by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor. 3.6. Instruments. If any Assignor owns or acquires any Instrument ----------- constituting Collateral, such Assignor will within 10 Business Days notify the Collateral Agent thereof, and upon request by the Collateral Agent will promptly deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. 3.7. Further Actions. Each Assignor will, at its own expense, make, --------------- execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS 4.1. Additional Representations and Warranties. Each Assignor ----------------------------------------- represents and warrants that it is the true and lawful owner of or otherwise has the right to use the registered Marks listed in Annex D hereto for such Assignor and that said listed Marks constitute all the marks and applications for marks registered in the United States Patent and Trademark Office or -7- the equivalent thereof in any foreign country that such Assignor owns or uses in connection with its business as of the Restatement Effective Date. Each Assignor represents and warrants that it owns, is licensed to use or otherwise has the right to use all Marks that it uses. Each Assignor further warrants that it has no knowledge of any third party claim that any aspect of such Assignor's present or contemplated business operations infringes or will infringe any trademark, service mark or trade name. Each Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use all trademark registrations and applications listed in Annex D hereto and that said registrations are valid, subsisting, have not been canceled and that such Assignor is not aware of any third-party claim that any of said registrations is invalid or unenforceable, or is not aware that there is any reason that any of said registrations is invalid or unenforceable, or is not aware that there is any reason that any of said applications will not pass to registration. Each Assignor represents and warrants that upon the recordation of a Grant of Security Interest in United States Trademarks and Patents in the form of Annex G hereto in the United States Patent and Trademark Office, together with filings on Form UCC-1 pursuant to this Agreement, all filings, registrations and recordings necessary or appropriate to perfect the security interest granted to the Collateral Agent in the United States Marks covered by this Agreement under federal law will have been accomplished. Each Assignor agrees to execute such a Grant of Security Interest in United States Trademark and Patents covering all right, title and interest in each United States Mark, and the associated goodwill, of such Assignor, and to record the same. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default, any document which may be required by the United States Patent and Trademark Office or the equivalent thereof in any foreign country in order to effect an absolute assignment of the Assignor's right, title and interest in each Mark, and record the same. 4.2. Licenses and Assignments. Except as otherwise permitted by the ------------------------ Credit Agreement or this Agreement, each Assignor hereby agrees not to divest itself of any right under any Mark absent prior written approval of the Collateral Agent. 4.3. Infringements. Each Assignor agrees, promptly upon learning ------------- thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who such Assignor believes is infringing or diluting or otherwise violating in any material respect any of such Assignor's rights in and to any Mark, or with respect to any party claiming that such Assignor's use of any Mark violates in any material respect any property right of that party. Each Assignor further agrees, unless otherwise agreed by the Collateral Agent, to prosecute any Person infringing any Mark in accordance with commercially reasonable business practices. 4.4. Preservation of Marks. Each Assignor agrees to use its Marks in --------------------- interstate commerce (or the equivalent thereof in any foreign jurisdiction) during the time in which this Agreement is in effect, sufficiently to preserve such Marks as trademarks or service marks under the laws of the United States or under the laws of the applicable foreign country, as the case may be; provided, -------- that, to the extent permitted by the Credit Agreement, no Assignor shall be obligated to preserve any Mark in the event such Assignor determines, in its reasonable business judgment, that the preservation of such Mark is no longer desirable in the conduct of its business. -8- 4.5. Maintenance of Registration. Each Assignor shall, at its own --------------------------- expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. (S)(S) 1051 et seq. (or the equivalent thereof in any foreign ------- jurisdiction) to maintain trademark registrations, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office (or the equivalent thereof in any foreign jurisdiction) for all of its registered Marks pursuant to 15 U.S.C. (S)(S) 1058(a), 1059 and 1065 (or the equivalent thereof in any foreign jurisdiction), and shall pay all fees and disbursements in connection therewith and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent; provided, that no Assignor shall -------- be obligated to maintain registration of any Mark in the event that such Assignor determines, in its reasonable business judgment, that such maintenance of such Mark is no longer necessary or desirable in the conduct of its business. Each Assignor agrees to notify the Collateral Agent three (3) months prior to the dates on which the affidavits of use or the applications for renewal registration are due with respect to any registered Mark that the affidavits of use or the renewal is being processed or being abandoned, as the case may be. 4.6. Future Registered Marks. If any registration for a Mark issues ----------------------- hereafter to any Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office (or the equivalent thereof in any foreign jurisdiction), within 30 days of receipt of such certificate, such Assignor shall deliver to the Collateral Agent a copy of such certificate, and a grant of security in such Mark, to the Collateral Agent and at the expense of such Assignor, confirming the grant of security in such Mark to the Collateral Agent hereunder, the form of such security to be substantially the same as the form hereof or in such other form as may be reasonably satisfactory to the Collateral Agent. 4.7. Remedies. If an Event of Default shall occur and be continuing, -------- the Collateral Agent may, by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested in the Collateral Agent for the benefit of the Secured Creditors, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditors, and the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 hereof to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of such Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of such Assignor in connection with which the Marks have been used; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Collateral Agent, change such Assignor's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that the Collateral Agent may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office (or the equivalent thereof in any foreign jurisdiction) to the Collateral Agent. -9- ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS 5.1. Additional Representations and Warranties. Each Assignor ----------------------------------------- represents and warrants that it is the true and lawful owner of or otherwise has the right to use (i) all material United States and foreign trade secrets and proprietary information necessary to operate the business of the Assignor (the "Trade Secret Rights"), (ii) the Patents listed in Annex E hereto for such Assignor and that said Patents constitute all the patents and applications for patents that such Assignor owns or uses as of the Restatement Effective Date and (iii) the Copyrights listed in Annex F hereto for such Assignor and that said Copyrights constitutes all registrations of copyrights and applications for copyright registrations that such Assignor owns or uses as of the Restatement Effective Date. Each Assignor further warrants that it has no knowledge of any third party claim that any aspect of such Assignor's present or contemplated business operations infringes or will infringe any patent or any copyright or such Assignor has misappropriated any trade secret or proprietary information, except those claims which in the aggregate could not be reasonably expected to have a Material Adverse Effect. Each Assignor represents and warrants that upon the recordation of a Grant of Security Interest in United States Trademarks and Patents in the form of Annex G hereto in the United States Patent and Trademark Office and the recordation of a Grant of Security Interest in United States Copyrights in the form of Annex H hereto in the United States Copyright Office, together with filings on Form UCC-1 pursuant to this Agreement, all filings, registrations and recordings necessary or appropriate to perfect the security interest granted to the Collateral Agent in the United States Patents and United States Copyrights covered by this Agreement under federal law will have been accomplished. Each Assignor agrees to execute such a Grant of Security Interest in United States Trademarks and Patents covering all right, title and interest in each United States Patent of such Assignor and to record the same, and to execute such a Grant of Security Interest in United States Copyrights covering all right, title and interest in each United States Copyright of such Assignor and to record the same. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of any Event of Default, any document which may be required by the United States Patent and Trademark Office (or the equivalent thereof in any foreign jurisdiction) or the United States Copyright Office (or the equivalent thereof in any foreign jurisdiction) in order to effect an absolute assignment of all right, title and interest in each Patent and Copyright, and to record the same. 5.2. Licenses and Assignments. Except as otherwise permitted by the ------------------------ Credit Agreement or this Agreement, each Assignor hereby agrees not to divest itself of any right under any Patent or Copyright absent prior written approval of the Collateral Agent. 5.3. Infringements. Each Assignor agrees, promptly upon learning ------------- thereof, to furnish the Collateral Agent in writing with all pertinent information available to such Assignor with respect to any infringement, contributing infringement or active inducement to infringe any of such Assignor's rights in and to in any Patent or Copyright or to any claim that such Assignor's practice of any Patent or use of any Copyright violates any property right of a third -10- party, or with respect to any misappropriation of any Trade Secret Right or any claim that such Assignor's practice of any Trade Secret Right violates any property right of a third party. Each Assignor further agrees, absent direction of the Collateral Agent to the contrary, diligently to prosecute any Person infringing any Patent or Copyright or any Person misappropriating any Trade Secret Right in accordance with commercially reasonable business practices. 5.4. Maintenance of Patents. At its own expense, each Assignor shall ---------------------- make timely payment of all post-issuance fees required pursuant to 35 U.S.C. (S) 41 (or the equivalent thereof in any foreign jurisdiction) to maintain in force rights under each Patent, absent prior written consent of the Collateral Agent; provided, that, to the extent permitted by the Credit Agreement, no Assignor - -------- shall be obligated to maintain any Patent in the event such Assignor determines, in its reasonable business judgment, that the maintenance of such Patent is no longer necessary or desirable in the conduct of its business. 5.5. Prosecution of Patent Application. At its own expense, each --------------------------------- Assignor shall diligently prosecute all applications for Patents listed in Annex E hereto for such Assignor and shall not abandon any such application prior to exhaustion of all administrative and judicial remedies, absent written consent of the Collateral Agent; provided, that, to the extent permitted by the Credit -------- Agreement, no Assignor shall be obligated to prosecute any application in the event such Assignor determines, in its reasonable business judgment, that the prosecuting of such application is no longer necessary or desirable in the conduct of its business. 5.6. Other Patents and Copyrights. Within 30 days of the acquisition ---------------------------- or issuance of a Patent, registration of a Copyright, or acquisition of a registered Copyright, or of filing of an application for a Patent or registration of Copyright, the relevant Assignor shall deliver to the Collateral Agent a copy of said Copyright or certificate or registration of, or application therefor, said Patents, as the case may be, with an assignment for security as to such Patent or Copyright, as the case may be, to the Collateral Agent and at the expense of such Assignor, confirming the assignment for security, the form of such assignment for security to be substantially the same as the form hereof or in such other form as may be reasonably satisfactory to the Collateral Agent. 5.7. Remedies. If an Event of Default shall occur and be continuing, -------- the Collateral Agent may by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title, and interest of such Assignor in each of the Patents and Copyrights vested in the Collateral Agent for the benefit of the Secured Creditors, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 hereof to execute, cause to be acknowledged and notarized and to record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from practicing the Patents and using the Copyrights directly or indirectly, and such Assignor shall execute such other and further documents as the Collateral Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors. -11- ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 6.1. Protection of Collateral Agent's Security. Each Assignor will ----------------------------------------- do nothing to impair the rights of the Collateral Agent in the Collateral except to the extent such impairment shall be waived in accordance with the terms of Section 10.2 hereof. Each Assignor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at such Assignor's own expense to the extent and in the manner provided in the Credit Agreement; all policies or certificates with respect to such insurance (and any other insurance maintained by such Assignor) (i) shall be endorsed to the Collateral Agent's reasonable satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as additional insured and loss payee) and (ii) shall state that such insurance policies shall not be canceled or revised without 30 days' prior written notice thereof (or 10 days prior written notice in the case of nonpayment of premium) by the insurer to the Collateral Agent; and certified copies of such policies or certificates shall be deposited with the Collateral Agent. If any Assignor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if any Assignor shall fail to so endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and such Assignor agrees to promptly reimburse the Collateral Agent for all costs and expenses of procuring such insurance. Except as otherwise permitted to be retained by the relevant Assignor pursuant to the Credit Agreement, the Collateral Agent shall, at the time such proceeds of such insurance are distributed to the Secured Creditors, apply such proceeds in accordance with Section 7.4 hereof. Each Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of such Assignor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Assignor. 6.2. Warehouse Receipts Non-Negotiable. Each Assignor agrees that if --------------------------------- any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in Section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law) or, if any warehouse receipt or any receipt in the nature of a warehouse receipt is "negotiable" (as such term is used in Section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law) then the respective Assignor shall promptly take all action as may be required under the relevant jurisdiction to grant a perfected security interest in such Collateral to the Collateral Agent for the benefit of the Secured Creditors. 6.3. Further Actions. (a) Each Assignor will, at its own expense, --------------- make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attor- -12- ney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. (b) Each Assignor hereby agrees that it will from time to time, at its own expense and at the request of the Collateral Agent or the Majority Lenders, take all actions (including making all appropriate filings) as may be necessary or in the reasonable opinion of the Collateral Agent desirable to perfect (and maintain the perfection of) any security interest in any material foreign Mark, Patent and/or Copyright, and in connection therewith shall deliver one or more opinions of foreign counsel confirming the validity and perfection of such foreign Marks, Patents and/or Copyrights. 6.4. Financing Statements. Each Assignor agrees to execute and -------------------- deliver to the Collateral Agent such financing statements, in form reasonably acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law. Each Assignor will pay any applicable filing fees, recordation taxes and related expenses relating to its Collateral. Each Assignor hereby authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor where permitted by law. ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 7.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor ----------------------------------------------- agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the Uniform Commercial Code in all relevant jurisdictions and may: (i) personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from such Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Assignor's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor; (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent; -13- (iii) withdraw all monies, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 7.4 hereof; (iv) sell, assign or otherwise liquidate any or all of the Collateral or any part thereof in accordance with Section 7.2 hereof, or direct the relevant Assignor to sell, assign or otherwise liquidate any or all of the Collateral or any part thereof, and, in each case, take possession of the proceeds of any such sale or liquidation; (v) take possession of the Collateral or any part thereof, by directing the relevant Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event such Assignor shall at its own expense: (x) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent; (y) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2 hereof; and (z) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and (vi) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine (taking into account such provisions as may be necessary to protect and preserve such Marks, Patents or Copyrights); it being understood that each Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by such Assignor of said obligation. The Secured Creditors agree that this Agreement may be enforced only by the action of the Administrative Agent or the Collateral Agent, in each case acting upon the instructions of the Majority Lenders (or, after the date on which all Loan Document Obligations have been paid in full and the Aggregate Commitment has been terminated, the holders of at least the majority of the outstanding Other Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Collateral Agent or the holders of at least a majority of the outstanding Interest Rate Obligations, as the case may be, for the benefit of the Secured Creditors upon the terms of this Agreement. 7.2. Remedies; Disposition of the Collateral. Any Collateral --------------------------------------- repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and any other Collateral whether or -14- not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair at the expense of the relevant Assignor which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the relevant Assignor or any nominee of such Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the City of New York. To the extent permitted by any such requirement of law, the Collateral Agent may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to the relevant Assignor. If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the relevant Assignor as hereinabove specified, the Collateral Agent need give such Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. 7.3. Waiver of Claims. Except as otherwise provided in this ---------------- Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each Assignor hereby further waives, to the extent permitted by law: (i) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and -15- (iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against such Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Assignor. 7.4. Application of Proceeds. (a) All moneys collected by the ----------------------- Collateral Agent (or, to the extent the Pledge Agreement, any Mortgage or any other Collateral Documents require proceeds of collateral under such Collateral Documents to be applied in accordance with the provisions of this Agreement, the Collateral Agent under such other Collateral Document) upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing the Collateral Agent of the type provided in clauses (iii) and (iv) of the definition of Obligations herein; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Obligations shall be paid to the Secured Creditors as provided in Section 7.4(c) hereof with each Secured Creditor receiving an amount equal to its outstanding Obligations or, if the proceeds are insufficient to pay in full all such Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii) and following the termination of this Agreement pursuant to Section 10.8 hereof, to the relevant Assignor or, to the extent directed by such Assignor or a court of competent jurisdiction, to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "Pro Rata Share" shall mean, when calculating a Secured Creditor'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 Creditor's Obligations and the denominator of which is the then outstanding amount of all Obligations. (c) All payments required to be made to the Lender Creditors hereunder shall be made to the Administrative Agent under the Credit Agreement for the account of the Lender Creditors and all payments required to be made to the Other Creditors hereunder shall be made directly to the respective Other Creditor. -16- (d) For purposes of applying payments received in accordance with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent under the Credit Agreement and (ii) the Other Creditors for a determination (which the Administrative Agent, each Other Creditor and the Secured Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Obligations owed to the Lender Creditors or the Other Creditors, as the case may be. Unless it has actual knowledge (including by way of written notice from a Lender Creditor or an Other Creditor) to the contrary, the Administrative Agent under the Credit Agreement, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that (x) no Loan Document Obligations other than principal, interest and regularly accruing fees are owing to any Lender Creditor and (y) no Interest Rate Protection Agreement or Other Hedging Agreement, or Other Obligations in respect thereof, are in existence. (e) It is understood that the Assignors 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 sums referred to in clause (a) of this Section 7.4 with respect to the relevant Assignor. 7.5. Remedies Cumulative. Each and every right, power and remedy ------------------- hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, the Interest Rate Protection Agreements or Other Hedging Agreements, the other Loan Documents or now or hereafter existing at law, in equity or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of the exercise of one shall not be deemed a waiver of the right to exercise any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. No notice to or demand on any Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including attorneys' fees, and the amounts thereof shall be included in such judgment. 7.6. Discontinuance of Proceedings. In case the Collateral Agent ----------------------------- shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the relevant Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. -17- ARTICLE VIII INDEMNITY 8.1. Indemnity. (a) Each Assignor jointly and severally agrees to --------- indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor and their respective successors, permitted assigns, employees, agents and servants (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including attorneys' fees and expenses) (for the purposes of this Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any Interest Rate Protection Agreement or Other Hedging Agreement, any other Loan Document or any other document executed in connection herewith or therewith or in any other way connected with the administration of the transactions contemplated hereby or thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any country, state or other governmental body or unit, any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage), or contract claim; provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent caused by the gross negligence or willful misconduct of such Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the relevant Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the relevant Assignor of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a) hereof, each Assignor agrees, jointly and severally, to pay, or reimburse the Collateral Agent for any and all reasonable fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) Without limiting the application of Section 8.1(a) or (b) hereof, each Assignor agrees, jointly and severally, to pay, indemnify and hold each Indemnitee harmless from and -18- against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any misrepresentation by any Assignor in this Agreement, any Interest Rate Protection Agreement or Other Hedging Agreement, any other Loan Document or in any writing contemplated by or made or delivered pursuant to or in connection with this Agreement, any Interest Rate Protection Agreement or Other Hedging Agreement or any other Loan Document. (d) If and to the extent that the obligations of any Assignor under this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2. Indemnity Obligations Secured by Collateral; Survival. Any ----------------------------------------------------- amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of each Assignor contained in this Article VIII shall continue in full force and effect notwithstanding the full payment of all the promissory notes issued under the Credit Agreement, the termination of all Interest Rate Protection Agreements or Other Hedging Agreements and the payment of all other Obligations and notwithstanding the discharge thereof. ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Administrative Agent" shall have the meaning provided in the recitals to this Agreement. "Agreement" shall mean this Amended and Restated Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Assignor" shall have the meaning provided in the first paragraph of this Agreement. "Borrower" shall have the meaning provided in the recitals to this Agreement. "Cash Collateral Account" shall mean, collectively, each cash collateral account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditors. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. -19- "Class" shall have the meaning provided in Section 10.2 of this Agreement. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of any Assignor (including, without limitation, all rights to payment) under each Contract. "Contracts" shall mean all contracts between any Assignor and one or more additional parties (including, without limitation, any Interest Rate Protection Agreements or Other Hedging Agreements). "Copyrights" shall mean any United States or foreign copyright owned by any Assignor, including any registrations of any Copyrights, in the United States Copyright Office or the equivalent thereof in any foreign country, as well as any application for a United States or foreign copyright registration now or hereafter made with the United States Copyright Office or the equivalent thereof in any foreign country by any Assignor, other than those countries outside the United States where the grant of a security interest would invalidate such Copyrights. "Credit Agreement" shall have the meaning provided in the recitals to this Agreement. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, movable trade fixtures and vehicles now or hereafter owned by any Assignor and any and 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. "Event of Default" shall mean any Event of Default under, and as defined in, the Credit Agreement and shall in any event, without limitation, include any payment default on any of the Obligations after the expiration of any applicable grace period. "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. -20- "Holdings" shall have the meaning provided in the recitals to this Agreement. "Indemnitee" shall have the meaning provided in Section 8.1 of this Agreement. "Instrument" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same; in all stages of production -- from raw materials through work- in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor. "Lender Creditors" shall have the meaning provided in the recitals to this Agreement. "Lenders" shall have the meaning provided in the recitals to this Agreement. "Liens" shall mean any security interest, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument, in, of, or on any Assignor's property. "Loan Document Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Marks" shall mean all right, title and interest in and to any United States or foreign trademarks, service marks and trade names now held or hereafter acquired by any Assignor, including any registration of any trademarks and service marks in the United States Patent and Trademark Office, or the equivalent thereof in any foreign country, other than those countries outside the United States, where the grant of a security interest would invalidate such trademarks, service marks and trade names, and any trade dress including logos and/or designs used by any Assignor in the United States or any foreign country. "Obligations" shall mean (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor, now existing or hereafter incurred under, arising out of or in connection with any Loan Document to which such Assignor is a party and the due performance and compliance by each Assignor with the terms of each such Loan Document, including, without limitation, in the case of the Borrower, all "Obligations" under and as defined in the Credit Agreement, and in the case of each other Assignor, all "Guaranteed Obligations" under and as defined in the Credit Agreement or the Subsidiary Guaranty, as applicable (all such obligations -21- and liabilities under this clause (i), except to the extent consisting of obligations or indebtedness with respect to Interest Rate Protection Agreements or Other Hedging Agreements, being herein collectively called the "Loan Document Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Protection Agreement or Other Hedging Agreement, including, without limitation, in the case of the Assignors other than the Borrower, all obligations of such Assignor under Article X of the Credit Agreement or under the Subsidiary Guaranty, as the case may be, in respect of Interest Rate Protection Agreements or Other Hedging Agreements (all such obligations and liabilities under this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all sums advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of each Assignor referred to in clauses (i) and (ii), after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement. "Original Security Agreement" shall have the meaning provided in the recitals to this Agreement. "Other Creditors" shall have the meaning provided in the recitals to this Agreement. "Other Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Patents" shall mean any United States or foreign patent to which any Assignor now or hereafter has title and any divisions or continuations thereof, as well as any application for a United States or foreign patent now or hereafter made by any Assignor, except those patents or patent applications in those countries outside the United States where the granting of a security interest in such patents is not permissible under the laws of that country. "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or any Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. -22- "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this Agreement. "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all of such Assignor's rights to payment for goods sold or leased or services performed by such Assignor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (a) all security pledged, assigned, hypothecated or granted to or held by such Assignor to secure the foregoing, (b) all of any Assignor's right, title and interest in and to any goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (e) all books, records, ledger cards, and invoices relating thereto, (f) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (g) all credit information, reports and memoranda relating thereto and (h) all other writings related in any way to the foregoing. "Requisite Creditors" shall have the meaning provided in Section 10.2 of this Agreement. "Secured Creditors" shall have the meaning provided in the recitals to this Agreement. "Termination Date" shall have the meaning provided in Section 10.8 of this Agreement. "Trade Secret Rights" shall have the meaning provided in Section 5.1 of this Agreement. ARTICLE X MISCELLANEOUS 10.1. Notices. Except as otherwise specified herein, all notices, ------- requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed: (a) if to any Assignor, at: -23- c/o CII Technologies, Inc. 1396 Charlotte Highway Fairview, N.C. 28730 Attention: Richard Heggelund Telephone No.: (704) 628-1711 Telecopier No.: (704) 628-1439 (b) if to the Collateral Agent, at: Bank of America National Trust and Savings Association NationsBank Corporate Center 100 North Tryon Street Charlotte, North Carolina 28255 Attention: John O'Neill Telephone No.: (704) 388-5045 Telecopier No.: (704) 386-9607 (c) if to any Lender Creditor (other than the Collateral Agent), at such address as such Lender Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor, at such address as such Other Creditor shall have specified in writing to each Assignor and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 10.2. Waiver; Amendment. None of the terms and conditions of this ----------------- Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Assignor directly affected thereby and the Collateral Agent (with the consent of (x) either the Majority Lenders (or, to the extent required by Section 12.01 of the Credit Agreement, all of the Lenders) at all times prior to the time on which all Loan Document Obligations have been paid in full and the Aggregate Commitment has been terminated or (y) the holders of at least a majority of the outstanding Other Obligations at all times after the time on which all Loan Document Obligations have been paid in full and the Aggregate Commitment has been terminated); provided, that any -------- change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such Class of Secured Creditors. For the purpose of this Agreement the term "Class" shall mean each class of Secured Creditors, i.e., whether (x) the Lender ---- Creditors as holders of the Loan Document Obligations or (y) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Loan Document Obligations, the Majority Lenders and (y) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. -24- 10.3. Obligations Absolute. The obligations of each Assignor -------------------- hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of such Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement, any other Loan Document or any Interest Rate Protection Agreement or Other Hedging Agreement; or (c) any amendment to or modification of any Loan Document or any Interest Rate Protection Agreement or Other Hedging Agreement or any security for any of the Obligations; whether or not any Assignor shall have notice or knowledge of any of the foregoing. 10.4. Successors and Assigns. This Agreement shall be binding upon ---------------------- each Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and its successors and assigns; provided, that no Assignor -------- may transfer or assign any or all of its rights or obligations hereunder without the prior written consent of the Collateral Agent. All agreements, statements, representations and warranties made by each Assignor herein or in any certificate or other instrument delivered by such Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement, the other Loan Documents and the Interest Rate Protection Agreements or Other Hedging Agreements regardless of any investigation made by the Secured Creditors or on their behalf. 10.5. Headings Descriptive. The headings of the several sections of -------------------- this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 10.6. Governing Law. 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. 10.7. Assignor's Duties. It is expressly agreed, anything herein ----------------- contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of each Assignor under or with respect to any Collateral. 10.8. Termination; Release. (a) After the Termination Date, this -------------------- Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 8.1 hereof shall survive such termination) and the Collateral Agent, at the request and expense of the respective Assignor, will promptly execute and deliver to such Assignor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in -25- this Agreement, "Termination Date" shall mean the date upon which the Aggregate Commitment and all Interest Rate Protection Agreements and Other Hedging Agreements have been terminated, no promissory note or Letter of Credit under the Credit Agreement is outstanding (other than Letters of Credit, together with all fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been secured in a manner satisfactory to the applicable Issuing Lenders in their sole and absolute discretion) and all other Obligations (other than any indemnities described in Section 8.1 hereof and in Section 12.05 of the Credit Agreement which are not then due and payable) have been paid in full. (b) In the event that any part of the Collateral is sold or otherwise disposed of in connection with a sale or other disposition permitted by Section 8.02 of the Credit Agreement or is otherwise released at the direction of the Majority Lenders (or all the Lenders if required by Section 12.01 of the Credit Agreement), the Collateral Agent, at the request and expense of such Assignor, will duly release from the security interest created hereby and assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in the possession of the Collateral Agent and has not theretofore been released pursuant to this Agreement. (c) At any time that the respective Assignor desires that Collateral be released as provided in the foregoing Section 10.8(a) or (b), it shall deliver to the Collateral Agent a certificate signed by a Responsible Officer of such Assignor stating that the release of the respective Collateral is permitted pursuant to Section 10.8(a) or (b) hereof. 10.9. Counterparts. This Agreement 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 Borrower and the Collateral Agent. 10.10. The Collateral Agent. The Collateral Agent will hold in -------------------- accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Collateral Agent as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement and as provided in the Uniform Commercial Code in the State of New York. The Collateral Agent shall act hereunder on the terms and conditions set forth in Article XI of the Credit Agreement. 10.11. Additional Assignors. It is understood and agreed that any -------------------- Subsidiary of Holdings that is required to execute a counterpart of this Agreement after the date hereof pursuant to Sections 7.12 and/or 8.15 of the Credit Agreement shall automatically become an Assignor hereunder by executing a counterpart hereof (or a Guarantor Supplement) and delivering the same to the Collateral Agent. * * * -26- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. CII TECHNOLOGIES, INC., as an Assignor By: _________________________________ Name: Title: COMMUNICATIONS INSTRUMENTS, INC., as an Assignor By: _________________________________ Name: Title: KILOVAC CORPORATION, as an Assignor By: _________________________________ Name: Title: KILOVAC INTERNATIONAL, INC., as an Assignor By: _________________________________ Name: Title: CORCOM, INC., as an Assignor By: _________________________________ Name: Title: PRODUCTS UNLIMITED CORPORATION, as an Assignor By: _________________________________ Name: Title: MARC INDUSTRIES, INC., as an Assignor By: _________________________________ Name: Title: SOL INDUSTRIES, INC., as an Assignor By: _________________________________ Name: Title: GW INDUSTRIES, INC., as an Assignor By: _________________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Collateral Agent By: _________________________________ Name: Title: ANNEX A ------- to -- SECURITY AGREEMENT ------------------ SCHEDULE OF CHIEF EXECUTIVE OFFICES AND OTHER RECORD LOCATIONS -------------------------- CII Technologies, Inc. - ---------------------- 1396 Charlotte Highway Fairview, North Carolina 28730 Communications Instruments, Inc. - -------------------------------- 1396 Charlotte Highway Fairview, North Carolina 28730 2 Craftsman Road East Windsor, Connecticut 3165 Sweeten Creek Road Asheville, North Carolina 28803 9B2 Butterfield Street El Paso, Texas 175 N. Diamond Street Mansfield, Ohio 245 E. 4th Street Mansfield, Ohio Two Solutions Way, Waynesboro, Virginia 22980-1999 Kilovac Corporation - -------------------- 550 Linden Avenue Carpinteria, California 93013 5095 6th Street Carpinteria, California 93013 5041 6th Street Carpinteria, California 93013 Kilovac International, Inc. - --------------------------- 550 Linden Avenue ANNEX A Page 2 Carpinteria, California 93013 Corcom, Inc. - ------------ 1201 Francisco Street Torrence, California 90502 6700 Fallbrook Avenue Suite 160 West Hills, California 91307 17 Sarah's Way Fairhaven, Massachusetts 02719 43 Butterfield Circle El Paso, Texas 07990 844 East Rockland Road Libertyville, Illinois 60648 2430 Amster Street Torrence, California 90505 ANNEX B to SECURITY AGREEMENT ------------------ SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS --------------------------------------------- CII Technologies, Inc. - ---------------------- 1396 Charlotte Highway Fairview, North Carolina 28730 Communications Instruments, Inc. - -------------------------------- 1396 Charlotte Highway Fairview, North Carolina 28730 2 Craftsman Road East Windsor, Connecticut 3165 Sweeten Creek Road Asheville, North Carolina 28803 9-B2 Butterfield Street El Paso, Texas 175 N. Diamond Street Mansfield, Ohio 245 E. 4th Street Mansfield, Ohio Two Solutions Way, Waynesboro, Virginia 22980-1999 Kilovac Corporation - -------------------- 550 Linden Avenue Carpinteria, California 93013 5095 6th Street Carpinteria, California 93013 5041 6th Street Carpinteria, California 93013 Kilovac International, Inc. - --------------------------- ANNEX A Page 2 550 Linden Avenue Carpinteria, California 93013 Corcom, Inc. - ------------ 1201 Francisco Street Torrence, California 90502 6700 Fallbrook Avenue Suite 160 West Hills, California 91307 17 Sarah's Way Fairhaven, Massachusetts 02719 43 Butterfield Circle El Paso, Texas 07990 844 East Rockland Road Libertyville, Illinois 60648 2430 Amster Street Torrence, California 90505 ANNEX C to SECURITY AGREEMENT ------------------ TRADE AND FICTITIOUS NAMES -------------------------- Midtex Relays Midtex Division of CII Technologies, Inc. Hartman Division of CII Technologies, Inc. Hartman Electrical Manufacturing Kilovac Division of CII Technologies, Inc. Communications Instruments, Inc. Division of CII Technologies, Inc. Corcom, Inc. ibex Aerospace Technologies, Inc. GENICOM Corporation GENICOM Corporation Relays Division ANNEX D to SECURITY AGREEMENT LIST OF MARKS - -------------------------------------------------------------------------------- MARK REGISTRATION STATUS NO. - -------------------------------------------------------------------------------- COMMUNICATIONS INSTRUMENTS, INC. - -------------------------------------------------------------------------------- CII logo - -------------------------------------------------------------------------------- CII TECHNOLOGIES - -------------------------------------------------------------------------------- FLAGSHIP 1,098,654 Inactive* US - -------------------------------------------------------------------------------- HARTMAN logo - -------------------------------------------------------------------------------- HiG logo 792,859 & 854,539 Inactive* US - -------------------------------------------------------------------------------- MIDTEX logo - -------------------------------------------------------------------------------- MISS TESTER 762,701 Inactive* US - -------------------------------------------------------------------------------- MM5 1,156,189 Inactive* US - -------------------------------------------------------------------------------- KILOVAC CORPORATION - -------------------------------------------------------------------------------- KILOVAC 824,815 & 1,687,712 Active US - -------------------------------------------------------------------------------- WEST COAST ELECTRICAL MANUFACTURING CO. - -------------------------------------------------------------------------------- WESCO and design 51,573 Active California - -------------------------------------------------------------------------------- * This registration was either canceled or expired and no representations and warranties are made with respect to this mark. - -------------------------------------------------------------------------------- MARK REGISTRATION STATUS NO. - -------------------------------------------------------------------------------- COMMUNICATIONS INSTRUMENTS, INC. (GENICOM) - -------------------------------------------------------------------------------- Decigrid 1,380,197 US - -------------------------------------------------------------------------------- Decigrid 229622 Not renewed Portugal - -------------------------------------------------------------------------------- Decigrid 439224 Renewal due Italy 04/30/05 - -------------------------------------------------------------------------------- Decigrid 339,189 Renewal due ANNEX D Page 2 - -------------------------------------------------------------------------------- MARK REGISTRATION STATUS NO. - -------------------------------------------------------------------------------- Switzerland 4/16/05 - -------------------------------------------------------------------------------- Decigrid 199,012 Renewal due Sweden 12/06/05 - -------------------------------------------------------------------------------- Decigrid 1,102,293 Renewal due Spain 11/05/05 - -------------------------------------------------------------------------------- Decigrid 124,083 Abandoned Norway - -------------------------------------------------------------------------------- Decigrid B1239799 Renewal due UK 04/15/06 - -------------------------------------------------------------------------------- Decigrid 1,090,568 Renewal due Germany 04/06/05 - -------------------------------------------------------------------------------- Decigrid 1,306,848 Renewal due France 04/22/05 - -------------------------------------------------------------------------------- Decigrid 01551/1986 Not renewed Denmark - -------------------------------------------------------------------------------- Decigrid TMA317259 Renewal due Canada 8/15/05 - -------------------------------------------------------------------------------- Decigrid 408,575 Renewal due Benelux 04/15/05 - -------------------------------------------------------------------------------- MARK REGISTRATION STATUS NO. - -------------------------------------------------------------------------------- CORCOM, INC. - -------------------------------------------------------------------------------- "Four C's" Mark - -------------------------------------------------------------------------------- 968,038 US - -------------------------------------------------------------------------------- 968,039 US - -------------------------------------------------------------------------------- 1,202,581 US - -------------------------------------------------------------------------------- 1,492,063 US - -------------------------------------------------------------------------------- 1,591,857 US - -------------------------------------------------------------------------------- 105765 Turkey - -------------------------------------------------------------------------------- 443915 Republic of China (Taiwan) - -------------------------------------------------------------------------------- ANNEX D Page 3 - -------------------------------------------------------------------------------- MARK REGISTRATION STATUS NO. - -------------------------------------------------------------------------------- 429833 Republic of China (Taiwan) - -------------------------------------------------------------------------------- 6759 Switzerland - -------------------------------------------------------------------------------- 181,835 Sweden - -------------------------------------------------------------------------------- 994,208 Spain - -------------------------------------------------------------------------------- 2461/88 Singapore - -------------------------------------------------------------------------------- MARK REGISTRATION STATUS NO. - -------------------------------------------------------------------------------- 140,173 New Zealand - -------------------------------------------------------------------------------- 336660 Mexico - -------------------------------------------------------------------------------- 226493 South Korea - -------------------------------------------------------------------------------- 1,786,919 Japan - -------------------------------------------------------------------------------- 23359-81 Italy - -------------------------------------------------------------------------------- 53487 Israel - -------------------------------------------------------------------------------- 196340 India - -------------------------------------------------------------------------------- 5513/81 Germany - -------------------------------------------------------------------------------- 1 701 525 France - -------------------------------------------------------------------------------- 517322 Peoples Republic of China - -------------------------------------------------------------------------------- 349576 Peoples Republic of China - -------------------------------------------------------------------------------- 271,422 Canada - -------------------------------------------------------------------------------- A369657 Australia - -------------------------------------------------------------------------------- ANNEX D Page 4 - -------------------------------------------------------------------------------- MARK REGISTRATION STATUS NO. - -------------------------------------------------------------------------------- 01 378884 Netherlands - -------------------------------------------------------------------------------- 1721 of 1982 Hong Kong - -------------------------------------------------------------------------------- 1,167,240 United Kingdom - -------------------------------------------------------------------------------- 99-200 Austria - -------------------------------------------------------------------------------- COMMUNICATIONS INSTRUMENTS, INC. (IBEX) - -------------------------------------------------------------------------------- The stylized format for "Ibex" as shown on the page of the Ibex letterhead - -------------------------------------------------------------------------------- ANNEX E to SECURITY AGREEMENT ------------------ LIST OF PATENTS AND APPLICATIONS --------------------------------
- -------------------------------------------------------------------------------------------------------------------- TITLE COUNTRY PATENT NO./ ISSUE DATE/ SERIAL NO. FILING DATE - -------------------------------------------------------------------------------------------------------------------- COMMUNICATIONS INSTRUMENTS, INC. - -------------------------------------------------------------------------------------------------------------------- Patents Issued - -------------------------------------------------------------------------------------------------------------------- Magnetic Circuit for Miniature Relays US 4,322,701 03/30/82 (SN143454) - -------------------------------------------------------------------------------------------------------------------- Electromagnetic Actuator US 4,581,597 04/08/86 (SN570513) - -------------------------------------------------------------------------------------------------------------------- Utility Meter Interface Circuit US 5,283,572 02/01/94 (SN569178) - -------------------------------------------------------------------------------------------------------------------- Patents Pending - -------------------------------------------------------------------------------------------------------------------- None - -------------------------------------------------------------------------------------------------------------------- KILOVAC CORPORATION - -------------------------------------------------------------------------------------------------------------------- Patents Issued - -------------------------------------------------------------------------------------------------------------------- DC Vacuum Relay Device US 5,394,128 02/28/95 (SN140275) - -------------------------------------------------------------------------------------------------------------------- DC Vacuum Relay Device EPO 587611 05/21/97 (SN2910682) - -------------------------------------------------------------------------------------------------------------------- DC Vacuum Relay Device Germany 69219890 06/26/97 (SN69219890) - -------------------------------------------------------------------------------------------------------------------- Armature Position Sensor for a Relay US 5,483,214 01/09/96 (SN233627) - -------------------------------------------------------------------------------------------------------------------- DC Vacuum Relay Japan 2646292 05/09/97 - -------------------------------------------------------------------------------------------------------------------- TITLE COUNTRY PATENT NO./ ISSUE DATE/ SERIAL NO. FILING DATE - -------------------------------------------------------------------------------------------------------------------- Sealed Relay Device US 5,519,370 05/21/96 (SN205526) - -------------------------------------------------------------------------------------------------------------------- DC Vacuum Relay Device US 5,554,962 09/10/96 with Angular Impact Break (SN542687) Mechanism (Continuation of Patent Application Serial No. 676968, abandoned) - --------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------- Patents Pending --------------- - -------------------------------------------------------------------------------------------------------------------- US 08/233629 04/26/94 - -------------------------------------------------------------------------------------------------------------------- PCT 924502545 03/26/93 - -------------------------------------------------------------------------------------------------------------------- PCT 95US2630 03/03/95 - -------------------------------------------------------------------------------------------------------------------- PCT 95US5152 04/26/95 - -------------------------------------------------------------------------------------------------------------------- PCT 97US/03119 02/27/97 - -------------------------------------------------------------------------------------------------------------------- CANADA 2184829 02/27/95 - -------------------------------------------------------------------------------------------------------------------- EPO 95913530 02/03/95 - -------------------------------------------------------------------------------------------------------------------- JAPAN 523041/95 02/03/95 - -------------------------------------------------------------------------------------------------------------------- PCT 97/07736 05/06/97 - -------------------------------------------------------------------------------------------------------------------- US 08/643469 05/06/97 - -------------------------------------------------------------------------------------------------------------------- US 08/913150 09/05/97 - -------------------------------------------------------------------------------------------------------------------- US 08/062328 10/17/97 - --------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------- CORCOM, INC - -------------------------------------------------------------------------------------------------------------------- Patents Issued -------------- - -------------------------------------------------------------------------------------------------------------------- TITLE COUNTRY PATENT NO./ ISSUE DATE/ SERIAL NO. FILING DATE - -------------------------------------------------------------------------------------------------------------------- Adjustable Inductor US 3480896 11/25/69 - -------------------------------------------------------------------------------------------------------------------- Noise Suppression Filter US 3996537 12/07/76 - -------------------------------------------------------------------------------------------------------------------- Apparatus for Determining Differential Mode and Common Mode Noise US 4263549 04/21/81 - -------------------------------------------------------------------------------------------------------------------- Leadless Filter US 4384263 05/17/83 - -------------------------------------------------------------------------------------------------------------------- A.C. Power Entry Module US 4488201 12/11/86 - -------------------------------------------------------------------------------------------------------------------- Power Line Interference Filter Mounted on a PC Board US 4622526 11/11/86 - -------------------------------------------------------------------------------------------------------------------- Telephone Connector with a Bypass Capacitor US 4695115 09/22/87 - -------------------------------------------------------------------------------------------------------------------- Broadband RFI Power Line - --------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------- Filter US 4761623 08/02/88 - -------------------------------------------------------------------------------------------------------------------- Modular Electrical Connector US 4772224 09/20/88 - -------------------------------------------------------------------------------------------------------------------- Electrical Contact Plug with a Metal Housing US 4863401 09/05/89 - -------------------------------------------------------------------------------------------------------------------- Power Entry Module US 5434740 07/18/95 - -------------------------------------------------------------------------------------------------------------------- Canada 1286014 - -------------------------------------------------------------------------------------------------------------------- Canada 1202055 - -------------------------------------------------------------------------------------------------------------------- TITLE COUNTRY PATENT NO./ ISSUE DATE/ SERIAL NO. FILING DATE - -------------------------------------------------------------------------------------------------------------------- European Patent 0 262 339 B1 Office (Publication No.) - -------------------------------------------------------------------------------------------------------------------- Japan 1846482 - -------------------------------------------------------------------------------------------------------------------- South Korea 91-1318 - -------------------------------------------------------------------------------------------------------------------- Republic of China NI-29960 (Taiwan) - -------------------------------------------------------------------------------------------------------------------- United Kingdom 0 262 339 - --------------------------------------------------------------------------------------------------------------------
ANNEX F to SECURITY AGREEMENT ------------------ LIST OF COPYRIGHTS AND APPLICATIONS ----------------------------------- ANNEX G to SECURITY AGREEMENT ------------------ GRANT OF SECURITY INTEREST -------------------------- IN UNITED STATES TRADEMARKS AND PATENTS --------------------------------------- FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which are hereby acknowledged, [Name of Grantor], a corporation ("the Grantor") with principal offices at_______________________________, hereby grants to Bank of America National Trust and Savings Association, as Collateral Agent, with principal offices at 100 North Tryon Street Street, Charlotte, North Carolina 28255 (the "Grantee"), a security interest in (i) all of the Grantor's right, title and interest in and to the United States trademarks, trademark registrations and trademark applications (the "Marks") set forth on Schedule A attached hereto, (ii) all of the Grantor's rights, title and interest in and to the United States patents (the "Patents") set forth on Schedule B attached hereto, in each case together with (iii) all Proceeds (as such term is defined in the Security Agreement referred to below) and products of the Marks and Patents, (iv) the goodwill of the businesses with which the Marks are associated and (v) all causes of action arising prior to or after the date hereof for infringement of any of the Marks and Patents or unfair competition regarding the same. THIS AGREEMENT is made to secure the satisfactory performance and payment of all the Obligations of the Grantor, as such term is defined in the Amended and Restated Security Agreement among Grantor, the other assignors from time to time party thereto and the Grantee, dated as of June 19, 1998, and amended and restated as of March 19, 1999 (as amended, restated and otherwise modified from time to time, the "Security Agreement"). Upon the occurrence of the Termination Date (as defined in the Security Agreement), the Grantee shall, upon such satisfaction, execute, acknowledge, and deliver to the Grantor an instrument in writing releasing the security interest in the Marks and Patents acquired under this Agreement. This Agreement has been granted in conjunction with the security interest granted to the Grantee under the Security Agreement. The rights and remedies of the Grantee with respect to the security interest granted herein are without prejudice to, and are in addition to those set forth in the Security Agreement, all terms and provisions of which are incorporated herein by reference. In the event that any provisions of this Agreement are deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall govern. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the ___ day of ____________. ANNEX G Page 2 [NAME OF GRANTOR], as Grantor By: _________________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Collateral Agent and Grantee By: _________________________________ Name: Title: STATE OF __________ ) ) ss.: COUNTY OF ________ ) On this __ day of _______, _____, before me personally came _________________ who, being by me duly sworn, did state as follows: that [s]he is _______________ of [Name of Grantor], that [s]he is authorized to execute the foregoing Agreement on behalf of said corporation and that [s]he did so by authority of the Board of Directors of said corporation. _________________________ Notary Public STATE OF __________ ) ) ss.: COUNTY OF ________ ) On this ___ day of ______, _____, before me personally came _______________ who, being by me duly sworn, did state as follows: that [s]he is __________________ of Bank of America National Trust and Savings Association, that [s]he is authorized to execute the foregoing Agreement on behalf of said corporation and that [s]he did so by authority of the Board of Directors of said corporation. _________________________ Notary Public SCHEDULE A ---------- MARK REG. NO. REG. DATE - ---- -------- --------- SCHEDULE B ---------- PATENT PATENT NO. ISSUE DATE - ------ ---------- ---------- ANNEX H ------- GRANT OF SECURITY INTEREST IN UNITED STATES COPYRIGHTS --------------------------- WHEREAS, [Name of Grantor], a _______________ corporation (the "Grantor"), having its chief executive office at ____________________, is the owner of all right, title and interest in and to the United States copyrights and associated United States copyright registrations and applications for registration set forth in Schedule A attached hereto; WHEREAS, Bank of America National Trust and Savings Association, as Collateral Agent, having its principal offices at 100 North Tryon Street, Charlotte, North Carolina 28255 (the "Grantee"), desires to acquire a security interest in said copyrights and copyright registrations and applications therefor; and WHEREAS, the Grantor is willing to grant to the Grantee a security interest in the copyrights and copyright registrations and applications therefor described above; NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and subject to the terms and conditions of the Amended and Restated Security Agreement, dated as of June 19, 1998, and amended and restated as of March 19, 1999, made by the Grantor, the other assignors from time to time party thereto and the Grantee (as amended, restated and otherwise modified from time to time, the "Security Agreement"), the Grantor hereby grants to the Grantee a security interest in the copyrights and copyright registrations and applications therefor set forth in Schedule A attached hereto. This Agreement has been granted in conjunction with the security interest granted to the Grantee under the Security Agreement. The rights and remedies of the Grantee with respect to the security interest granted herein are without prejudice to, and are in addition to those set forth in the Security Agreement, all terms and provisions of which are incorporated herein by reference. In the event that any provisions of this Agreement are deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall govern. Executed at ________, ________, the ___ day of _____ _____. ANNEX H PAGE 2 [NAME OF GRANTOR], as Grantor By: _________________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Collateral Agent and Grantee By: _________________________________ Name: Title: STATE OF __________ ) ) ss.: COUNTY OF ________ ) On this ___ day of _____ ______, before me personally came _______________, who being duly sworn, did depose and say that [s]he is ___________________ of [Name of Grantor], that [s]he is authorized to execute the foregoing Agreement on behalf of said corporation and that [s]he did so by authority of the Board of Directors of said corporation. _________________________ Notary Public STATE OF __________ ) ) ss.: COUNTY OF _________ ) On this ___ day of ______, _______, before me personally came ______________ who, being by me duly sworn, did state as follows: that [s]he is __________________ of Bank of America National Trust and Savings Association, that [s]he is authorized to execute the foregoing Agreement on behalf of said corporation and that [s]he did so by authority of the Board of Directors of said corporation. ____________________________ Notary Public SCHEDULE A ---------- U.S. COPYRIGHTS --------------- REGISTRATION PUBLICATION NUMBERS DATE COPYRIGHT TITLE - ------------ ----------- --------------- EX-10.5 6 AMENDED AND RESTATED PLEDGE AGREEMENT EXHIBIT 10.5 EXHIBIT E [CONFORMED AS EXECUTED] AMENDED AND RESTATED PLEDGE AGREEMENT ------------------------------------- AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of June 19, 1998, and amended and restated as of March 19, 1999 (as amended, restated, modified or supplemented from time to time, this "Agreement"), made by each of the undersigned pledgors (each, a "Pledgor" and, together with any other entity that becomes a party hereto pursuant to Section 25 hereof, the "Pledgors"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Collateral Agent (together with its successors and assigns, the "Pledgee"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H: ------------------- WHEREAS, CII Technologies, Inc. ("Holdings"), Communications Instruments, Inc. (the "Borrower"), the several financial institutions from time to time party thereto (the "Lenders"), NationsBank, N.A., as an Issuing Lender and the Swingline Lender, and NationsBank, N.A., as Administrative Agent (together with any successor administrative agent, the "Administrative Agent", and together with the Pledgee, the Issuing Lenders, the Swingline Lender and the Lenders, the "Lender Creditors"), have entered into a Credit Agreement, dated as of June 19, 1998, and amended and restated as of March 19, 1999 (as amended, restated, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein; WHEREAS, the Borrower may from time to time be party to one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Lenders or with an affiliate of a Lender (each such Lender or affiliate, even if the respective Lender subsequently ceases to be a Lender under the Credit Agreement for any reason, together with such Lender's or affiliate's successors and assigns, collectively, the "Other Creditors," and together with the Lender Creditors, the "Secured Creditors"); WHEREAS, pursuant to Article X of the Credit Agreement, Holdings has guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Loan Documents and the Interest Rate Protection Agreements and Other Hedging Agreements; WHEREAS, pursuant to the Subsidiary Guaranty, each Pledgor (other than Holdings and the Borrower) has jointly and severally guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Loan Documents and the Interest Rate Protection Agreements and Other Hedging Agreements; WHEREAS, the Pledgee and the Pledgors (other than Products Unlimited and its Domestic Subsidiaries) entered into a Pledge Agreement, dated as of June 19, 1998 (the "Original Pledge Agreement"), in connection with the Original Credit Agreement; WHEREAS, the parties hereto wish to amend and restate the Original Pledge Agreement in its entirety in the form of this Agreement; WHEREAS, it is a condition precedent to the Restatement Effective Date and to the making of Loans to the Borrower and the issuance of Letters of Credit for the account of the Borrower under the Credit Agreement that each Pledgor shall have executed and delivered to the Pledgee this Agreement; and WHEREAS, each Pledgor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, (i) the parties hereto hereby acknowledge and agree that the Original Pledge Agreement shall be, and hereby is, amended and restated in its entirety in the form of this Agreement and (ii) each Pledgor hereby makes the following representations and warranties to the Pledgee for the benefit of the Secured Creditors and hereby covenants and agrees with the Pledgee for the benefit of the Secured Creditors as follows: 1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor for the benefit of the Secured Creditors to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities (including, without limitation, indemnities, fees and interest thereon) of such Pledgor to the Lender Creditors, whether now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the other Loan Documents to which such Pledgor is a party and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement and in such other Loan Documents, including, without limitation, in the case of the Borrower, all "obligations" under and as defined in the Credit Agreement, and in the case of each other Pledgor, all "Guaranteed Obligations" under and as defined in the Credit Agreement or the Subsidiary Guaranty, as applicable (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or indebtedness with respect to Interest Rate Protection Agreements or Other Hedging Agreements, being herein collectively called the "Loan Document Obligations"); -2- (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic say under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by such Pledgor to the Other Creditors under, or with respect to, any Interest Rate Protection Agreement or Other Hedging Agreement, whether such Interest Rate Protection Agreement or Other Hedging Agreement is now in existence or hereafter arising, and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements contained therein, including, without limitation, in the case of the Pledgors other than the Borrower, all obligations of such Pledgor under Article X of the Credit Agreement or under the Subsidiary Guaranty, as the case may be, in respect of Interest Rate Protection Agreements or Other Hedging Agreements (all such obligations and liabilities described in this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations or liabilities of such Pledgor referred to in clauses (i), (ii) and (iii) above, after an Event of Default (which term to mean and include any Event of Default under, and as defined in, the Credit Agreement or any payment default by the Borrower under any Interest Rate Protection Agreement or Other Hedging Agreement and shall, in any event, include, without limitation, any payment default (after the expiration of any applicable grace period) on any of the Obligations (as hereinafter defined)) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 11 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1 being herein collectively called the "Obligations," it being acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. 2. DEFINITIONS. (a) Unless otherwise defined herein, all capitalized terms used herein and defined in the Credit Agreement shall be used herein as therein defined. Reference to singular terms shall include the plural and vice versa. (b) The following capitalized terms used herein shall have the definitions specified below: "Administrative Agent" has the meaning set forth in the Recitals -------------------- hereto. "Adverse Claim" has the meaning given such term in Section 8- ------------- 102(a)(1) of the UCC. -3- "Agreement" has the meaning set forth in the first paragraph hereof. --------- "Certificated Security" has the meaning given such term in Section 8- --------------------- 102(a)(4) of the UCC. "Clearing Corporation" has the meaning given such term in Section 8- -------------------- 102(a)(5) of the UCC. "Collateral" has the meaning set forth in Section 3.1 hereof. ---------- "Collateral Accounts" means any and all accounts established and ------------------- maintained by the Pledgee in the name of any Pledgor to which Collateral may be credited. "Credit Agreement" has the meaning set forth in the Recitals hereto. ---------------- "Domestic Corporation" has the meaning set forth in the definition of -------------------- "Stock." "Event of Default" has the meaning set forth in Section 1 hereof. ---------------- "Financial Asset" has the meaning given such term in Section 8- --------------- 102(a)(9) of the UCC. "Foreign Corporation" has the meaning set forth in the definition of ------------------- "Stock." "Indemnitees" has the meaning set forth in Section 11 hereof. ----------- "Instrument" has the meaning given such term in Section 9-105(1)(i) of ---------- the UCC. "Investment Property" has the meaning given such term in Section 9- ------------------- 115(f) of the UCC. "Lender Creditors" has the meaning set forth in the Recitals hereto. ---------------- "Lenders" has the meaning set forth in the Recitals hereto. ------- "Limited Liability Company Assets" means all assets, whether tangible -------------------------------- or intangible and whether real, personal or mixed (including, without limitation, all limited liability company capital and interest in other limited liability companies), at any time owned or represented by any Limited Liability Company Interest. "Limited Liability Company Interests" means the entire limited ----------------------------------- liability company membership interest at any time owned by any Pledgor in any limited liability company. "Loan Document Obligations" has the meaning set forth in Section 1 ------------------------- hereof. "Majority Lenders" has the meaning given such term in the Credit ---------------- Agreement. "Non-Voting Stock" means all capital stock which is not Voting Stock. ---------------- -4- "Notes" means all intercompany notes among Holdings and its ----- Subsidiaries and all other promissory notes from time to time issued to, or held by, any Pledgor. "Obligations" has the meaning set forth in Section 1 hereof. ----------- "Original Pledge Agreement" has the meaning set forth in the Recitals hereto. "Other Creditors" has the meaning set forth in the Recitals hereto. --------------- "Other Obligations" has the meaning set forth in Section 1 hereof. ----------------- "Partnership Assets" means all assets, whether tangible or intangible ------------------ and whether real, personal or mixed (including, without limitation, all partnership capital and interest in other partnerships), at any time owned or represented by any Partnership Interest. "Partnership Interest" means the entire general partnership interest -------------------- or limited partnership interest at any time owned by any Pledgor in any general partnership or limited partnership. "Pledged Notes" has the meaning set forth in Section 3.5 hereof. ------------- "Pledgee" has the meaning set forth in the first paragraph hereof. ------- "Pledgor" has the meaning set forth in the first paragraph hereof. ------- "Proceeds" has the meaning given such term in Section 9-306(l) of the -------- UCC. "Secured Creditors" has the meaning set forth in the Recitals hereto. ----------------- "Secured Debt Agreements" has the meaning set forth in Section 5 ----------------------- hereof. "Securities Account" has the meaning given such term in Section 8- ------------------ 501(a) of the UCC. "Securities Act" means the Securities Act of 1933, as amended, as in -------------- effect from time to time. "Security" and "Securities" has the meaning given such term in Section -------- ---------- 8-102(a)(15) of the UCC and shall in any event include all Stock and Notes (to the extent same constitute "Securities" under Section 8-102(a)(15)). "Security Entitlement" has the meaning given such term in Section 8- -------------------- 102(a)(17) of the UCC. "Stock" means (x) with respect to corporations incorporated under the ----- laws of the United States or any State or territory thereof (each a "Domestic Corporation"), all of the issued and outstanding shares of capital stock of any corporation at any time owned by any Pledgor of -5- any Domestic Corporation and (y) with respect to corporations not Domestic Corporations (each a "Foreign Corporation"), all of the issued and outstanding shares of capital stock at any time owned by any Pledgor of any Foreign Corporation. "Termination Date" has the meaning set forth in Section 20 hereof. ---------------- "UCC" means the Uniform Commercial Code as in effect in the State of --- New York from time to time; provided that all references herein to sp ecific -------- sections or subsections of the UCC are references to such sections or subsections, as the case may be, of the Uniform Commercial Code as in effect in the State of New York on the date hereof. "Uncertificated Security" has the meaning given such term in Section ----------------------- 8-102(a)(18) of the UCC. "Voting Stock" means all classes of capital stock of any Foreign ------------ Corporation entitled to vote. 3. PLEDGE OF SECURITIES, ETC. 3.1 Pledge. To secure the Obligations now or hereafter owed or to be ------ performed by such Pledgor, each Pledgor does hereby grant, pledge and assign (and hereby reconfirms its grant, pledge and assignment under the Original Pledge Agreement) to the Pledgee for the benefit of the Secured Creditors, and does hereby create (and reconfirms its previous creation of) a continuing security interest in favor of the Pledgee for the benefit of the Secured Creditors in, all of the right, title and interest in and to the following, whether now existing or hereafter from time to time acquired (collectively, the "Collateral"): (a) each of the Collateral Accounts, including any and all assets of whatever type or kind deposited by such Pledgor in such Collateral Account, whether now owned or hereafter acquired, existing or arising, including, without limitation, all Financial Assets, Investment Property, moneys, checks, drafts, Instruments, Securities or interests therein of any type or nature deposited or required by the Credit Agreement or any other Secured Debt Agreement to be deposited in such Collateral Account, and all investments and all certificates and other Instruments (including depository receipts, if any) from time to time representing or evidencing the same, and all dividends, interest, distributions, cash and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing; (b) all Securities of such Pledgor from time to time; (c) all Limited Liability Company Interests of such Pledgor from time to time and all of its right, title and interest in each limited liability company to which each such interest relates, whether now existing or hereafter acquired, including, without limitation: -6- (A) all the capital thereof and its interest in all profits, losses, Limited Liability Company Assets and other distributions to which such Pledgor shall at any time be entitled in respect of such Limited Liability Company Interests; (B) all other payments due or to become due to such Pledgor in respect of Limited Liability Company Interests, whether under any limited liability company agreement, operating agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (C) all of its claims, rights, powers, privileges, authority, options, security interests, liens and remedies, if any, under any limited liability company agreement or operating agreement, or at law or otherwise in respect of such Limited Liability Company Interests; (D) all present and future claims, if any, of such Pledgor against any such limited liability company for moneys loaned or advanced, for services rendered or otherwise; (E) all of such Pledgor's rights under any limited liability company agreement or operating agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of such Pledgor relating to such Limited Liability Company Interests, including any power to terminate, cancel or modify any limited liability company agreement or operating agreement, to execute any instruments and to take any and all other action on behalf of and in the name of any of such Pledgor in respect of such Limited Liability Company Interests and any such limited liability company, to make determinations, to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect or receipt for any of the foregoing or for any Limited Liability Company Asset, to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing (with all of the foregoing rights only to be exercisable upon the occurrence and during the continuation of an Event of Default); and (F) all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; (d) all Partnership Interests of such Pledgor from time to time and all of its right, title and interest in each partnership to which each such interest relates, whether now existing or hereafter acquired, including, without limitation: -7- (A) all the capital thereof and its interest in all profits, losses, Partnership Assets and other distributions to which such Pledgor shall at any time be entitled in respect of such Partnership Interests; (B) all other payments due or to become due to such Pledgor in respect of Partnership Interests, whether under any partnership agreement, operating agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (C) all of its claims, rights, powers, privileges, authority, options, security interests, liens and remedies, if any, under any partnership agreement or operating agreement, or at law or otherwise in respect of such Partnership Interests; (D) all present and future claims, if any, of such Pledgor against any such partnership for moneys loaned or advanced, for services rendered or otherwise; (E) all of such Pledgor's rights under any partnership agreement or operating agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of such Pledgor relating to such Partnership Interests, including any power to terminate, cancel or modify any partnership agreement or operating agreement, to execute any instruments and to take any and all other action on behalf of and in the name of any of such Pledgor in respect of such Partnership Interests and any such partnership, to make determinations, to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect or receipt for any of the foregoing or for any Partnership Asset, to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing (with all of the foregoing rights only to be exercisable upon the occurrence and during the continuation of an Event of Default); and (F) all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; (e) all Security Entitlements of such Pledgor from time to time in any and all of the foregoing; (f) all Financial Assets and Investment Property of such Pledgor from time to time; and -8- (g) all Proceeds of any and all of the foregoing. Notwithstanding anything to the contrary contained in this Section 3.1, (x) no Pledgor (to the extent that it is the Borrower or a Domestic Subsidiary of the Borrower) shall be required at any time to pledge hereunder more than 66% of the Voting Stock of any Foreign Corporation except as otherwise provided in Section 7.12(b) of the Credit Agreement, and (y) each Pledgor shall be required to pledge hereunder 100% of any Non-Voting Stock at any time and from time to time acquired by such Pledgor of any Foreign Corporation. The parties hereto hereby confirm that the security interests created pursuant to the Original Pledge Agreement shall continue uninterrupted pursuant to this Agreement. 3.2. Procedures. (a) To the extent that any Pledgor at any time or ---------- from time to time owns, acquires or obtains any right, title or interest in any Collateral, such Collateral shall automatically (and without the taking of any action by the respective Pledgor) be pledged pursuant to Section 3.1 of this Agreement and, in addition thereto, such Pledgor shall (to the extent provided below) take the following actions as set forth below (as promptly as practicable and, in any event, within 10 days after it obtains such Collateral) for the benefit of the Pledgee and the Secured Creditors: (i) with respect to a Certificated Security (other than a Certificated Security credited on the books of a Clearing Corporation), the respective Pledgor shall physically deliver such Certificated Security to the Pledgee, endorsed to the Pledgee or endorsed in blank; (ii) with respect to an Uncertificated Security (other than an Uncertificated Security credited on the books of a Clearing Corporation), the respective Pledgor shall cause (or, in the case of an Uncertificated Security issued by a Person which is not a Subsidiary of such Pledgor, shall use its reasonable best efforts to cause) the issuer of such Uncertificated Security to duly authorize and execute, and deliver to the Pledgee, an agreement for the benefit of the Pledgee and the Secured Creditors substantially in the form of Annex G hereto (appropriately completed to the satisfaction of the Pledgee and with such modifications, if any, as shall be satisfactory to the Pledgee) pursuant to which such issuer agrees to comply with any and all instructions originated by the Pledgee without further consent by the registered owner and not to comply with instructions regarding such Uncertificated Security (and any Partnership Interests and Limited Liability Company Interests issued by such issuer) originated by any other Person other than a court of competent jurisdiction; (iii) with respect to a Certificated Security, Uncertificated Security, Partnership Interest or Limited Liability Company Interest credited on the books of a Clearing Corporation (including a Federal Reserve Bank, Participants Trust Company or The Depository Trust Company), the respective Pledgor shall promptly notify the Pledgee thereof and shall promptly take all actions required (i) to comply with the applicable rules of such Clearing Corporation and (ii) to perfect the security interest of the Pledgee under applicable law (including, in any event, under Sections 9-115 (4)(a) and (b), 9-115 (1)(e) -9- and 8-106 (d) of the UCC). The Pledgor further agrees to take such actions as the Pledgee deems necessary or desirable to effect the foregoing; (iv) with respect to a Partnership Interest or a Limited Liability Company Interest (other than a Partnership Interest or Limited Liability Interest credited on the books of a Clearing Corporation), (1) if such Partnership Interest or Limited Liability Company Interest is represented by a certificate, the procedure set forth in Section 3.2(a)(i) hereof, and (2) if such Partnership Interest or Limited Liability Company Interest is not represented by a certificate, the procedure set forth in Section 3.2(a)(ii) hereof; (v) with respect to any Note, physical delivery of such Note to the Pledgee, endorsed to the Pledgee or endorsed in blank; and (vi) with respect to cash, (i) establishment by the Pledgee of a cash account in the name of such Pledgor over which the Pledgee shall have exclusive and absolute control and dominion (and no withdrawals or transfers may be made therefrom by any Person except with the prior written consent of the Pledgee) and (ii) deposit of such cash in such cash account. (b) In addition to the actions required to be taken pursuant to proceeding Section 3.2(a) hereof, each Pledgor shall take the following additional actions with respect to the Securities and Collateral: (i) with respect to all Collateral of such Pledgor whereby or with respect to which the Pledgee may obtain "control" thereof within the meaning of Section 8-106 of the UCC (or under any provision of the UCC as same may be amended or supplemented from time to time, or under the laws of any relevant State other than the State of New York), the respective Pledgor shall take all actions as may be requested from time to time by the Pledgee so that "control" of such Collateral is obtained (to the greatest extent feasible in the case of any Collateral constituting a partnership or membership interest in any Person which is not a Subsidiary of any Pledgor) and at all times held by the Pledgee; and (ii) each Pledgor shall from time to time cause appropriate financing statements (on Form UCC-1 or other appropriate form) under the Uniform Commercial Code as in effect in the various relevant States, on form covering all Collateral hereunder (with the form of such financing statements to be satisfactory to the Pledgee), to be filed in the relevant filing offices so that at all times the Pledgee has a security interest in all Investment Property and other Collateral which is perfected by the filing of such financing statements (in each case to the maximum extent perfection by filing may be obtained under the laws of the relevant States, including, without limitation, Section 9-115(4)(b) of the UCC). 3.3 Subsequently Acquired Collateral. If any Pledgor shall acquire -------------------------------- (by purchase, stock dividend or otherwise) any additional Collateral at any time or from time to time after the date hereof, such Collateral shall automatically (and without any further action being required to -10- be taken) be subject to the pledge and security interests created pursuant to Section 3.1 hereof and, furthermore, the Pledgor will promptly thereafter take (or cause to be taken) all action with respect to such Collateral in accordance with the procedures set forth in Section 3.2 hereof, and will promptly thereafter deliver to the Pledgee (i) a certificate executed by a principal executive officer of such Pledgor describing such Collateral and certifying that the same has been duly pledged in favor of the Pledgee (for the benefit of the Secured Creditors) hereunder and (ii) supplements to Annexes A through F hereto as are necessary to cause such annexes to be complete and accurate at such time. Without limiting the foregoing, each Pledgor shall be required to pledge hereunder any shares of stock at any time and from time to time after the date hereof acquired by such Pledgor of any Foreign Corporation, provided that (x) no -------- Pledgor (to the extent that it is the Borrower or a Domestic Subsidiary of the Borrower) shall be required at any time to pledge hereunder more than 66% of the Voting Stock of any Foreign Corporation except as otherwise provided in Section 7.12(b) of the Credit Agreement, and (y) each Pledgor shall be required to pledge hereunder 100% of any Non-Voting Stock at any time and from time to time acquired by such Pledgor of any Foreign Corporation. 3.4 Transfer Taxes. Each pledge of Collateral under Section 3.1 or -------------- Section 3.3 hereof shall be accompanied by any transfer tax stamps required in connection with the pledge of such Collateral. 3.5 Definition of Pledged Notes. All Notes at any time pledged or --------------------------- required to be pledged hereunder are hereinafter called the "Pledged Notes". 3.6 Certain Representations and Warranties Regarding the Collateral. --------------------------------------------------------------- Each Pledgor represents and warrants that on the date hereof (i) each Subsidiary of such Pledgor, and the direct ownership thereof, is listed in Annex A hereto; (ii) the Stock held by such Pledgor consists of the number and type of shares of the stock of the corporations as described in Annex B hereto; (iii) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Annex B hereto; (iv) the Notes held by such Pledgor consist of the promissory notes described in Annex C hereto where such Pledgor is listed as the lender; (v) the Limited Liability Company Interests held by such Pledgor consist of the number and type of interests of the Persons described in Annex D hereto; (vi) each such Limited Liability Company Interest constitutes that percentage of the issued and outstanding equity interest of the issuing Person as set forth in Annex D hereto; (vii) the Partnership Interests held by such Pledgor consist of the number and type of interests of the Persons described in Annex E hereto; (viii) each such Partnership Interest constitutes that percentage or portion of the entire partnership interest of the Partnership as set forth in Annex E hereto; (ix) the Pledgor has complied with the respective procedure set forth in Section 3.2(a) hereof with respect to each item of Collateral described in Annexes A through E hereto; and (x) on the date hereof, such Pledgor owns no other Securities, Limited Liability Company Interests or Partnership Interests. 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. If and to the extent necessary to enable the Pledgee to perfect its security interest in any of the Collateral or to exercise any of its remedies hereunder, the Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Collateral, which may be held -11- (in the discretion of the Pledgee) in the name of the relevant Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. 5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there shall have occurred and be continuing an Event of Default, each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral owned by it, and to give consents, waivers or ratifications in respect thereof; provided, that, in each case, no vote shall be cast or any -------- consent, waiver or ratification given or any action taken or omitted to be taken which would violate or be inconsistent with any of the terms of this Agreement, the Credit Agreement, any other Loan Document or any Interest Rate Protection Agreement or Other Hedging Agreement (collectively, the "Secured Debt Agreements"), or which would have the effect of impairing the value of the Collateral or any part thereof or the position or interests of the Pledgee or any other Secured Creditor in the Collateral. All such rights of each Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default has occurred and is continuing, and Section 7 hereof shall become applicable. 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall have occurred and be continuing an Event of Default, all cash dividends, cash distributions, cash Proceeds and other cash amounts payable in respect of the Collateral shall be paid to the respective Pledgor. The Pledgee shall be entitled to receive directly, and to retain as part of the Collateral: (i) all other or additional stock, notes, limited liability company interests, partnership interests, instruments or other securities or property (including cash dividends except as otherwise provided above) paid or distributed by way of dividend or otherwise in respect of the Collateral; (ii) all other or additional stock, notes, limited liability company interests, partnership interests, instruments or other securities or property (including, but not limited to, cash) paid or distributed in respect of the Collateral by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (iii) all other or additional stock, notes, limited liability company interests, partnership interests, instruments or other securities or property (including, but not limited to, cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization. Nothing contained in this Section 6 shall limit or restrict in any way the Pledgee's right to receive proceeds of the Collateral in any form in accordance with Section 3 of this Agreement. All dividends, distributions or other payments which are received by any Pledgor contrary to the provisions of this Section 6 and Section 7 hereof shall be received in trust for the benefit of the Pledgee, shall be segregated from other property or funds of such Pledgor and shall be forthwith paid over to the Pledgee as Collateral in the same form as so received (with any necessary endorsement). -12- 7. REMEDIES IN CASE OF EVENT OF DEFAULT. If there shall have occurred and be continuing an Event of Default, then and in every such case, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement, any other Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled to exercise all the rights and remedies of a secured party under the Uniform Commercial Code as in effect in any relevant jurisdiction and also shall be entitled, without limitation, to exercise the following rights, which each Pledgor hereby agrees to be commercially reasonable: (i) to receive all amounts payable in respect of the Collateral otherwise payable under Section 6 hereof to the respective Pledgor; (ii) to transfer all or any part of the Collateral into the Pledgee's name or the name of its nominee or nominees; (iii) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note (including, without limitation, to make any demand for payment thereon); (iv) to vote all or any part of the Collateral (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (each Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of such Pledgor, with full power of substitution to do so); (v) at any time and from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine, provided that at least 10 days' written -------- notice of the time and place of any such sale shall be given to the respective Pledgor. The Pledgee shall not be obligated to make any such sale of Collateral regardless of whether any such notice of sale has theretofore been given. Each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Pledgee nor any other Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto; and -13- (vi) to set-off any and all Collateral against any and all Obligations, and to withdraw any and all cash or other Collateral from any and all Collateral Accounts and to apply such cash and other Collateral to the payment of any and all Obligations. 8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy of the Pledgee provided for in this Agreement or in any other Secured Debt Agreement, or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. No notice to or demand on any Pledgor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Pledgee or any other Secured Creditor to any other or further action in any circumstances without notice or demand. The Secured Creditors agree that this Agreement may be enforced only by the action of the Administrative Agent or the Pledgee, in each case acting upon the instructions of the Majority Lenders (or, after the date on which all Loan Document Obligations have been paid in full, the holders of at least the majority of the outstanding Other Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Pledgee or the holders of at least a majority of the outstanding Other Obligations, as the case may be, for the benefit of the Secured Creditors upon the terms of this Agreement. 9. APPLICATION OF PROCEEDS. (a) All monies collected by the Pledgee upon any sale or other disposition of the Collateral pursuant to the terms of this Agreement, together with all other monies received by the Pledgee hereunder, shall be applied in the manner provided in the Security Agreement. (b) It is understood and agreed that the Pledgors shall remain jointly and severally liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the Obligations. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. -14- 11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to indemnify and hold harmless the Pledgee, each other Secured Creditor and their respective successors, assigns, employees, agents, affiliates and servants (individually an "Indemnitee," and collectively the "Indemnitees") from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and (ii) to reimburse each Indemnitee for all costs and expenses, including reasonable attorneys' fees, in each case growing out of or resulting from this Agreement or the exercise by any Indemnitee of any right or remedy granted to it hereunder or under any other Secured Debt Agreement (but excluding any claims, demands, losses, judgments and liabilities or expenses to the extent incurred by reason of gross negligence or willful misconduct of such Indemnitee as finally determined by a court of competent jurisdiction). In no event shall the Pledgee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other than to account for monies actually received by it in accordance with the terms hereof. If and to the extent that the obligations of any Pledgor under this Section 11 are unenforceable for any reason, such Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 12. PLEDGEE NOT A PARTNER OR LIMITED LIABILITY COMPANY MEMBER. (a) Nothing herein shall be construed to make the Pledgee or any other Secured Creditor liable as a member of any limited liability company or as a partner of any partnership and neither the Pledgee nor any other Secured Creditor by virtue of this Agreement or otherwise (except as referred to in the following sentence) shall have any of the duties, obligations or liabilities of a member of any limited liability company or of a partner of any partnership. The parties hereto expressly agree that, unless the Pledgee shall become the absolute owner of Collateral consisting of a Limited Liability Company Interest or Partnership Interest pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture among the Pledgee, any other Secured Creditor and/or any Pledgor. (b) Except as provided in the last sentence of paragraph (a) of this Section 12, the Pledgee, by accepting this Agreement, did not intend to become a member of any limited liability company or a partner of any partnership or otherwise be deemed to be a co-venturer with respect to any Pledgor or any limited liability company or partnership either before or after an Event of Default shall have occurred. The Pledgee shall have only those powers set forth herein and the Secured Creditors shall assume none of the duties, obligations or liabilities of a member of any limited liability company or of a partner of any partnership or any Pledgor except as provided in the last sentence of paragraph (a) of this Section 12. (c) The Pledgee and the other Secured Creditors shall not be obligated to perform or discharge any obligation of any Pledgor as a result of the pledge hereby effected. (d) The acceptance by the Pledgee of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Pledgee or any other Secured Creditor to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to -15- expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral. 13. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor's own expense, file and refile under the Uniform Commercial Code or other applicable law such financing statements, continuation statements and other documents in such offices as the Pledgee may deem necessary and wherever required by law in order to perfect and preserve the Pledgee's security interest in the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem necessary to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. (b) Each Pledgor hereby appoints the Pledgee such Pledgor's attorney- in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor or otherwise, to act from time to time solely after the occurrence and during the continuance of an Event of Default in the Pledgee's reasonable discretion to take any action and to execute any instrument which the Pledgee may deem necessary or advisable to accomplish the purposes of this Agreement. 14. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed by each Secured Creditor that by accepting the benefits of this Agreement each such Secured Creditor acknowledges and agrees that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein and in Article XI of the Credit Agreement. 15. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except as may be permitted in accordance with the terms of the Credit Agreement). 16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS. (a) Each Pledgor represents, warrants and covenants that: (i) it is the legal, beneficial and record owner of, and has good and marketable title to, all Collateral consisting of one or more Securities and that it has sufficient interest in all Collateral in which a security interest is purported to be created hereunder for such security interest to attach (subject, in each case, to no pledge, lien, mortgage, hypothecation, security interest, charge, option, Adverse Claim or other encumbrance whatsoever, except the liens and security interests created by this Agreement); -16- (ii) it has full power, authority and legal right to pledge all the Collateral pledged by it pursuant to this Agreement; (iii) this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes a legal, valid and binding obligation of such Pledgor enforceable against such Pledgor in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); (iv) except to the extent already obtained or made, no consent of any other party (including, without limitation, any stockholder, partner, member or creditor of such Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection with (a) the execution, delivery or performance of this Agreement, (b) the validity or enforceability of this Agreement (except as set forth in clause (iii) above), (c) the perfection or enforceability of the Pledgee's security interest in the Collateral or (d) except for compliance with or as may be required by applicable securities laws, the exercise by the Pledgee of any of its rights or remedies provided herein; (v) the execution, delivery and performance of this Agreement will not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, applicable to such Pledgor, or of the certificate of incorporation, operating agreement, limited liability company agreement, partnership agreement or by-laws of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or of any mortgage, deed of trust, indenture, lease, loan agreement, credit agreement or other material contract, agreement or instrument or undertaking to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of (or the obligation to create or impose) any lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (vi) all of the Collateral (consisting of Securities, Limited Liability Company Interests or Partnership Interests) has been duly and validly issued and acquired, is fully paid and non-assessable and is subject to no options to purchase or similar rights; (vii) each of the Pledged Notes constitutes, or when executed by the obligor thereof will constitute, the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); -17- (viii) the pledge, collateral assignment and delivery to the Pledgee of the Collateral consisting of Certificated Securities pursuant to this Agreement creates a valid and perfected first priority security interest in such Certificated Securities, and the proceeds thereof, subject to no prior Lien or encumbrance or to any agreement purporting to grant to any third party a Lien or encumbrance on the property or assets of such Pledgor which would include the Securities, and the Pledgee is entitled to all the rights, priorities and benefits afforded by the UCC or other relevant law as enacted in any relevant jurisdiction to perfect security interests in respect of such Collateral; and (ix) "control" (as defined in Section 8-106 of the UCC) has been obtained by the Pledgee over all Collateral consisting of Securities (including Notes which are Securities) with respect to which such "control" may be obtained pursuant to Section 8-106 of the UCC. (b) Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all persons whomsoever; and each Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the other Secured Creditors. (c) Each Pledgor covenants and agrees that it will take no action which would violate any of the terms of any Secured Debt Agreement. 17. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of each Pledgor is located at the address specified in Annex F hereto for such Pledgor. Each Pledgor will not move its chief executive office except to such new location as such Pledgor may establish in accordance with the last sentence of this Section 17. The originals of all documents in the possession of such Pledgor evidencing all Collateral, including but not limited to all Limited Liability Company Interests and Partnership Interests, and the only original books of account and records of such Pledgor relating thereto are, and will continue to be, kept at such chief executive office as specified in Annex F hereto, or at such new locations as such Pledgor may establish in accordance with the last sentence of this Section 17. All Limited Liability Company Interests and Partnership Interests are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, such chief executive office as specified in Annex F hereto, or such new locations as such Pledgor may establish in accordance with the last sentence of this Section 17. No Pledgor shall establish a new location for such offices until (i) it shall have given to the Pledgee within 10 days' following such relocation, clearly describing such new location and providing such other information in connection therewith as the Pledgee may reasonably request and (ii) with respect to such new location, it shall have taken all action, satisfactory to the Pledgee, to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. Promptly after establishing a new location for such offices in accordance with the immediately preceding sentence, the respective Pledgor shall -18- deliver to the Pledgee a supplement to Annex F hereto so as to cause such Annex F hereto to be complete and accurate. 18. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any Secured Debt Agreement or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument including, without limitation, this Agreement; (iii) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to any Pledgor or any Subsidiary of any Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing. 19. REGISTRATION, ETC. (a) If there shall have occurred and be continuing an Event of Default then, and in every such case, upon receipt by any Pledgor from the Pledgee of a written request or requests that such Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Collateral consisting of Securities, Limited Liability Company Interests or Partnership Interests, such Pledgor as soon as practicable and at its expense will use its reasonable best efforts to cause such registration to be effected (and be kept effective) and will use its reasonable best efforts to cause such qualification and compliance to be declared effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Collateral, including, without limitation, registration under the Securities Act, as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements, provided -------- that the Pledgee shall furnish to such Pledgor such information regarding the Pledgee as such Pledgor may reasonably request in writing and as shall be required in connection with any such registration, qualification or compliance. Such Pledgor will cause the Pledgee to be kept advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Pledgee such number of prospectuses, offering circulars or other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify the Pledgee, each other Secured Creditor and all others participating in the distribution of such Collateral against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the -19- statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to such Pledgor by the Pledgee or such other Secured Creditor expressly for use therein. (b) If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Collateral consisting of Securities, Limited Liability Company Interests or Partnership Interests pursuant to Section 7 hereof, and the Collateral or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Collateral, as the case may be, or part thereof by private sale in such manner and under such circumstances as the Pledgee may deem necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Collateral or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale, and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Collateral or part thereof. In the event of any such sale, the Pledgee shall incur no responsibility or liability for selling all or any part of the Collateral at a price which the Pledgee, in its sole and absolute discretion, in good faith deems reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. 20. TERMINATION; RELEASE. (a) After the Termination Date, this Agreement and the security interest created hereby shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 11 hereof shall survive any such termination), and the Pledgee, at the request and expense of any Pledgor, will execute and deliver to such Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any monies at the time held by the Pledgee or any of its sub-agents hereunder. As used in this Agreement, "Termination Date" shall mean the date upon which the Aggregate Commitment and all Interest Rate Protection Agreements and Other Hedging Agreements have been terminated, no promissory note under the Credit Agreement is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all Obligations then due and payable have been paid in full. (b) In the event that any part of the Collateral is sold in connection with a sale permitted by Section 8.02 of the Credit Agreement (other than a sale to any Pledgor or any Subsidiary thereof) or is otherwise released at the direction of the Majority Lenders (or all Lenders if required by Section 12.01 of the Credit Agreement) and the proceeds of such sale or sales or from such release are applied in accordance with the provisions of the Credit Agreement, to the extent required to be so applied, the Pledgee, at the request and expense of any Pledgor, will duly assign, transfer and deliver to such Pledgor (without recourse and without any represen- -20- tation or warranty) such of the Collateral (and releases therefor) as is then being (or has been) so sold or released and has not theretofore been released pursuant to this Agreement. (c) At any time that a Pledgor desires that the Pledgee assign, transfer and deliver Collateral (and releases therefor) as provided in Section 20(a) or (b) hereof, it shall deliver to the Pledgee a certificate signed by a principal executive officer of such Pledgor stating that the release of the respective Collateral is permitted pursuant to such Section 20(a) or (b). (d) The Pledgee shall have no liability whatsoever to any other Secured Creditor as the result of any release of Collateral by it in accordance with this Section 20. 21. NOTICES, ETC. All such notices and communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered to the appropriate address set forth below. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective when deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier, except that notices and communications to (x) the Pledgee shall not be effective until received by the Pledgee and (y) any Pledgor shall not be effective until received by any such Pledgor, as the case may be. All notices and other communications shall be in writing and addressed as follows: (a) if to any Pledgor, at; c/o CII Technologies, Inc. 1396 Charlotte Highway Fairview, N.C. 29730 Attention: Richard Heggelund Telephone No.: (704) 628-1711 Telecopier No.: (704) 628-1439 (b) if to the Pledgee, at: Bank of America National Trust and Savings Association NationsBank Corporate Center 100 North Tryon Street Charlotte, NC 28255 Attention: John O'Neill Telephone No.: (704) 388-5045 Telecopier No.: (704) 386-9607 (c) if to any Lender Creditor, either (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreement or (y) at such address as such Lender Creditor shall have specified in the Credit Agreement; -21- (d) if to any Other Creditor at such address as such Other Creditor shall have specified in writing to the Pledgors and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 22. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Pledgor directly affected thereby and the Pledgee (with the written consent of either (x) the Majority Lenders (or all of the Lenders to the extent required by Section 12.01 of the Credit Agreement) at all times prior to the time on which all Loan Document Obligations have been paid in full or (y) the holders of at least a majority of the outstanding Other Obligations at all times after the time on which all Loan Document Obligations have been paid in full); provided that any change, waiver, modification or -------- variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall also require the written consent of the Requisite Creditors (as defined below) of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (i) the Lender ---- Creditors as holders of the Loan Document Obligations or (ii) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (i) with respect to the Loan Document Obligations, the Majority Lenders and (ii) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements and Other Hedging Agreements. 23. MISCELLANEOUS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and its successors and assigns, provided that no Pledgor may assign any of its rights or -------- obligations under this Agreement without the prior consent of the Collateral Agent. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. EACH PLEDGOR IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. 24. RECOURSE. This Agreement is made with full recourse to the Pledgors and pursuant to and upon all the representations, warranties, covenants and agreements on the part of the Pledgors contained herein and in the other Secured Debt Agreements and otherwise in writing in connection herewith or therewith. -22- 25. ADDITIONAL PLEDGORS. It is understood and agreed that any Subsidiary of Holdings that is required to execute a counterpart of this Agreement after the date hereof pursuant to Sections 7.12 and/or 8.15 of the Credit Agreement shall automatically become a Pledgor hereunder by executing a counterpart hereof (or a Guarantor Supplement) and delivering the same to the Pledgee. * * * * -23- IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. CII TECHNOLOGIES, INC., as a Pledgor By: /s/ Michael A. Steinback -------------------------- Title: President COMMUNICATIONS INSTRUMENTS, INC., as a Pledgor By: /s/ Michael A. Steinback -------------------------- Title: President KILOVAC CORPORATION, as a Pledgor By: /s/ Michael A. Steinback -------------------------- Title: President KILOVAC INTERNATIONAL, INC., as a Pledgor By: /s/ Michael A. Steinback -------------------------- Title: President CORCOM, INC., as a Pledgor By: /s/ Michael A. Steinback -------------------------- Title: President PRODUCTS UNLIMITED CORPORATION, as a Pledgor By: /s/ Michael A. Steinback -------------------------- Title: President MARC INDUSTRIES, INC., as a Pledgor By: /s/ Michael A. Steinback -------------------------- Title: President SOL INDUSTRIES, INC., as a Pledgor By: /s/ Michael A. Steinback -------------------------- Title: President GW INDUSTRIES, INC., as a Pledgor By: /s/ Michael A. Steinback -------------------------- Title: President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Pledgee and Collateral Agent By: /s/ Elizabeth R. Borow ------------------------ Title: Managing Director ANNEX A to PLEDGE AGREEMENT ---------------- LIST OF SUBSIDIARIES -------------------- I. CII Technologies, Inc. Communications Instruments, Inc. II. Communications Instruments, Inc. Kilovac Corporation Corcom, Inc. Products Unlimited Corporation III. Kilovac Corporation Kilovac International, Inc. IV. Kilovac International, Inc. None V. Corcom, Inc. None VI. Products Unlimited Corporation Marc Enterprises, Inc. Sol Industries, Inc. GW Industries, Inc. Products Unlimited Export Corporation [others?] ANNEX B to PLEDGE AGREEMENT ---------------- LIST OF STOCK ------------- I. CII Technologies, Inc. ----------------------
================================================================================================= Percentage of Relevant Outstanding Sub-Clause of Name of Issuing Certificate Type of Number of Shares of Section 3.2(a) of Corporation Number Shares Shares Capital Stock Pledge Agreement ----------- ------ ------ ------ ------------- ---------------- - ------------------------------------------------------------------------------------------------- 1. Communications Instruments, Inc. =================================================================================================
II. Communications Instruments, Inc. --------------------------------
================================================================================================= Percentage of Relevant Outstanding Sub-Clause of Name of Issuing Certificate Type of Number of Shares of Section 3.2(a) of Corporation Number Shares Shares Capital Stock Pledge Agreement ----------- ------ ------ ------ ------------- ---------------- - ------------------------------------------------------------------------------------------------- 1. _________________ =================================================================================================
III. ________________________
================================================================================================= Percentage of Relevant Outstanding Sub-Clause of Name of Issuing Certificate Type of Number of Shares of Section 3.2(a) of Corporation Number Shares Shares Capital Stock Pledge Agreement ----------- ------ ------ ------ ------------- ---------------- - ------------------------------------------------------------------------------------------------- ___________________ =================================================================================================
ANNEX C to PLEDGE AGREEMENT ---------------- LIST OF NOTES ------------- I. CII Technologies, Inc. Amount Maturity Date Obligor Relevant Sub-clause of Section - ------ ------------- ------- 3.2(a) of Pledge Agreement ------------------- II. Communications Instruments, Inc. Amount Maturity Date Obligor Relevant Sub-clause of Section - ------ ------------- ------- 3.2(a) of Pledge Agreement ------------------- III. _____________________ Amount Maturity Date Obligor Relevant Sub-clause of Section - ------ ------------- ------- 3.2(a) of Pledge Agreement ------------------- IV. ______________________ Amount Maturity Date Obligor Relevant Sub-clause of Section - ------ ------------- ------- 3.2(a) of Pledge Agreement ------------------- ANNEX D to PLEDGE AGREEMENT ---------------- LIST OF LIMITED LIABILITY COMPANY INTERESTS ------------------------------------------- I. CII Technologies, Inc. --------------------- II. Communications Instruments, Inc. ------------------------------- III. Kilovac Corporation ------------------- IV. Kilovac International, Inc. -------------------------- V. Corcom, Inc. ------------ VI. Products Unlimited Corporation ------------------------------ ANNEX E to PLEDGE AGREEMENT ---------------- LIST OF PARTNERSHIP INTERESTS ----------------------------- I. CII Technologies, Inc. --------------------- II. Communications Instruments, Inc. ------------------------------- III. Kilovac Corporation ------------------- IV. Kilovac International, Inc. -------------------------- V. Corcom, Inc. ------------ VI. Products Unlimited Corporation ------------------------------ [OTHERS?] ANNEX F to PLEDGE AGREEMENT ---------------- LIST OF CHIEF EXECUTIVE OFFICES ------------------------------- I. CII Technologies, Inc. --------------------- II. Communications Instruments, Inc. ------------------------------- III. Kilovac Corporation ------------------- IV. Kilovac International, Inc. -------------------------- V. Corcom, Inc. ------------ VI. Products Unlimited Corporation ------------------------------ [OTHERS?] ANNEX G to PLEDGE AGREEMENT ---------------- Form of Agreement Regarding Uncertificated Securities, Limited Liability ------------------------------------------------------------------------ Company Interests and Partnership Interests ------------------------------------------- AGREEMENT (as amended, modified or supplemented from time to time, this "Agreement"), dated as of _______ __, ____, among each of the undersigned pledgors (each a "Pledgor" and, collectively, the "Pledgors"), Bank of America National Trust and Savings Association, not in its individual capacity but solely as Collateral Agent (the "Pledgee"), and __________, as the issuer of the Uncertificated Securities, Limited Liability Company Interests and/or Partnership Interests (each as defined below) (the "Issuer"). W I T N E S S E T H : -------------------- WHEREAS, each Pledgor and the Pledgee have entered into an Amended and Restated Pledge Agreement, dated as of June 19, 1998, and amended and restated as of March 19, 1999 (as amended, amended and restated, modified or supplemented from time to time, the "Pledge Agreement"), under which, among other things, in order to secure the payment of the Obligations (as defined in the Pledge Agreement), each Pledgor will pledge to the Pledgee for the benefit of the Secured Creditors (as defined in the Pledge Agreement), and grant a security interest in favor of the Pledgee for the benefit of the Secured Creditors in, all of the right, title and interest of such Pledgor in and to any and all (1) "uncertificated securities" (as defined in Section 8-102(a)(18) of the Uniform Commercial Code, as adopted in the State of New York) ("Uncertificated Securities"), (2) Partnership Interests (as defined in the Pledge Agreement) and (3) Limited Liability Company Interests (as defined in the Pledge Agreement), in each case issued from time to time by the Issuer, whether now existing or hereafter from time to time acquired by such Pledgor (with all of such Uncertificated Securities, Partnership Interests and Limited Liability Company Interests being herein collectively called the "Issuer Pledged Interests"); and WHEREAS, each Pledgor desires the Issuer to enter into this Agreement in order to perfect the security interest of the Pledgee under the Pledge Agreement in the Issuer Pledged Interests, to vest in the Pledgee control of the Issuer Pledge Interests and to provide for the rights of the parties under this Agreement; NOW THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Each Pledgor hereby irrevocably authorizes and directs the Issuer, and the Issuer hereby agrees, to comply with any and all instructions and orders originated by the Pledgee (and its successors and assigns) regarding any and all of the Issuer Pledged Interests without the further consent by the registered owner (including the respective Pledgor), and not to comply with any instructions or orders regarding any or all of the Issuer Pledged Interests originated by any person or entity other than the Pledgee (and its successors and assigns) or a court of competent jurisdiction. 2. The Issuer hereby certifies that (i) no notice of any security interest, lien or other encumbrance or claim affecting the Issuer Pledged Interests (other than the security interest of the Pledgee) has been received by it, and (ii) the security interest of the Pledgee in the Issuer Pledged Interests has been registered in the books and records of the Issuer. 3. The Issuer hereby represents and warrants that (i) the pledge by the Pledgors of, and the granting by the Pledgors of a security interest in, the Issuer Pledged Interests to the Pledgee, for the benefit of the Secured Creditors, does not violate the charter, by-laws, partnership agreement, membership agreement or any other agreement governing the Issuer or the Issuer Pledged Interests, and (ii) the Issuer Pledged Interests are fully paid and nonassessable. 4. All notices, statements of accounts, reports, prospectuses, financial statements and other communications to be sent to any Pledgor by the Issuer in respect of the Issuer will also be sent to the Pledgee at the following address: Bank of America National Trust and Savings Association NationsBank Corporate Center 100 North Tryon Street Charlotte, North Carolina 28255 Attention: John O'Neill Tel: (704) 388-5045 Fax: (704) 386-9607 5. Until the Pledgee shall have delivered written notice to the Issuer that all of the Obligations have been paid in full and this Agreement is terminated, the Issuer will send any and all redemptions, distributions, interest or other payments in respect of the Issuer Pledged Interests from the Issuer for the account of the Pledgor only by wire transfers to the following address: _____________________ _____________________ _____________________ _____________________ ABA No.: __________________________ Account in the Name of: ___________ Account No.: ______________________ 2 6. Except as expressly provided otherwise in Sections 4 and 5 above, all notices, instructions, orders and communications hereunder shall be sent or delivered by mail, telex, telecopy or overnight courier service and all such notices and communications shall, when mailed, telexed, telecopied or sent by overnight courier, be effective when deposited in the mails or delivered to the overnight courier, prepaid and properly addressed for delivery on such or the next Business Day, or sent by telex or telecopier, except that notices and communications to the Pledgee shall not be effective until received by the Pledgee. All notices and other communications shall be in writing and addressed as follows: (a) if to any Pledgor, at: c/o CII Technologies, Inc. 1396 Charlotte Highway Fairview, NC 29730 Attention: Richard Heggelund Tel.: (704) 628-1711 Fax: (704) 628-1439 (b) if to the Pledgee, at: Bank of America National Trust and Savings Association NationsBank Corporate Center 100 North Tryon Street Charlotte, North Carolina 28255 Attention: John O'Neill Tel: (704) 388-5045 Fax: (312) 386-9607 (c) if to the Issuer, at: __________________________ __________________________ __________________________ Attention: ______________ Telephone No.:____________ Telecopier No.:___________ or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. As used in this Section 6, "Business Day" means any day other than a Saturday, Sunday, or other day in which banks in New York are authorized to remain closed. 7. This Agreement shall be binding upon the successors and assigns of each Pledgor and the Issuer and shall inure to the benefit of and be enforceable by the Pledgee and its 3 successors and assigns. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever except in writing signed by the Pledgee, the Issuer and any Pledgor which at such time owns any Issuer Pledged Interests. 8. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its principles of conflict of laws. IN WITNESS WHEREOF, each Pledgor, the Pledgee and the Issuer have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. [_____________________________], as a Pledgor By_____________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, not in its individual capacity but solely as Collateral Agent and Pledgee By_____________________________ Name: Title: [_____________________________], the Issuer By_____________________________ Name: Title: 4 EX-99.1 7 PRESS RELEASE DATED MARCH 22, 1999 EXHIBIT 99.1 FOR IMMEDIATE RELEASE: March 22, 1999 Contact:: Mr. Rick Heggelund Mr. David Kemper Chief Financial Officer Worldwide Marketing Services Manager CII Technologies CII Technologies (828)628-1891, ext. 390 (828)628-1891, ext. 419 CII TECHNOLOGIES ANNOUNCES ACQUISITION OF PRODUCTS UNLIMITED Fairview, N.C. - CII Technologies announced today that its wholly owned subsidiary, Communications Instruments, Inc. (CII), has acquired Products Unlimited, Inc. Details of the cash transaction were not released. Ramzi Dabbagh, Chairman and CEO of CII Technologies (CIIT) said the Products Unlimited acquisition represents a very important facet of CII's growth strategy. "The corporation has systematically expanded its electrical and electronic control business to serve additional markets where it can provide strong leadership in technology and service. Products Unlimited has a fine reputation and a broad offering of relays, contactors, and transformers, and those product lines compliment our existing business. We are proud to have them as part of our family." Mr. Gary Schreiner, President of Products Unlimited, stated that CII is a "perfect match" for Products Unlimited. He added that both companies hold leadership positions in served markets and both are committed to quality and customer service. Mr. Mike Steinback, President and Chief Operating Officer of CII said, "We plan to capitalize on Product Unlimited's superior organization and leadership in the HVAC marketplace. Synergies between Products Unlimited and CIIT's other brands add value both to our customers and the industry." Mr. Steinback indicated that Products Unlimited will join the Corcom and Midtex brands to become part of CIIT's Specialized Industrial Group. Products Unlimited, Inc. operates from its corporate headquarters in Sterling, IL and has facilities in Prophetstown, IL, Sabula, IA and Guttenberg, IA. CII Technologies, based in Fairview, NC, provides advanced control electronic solutions in relays, solenoids and filters to the commercial/industrial equipment, communications, aerospace, defense and automatic test equipment markets. CIIT is the source of five major brands: CII, Hartman, Kilovac, Corcom, and Midtex. It has manufacturing facilities in Asheville and Fairview, NC, Mansfield, OH, Santa Barbara, CA, Libertyville, IL, Juarez, Mexico, Cochin, India and Shanghai, China. CII Technologies' majority shareholder is Code Hennessy and Simmons, LLC, a Chicago based private investment and management firm. Additional information on the company is available at www.ciitech.com. --------------- -----END PRIVACY-ENHANCED MESSAGE-----