-----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, ErKXGesI0D187iWpVaxabxiepUGIQK8lnPmSxg853kXcIvFCVjavxj8qluadmNgM ps9cfvUsEmzxJA0YK01qew== 0001036050-98-001286.txt : 19980806 0001036050-98-001286.hdr.sgml : 19980806 ACCESSION NUMBER: 0001036050-98-001286 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 32 FILED AS OF DATE: 19980805 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COYNE INTERNATIONAL ENTERPRISES CORP CENTRAL INDEX KEY: 0001066242 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES [5040] STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-60247 FILM NUMBER: 98677743 BUSINESS ADDRESS: STREET 1: 140 CORTLAND AVENUE CITY: SYRACUSE STATE: NY ZIP: 13221 BUSINESS PHONE: 3154759978 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUE RIDGE TEXTILE MANUFACTURING INC CENTRAL INDEX KEY: 0001066243 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-60247-01 FILM NUMBER: 98677744 BUSINESS ADDRESS: STREET 1: 1130 ADA STREET STREET 2: P O BOX 1299 CITY: BLUE RIDGE STATE: CA ZIP: 30513 BUSINESS PHONE: 3154759978 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OHIO GARMENT RENTAL INC CENTRAL INDEX KEY: 0001066244 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-60247-02 FILM NUMBER: 98677745 BUSINESS ADDRESS: STREET 1: 140 CORTLAND AVENUE CITY: SYRACUSE STATE: NY ZIP: 13221 BUSINESS PHONE: 3154759978 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIDWAY CTS BUFFALO LTD CENTRAL INDEX KEY: 0001066245 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-60247-03 FILM NUMBER: 98677746 BUSINESS ADDRESS: STREET 1: 140 CORTLAND AVENUE CITY: SYRACUSE STATE: NY ZIP: 13221 BUSINESS PHONE: 3154759978 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEAN TOWEL SERVICE INC CENTRAL INDEX KEY: 0001066246 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-60247-04 FILM NUMBER: 98677747 BUSINESS ADDRESS: STREET 1: 140 CORTLAND AVENUE CITY: SYRACUSE STATE: NY ZIP: 13221 BUSINESS PHONE: 3154759978 S-4/A 1 AMENDMENT NO. 1 TO FORM S-4 As filed with the Securities and Exchange Commission on August 5, 1998 Registration No. 333-60247 333-60247-01 333-60247-02 333-60247-03 333-60247-04 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________________ AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ___________________ COYNE INTERNATIONAL ENTERPRISES CORP. BLUE RIDGE TEXTILE MANUFACTURING, INC. CLEAN TOWEL SERVICE, INC. OHIO GARMENT RENTAL, INC. MIDWAY-CTS BUFFALO, LTD. (Exact name of registrants as specified in their charter) NEW YORK 7210 16-6040758 GEORGIA 7210 58-2018333 GEORGIA 7210 58-1205265 OHIO 7210 34-1261376 NEW YORK 7210 16-1469155 - -------------------------------------------------------------------------------- (State or other jurisdiction of (Primary standard industrial (I.R.S. employer incorporation or organization) classification code number) identification no.) - -------------------------------------------------------------------------------------------------------
140 CORTLAND AVENUE SYRACUSE, NY 13221 (315) 475-1626 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ____________________ THOMAS M. COYNE CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER COYNE INTERNATIONAL ENTERPRISES CORP. 140 CORTLAND AVENUE SYRACUSE, NY 13221 TELEPHONE: (315) 475-1626 FACSIMILE: (315) 475-9978 (Name, address, including zip code, and telephone number, including area code, of agent for service) _____________________ Copy to: FRANCIS E. DEHEL, ESQUIRE BLANK ROME COMISKY & MCCAULEY LLP ONE LOGAN SQUARE PHILADELPHIA, PENNSYLVANIA 19103 TELEPHONE: (215) 569-5500 FACSIMILE: (215) 569-5555 _____________________ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b)under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
TITLE OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) FEE - ----------------------------------------------------------------------------------------------------------------- 11 1/4% Series B Senior Subordinated Notes due 2008 $75,000,000 $1,000 $75,000,000 $22,125(3) - ----------------------------------------------------------------------------------------------------------------- Guarantees of 11 1/4% Series B Senior $75,000,000 (2) (2) None Subordinated Notes due 2008 - -------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f). (2) No further fee is payable pursuant to Rule 457(n). (3) Such fee was previously paid by the Registrant on July 30, 1998 THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED AUGUST 5, 1998 PROSPECTUS COYNE INTERNATIONAL ENTERPRISES CORP. OFFER TO EXCHANGE ITS 11 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2008,WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1998, unless extended. ----------- Coyne International Enterprises Corp. d/b/a/ Coyne Textile Services ("CTS" or the "Company"), a New York corporation, hereby offers (the "Exchange Offer"), upon the terms and conditions set forth in this Prospectus (the "'Prospectus") and the accompanying Letter of Transmittal (the "'Letter of Transmittal"), to exchange $1,000 principal amount of its 11 1/4% Senior Subordinated Notes due 2008 (the "'Exchange Notes"'), which will have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which this Prospectus is a part, for each $1,000 principal amount of its outstanding 11 1/4% Series A Senior Subordinated Notes due 2008 (the "'Initial Notes"), of which $75,000,000 principal amount is outstanding. The Exchange Notes and the Initial Notes are each sometimes referred to herein as the "'Notes." The form and terms of the Exchange Notes are the same as the form and terms of the Initial Notes (which they replace), except that the Exchange Notes (i) will bear a Series B designation and a different CUSIP number from the Initial Notes, (ii) will have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and (iii) will no longer be entitled to certain rights under the Registration Rights Agreement (as defined herein). The Exchange Notes evidence the same debt as the Initial Notes and will be issued under and be entitled to the benefits of the Indenture, dated as of June 26, 1998 (the "Indenture"), between the Company, the Guarantors (as defined herein) and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), which also governs the Initial Notes. See "Exchange Offer." The Exchange Notes will be general unsecured obligations of the Company, will rank subordinate in right of payment to all Senior Debt (as defined herein) and will rank senior or pari passu in right of payment to all existing and future subordinated indebtedness of the Company. The Exchange Notes will be unconditionally guaranteed (the "Subsidiary Guarantees") on a senior subordinated basis by all of the Company's current and future Domestic Subsidiaries (as defined herein) other than Receivables Subsidiaries (as defined herein) (the "Guarantors"). The Subsidiary Guarantees will be general unsecured obligations of the Guarantors, will rank subordinate in right of payment to all Senior Debt of the Guarantors and will rank senior or pari passu in right of payment to all existing and future subordinated indebtedness of the Guarantors. As of April 30, 1998, on an as adjusted basis, the Company and its subsidiaries had approximately $10.6 million of Senior Debt outstanding. The Notes mature on June 1, 2008, unless previously redeemed. Interest on the Notes is payable semiannually on June 1 and December 1, commencing December 1, 1998. The Notes will be redeemable at the option of the Company, in whole or in part, on or after June 1, 2003, at the redemption prices set forth herein, plus accrued and unpaid interest thereon and Liquidated Damages (as defined herein), if any, to the redemption date. Upon a Change of Control (as defined herein), the Company will be required to make an offer to repurchase all outstanding Notes at 101% of the principal amount thereof plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the date of repurchase. (Cover continued on following page.) ----------- See "RISK FACTORS" BEGINNING ON PAGE 19 HEREIN FOR A DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR INITIAL NOTES IN THE EXCHANGE OFFER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSIONER OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1998. The Company will accept for exchange any and all Initial Notes duly tendered and not validly withdrawn prior to 5:00 p.m., New York City time, on , 1998, unless extended by the Company in its sole discretion (the "'Expiration Date"). Tenders of Initial Notes may be withdrawn at any time prior to 5:00 p.m. New York City time on the Expiration Date. The Exchange Offer is subject to certain customary conditions. The Initial Notes were sold by the Company on June 26, 1998 to NationsBanc Montgomery Securities, LLC and First Union Capital Markets, a division of Wheat First Securities, Inc. (the "Initial Purchasers") in a transaction not registered under the Securities Act in reliance upon an exemption from registration under the Securities Act (the "Offering"). The Initial Purchasers subsequently resold the Initial Notes in the United States to qualified institutional buyers in reliance upon Rule 144A under the Securities Act. Accordingly, the Initial Notes may not be reoffered, resold or otherwise transferred in the United States unless registered under the Securities Act or unless an applicable exemption from the registration requirements of the Securities Act is available. The Exchange Notes are being offered hereunder in order to satisfy the obligations of the Company under the Registration Rights Agreement (as defined herein) entered into by the Company in connection with the Offering. See "Exchange Offer." Based on no-action letters issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties, the Company believes the Exchange Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. See "Exchange Offer." Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer (a "Participating Broker-Dealer") must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective, and (ii) the date on which a Participating Broker-Dealer is no longer required to deliver a prospectus in connection with market making or other trading activities, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale; provided, however, that the Company and the Guarantors will have no obligation to amend or supplement this Prospectus unless the Company has received written notice from a Participating Broker- Dealer of their prospectus delivery requirements under the Securities Act within fifteen (15) business days following consummation of the Exchange Offer. See "Plan of Distribution." Holders of Initial Notes not tendered and accepted in the Exchange Offer will continue to hold such Initial Notes and will be entitled to all the rights and benefits and will be subject to the limitations applicable thereto under the Indenture and with respect to transfer under the Securities Act. In the event that any changes in law or the applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer or if any holder of the Initial Notes (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) is not eligible to participate in the Exchange Offer, and such holder has satisfied certain conditions relating to the provision of information to the Company for use therein, the Company will, at its cost, use its best efforts to (a) file a shelf registration statement (the "Shelf Registration Statement") covering resales of the Initial Notes, (b) cause the Shelf Registration Statement to be declared effective under the Securities Act and (c) keep continuously effective the Shelf Registration Statement for a period of at least two years. Other than as set forth above, holders of Initial Notes not tendered in the Exchange Offer will not retain any rights under the Registration Rights Agreement, except in limited circumstances. The Company will pay all the expenses incurred by it incident to the Exchange Offer. See "Exchange Offer." The Initial Notes are eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market. There has not previously been any public market for the Initial Notes or the Exchange Notes. The Company does not intend to list the Exchange Notes on any securities exchange or to seek approval for quotation through any automated quotation system. There can be no assurance that an active market for the Exchange Notes will develop. If a market for the Exchange Notes should develop, the Exchange Notes could trade at a discount from their principal amount. See "Risk Factors--Absence of Public Market Could Adversely Affect the Value of Notes." Moreover, to the extent that Initial Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Initial Notes could be adversely affected. The Company will not receive any proceeds from, and has agreed to bear all registration expenses of, the Exchange Offer. No underwriter is being used in connection with the Exchange Offer. See "'Exchange Offer--Fees and Expenses." AVAILABLE INFORMATION The Company and the Guarantors have filed with the Commission a Registration Statement on Form S-4 (the "Exchange Offer Registration Statement," which term shall encompass all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the Exchange Notes being offered hereby. This Prospectus does not contain all the information set forth in the Exchange Offer Registration Statement. For further information with respect to the Company, the Guarantors and the Exchange Offer, reference is made to the Exchange Offer Registration Statement. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Exchange Offer Registration Statement, reference is made to the exhibit for a more complete description of the document or matter involved, and each such statement shall be deemed qualified in its entirety by such reference. The Exchange Offer Registration Statement, including the exhibits thereto, can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the Regional Offices of the Commission at 75 Park Place, New York, New York 10007 and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such site is http://www.sec.gov. As a result of the filing of the Exchange Offer Registration Statement with the Commission, the Company and the Guarantors will become subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith will be required to file periodic reports and other information with the Commission. The obligation of the Company and the Guarantors to file periodic reports and other information with the Commission will be suspended if the Exchange Notes are held of record by fewer than 300 holders as of the beginning of any fiscal year of the Company other than the fiscal year in which the Exchange Offer Registration Statement is declared effective. The Company will nevertheless be required to continue to file reports with the Commission if the Exchange Notes are listed on a national securities exchange. The Indenture provides that, whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding and commencing with information relating to the fiscal quarter ended July 31, 1998, the Company will furnish to the holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports, in each case, within the time periods specified in the Commission's rules and regulations. In addition, commencing after the consummation of the Exchange Offer, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) within the time periods specified in the Commission's rules and regulations, and make such information available to securities analysts and prospective investors upon their reasonable request. In addition, each of the Company and the Guarantors has agreed that, for so long as any Notes remain outstanding, it will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. i NOTE REGARDING FORWARD-LOOKING INFORMATION THE INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WHICH ARE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "COULD," "SHOULD," "EXPECT," "ANTICIPATE," "INTEND," "PLAN," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREOF. SUCH FORWARD-LOOKING STATEMENTS ARE NECESSARILY BASED ON VARIOUS ASSUMPTIONS AND ESTIMATES AND ARE INHERENTLY SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING RISKS AND UNCERTAINTIES RELATING TO THE POSSIBLE INVALIDITY OF THE UNDERLYING ASSUMPTIONS AND ESTIMATES AND POSSIBLE CHANGES OR DEVELOPMENTS IN SOCIAL, ECONOMIC, BUSINESS, INDUSTRY, MARKET, LEGAL AND REGULATORY CIRCUMSTANCES AND CONDITIONS AND ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THIRD PARTIES, INCLUDING CUSTOMERS, SUPPLIERS, BUSINESS PARTNERS AND COMPETITORS AND LEGISLATIVE, REGULATORY, JUDICIAL AND OTHER GOVERNMENTAL AUTHORITIES AND OFFICIALS. IN ADDITION TO ANY RISKS AND UNCERTAINTIES SPECIFICALLY IDENTIFIED IN THE TEXT SURROUNDING SUCH FORWARD-LOOKING STATEMENTS, THE STATEMENTS IN "RISK FACTORS" CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE ACTUAL AMOUNTS, RESULTS, EVENTS AND CIRCUMSTANCES TO DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS. ii SUMMARY The following summary information is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus. As used herein, unless the context otherwise requires, the terms "Company" and "CTS" refer to Coyne International Enterprises Corp. d/b/a Coyne Textile Services and its subsidiaries. The Company uses a 52/53 week fiscal year ending on the last Saturday in October. For convenience, the dating of the financial information in this Prospectus has been labeled as of and for the years ended October 31, 1997, 1996, 1995, 1994 and 1993 and as of and for the periods ended April 30, 1998 and 1997, as the case may be, rather than the actual fiscal year end or fiscal period end dates. THE COMPANY GENERAL The Company provides textile rental products and laundering services from 40 locations to approximately 40,000 accounts in diversified industries throughout the eastern United States. Textile rental products provided by the Company include workplace uniforms, protective clothing, shop towels and other reusable absorbent products, floormats and treated mops and other dust control products. The Company primarily rents textile products to clients under laundry service contracts, but also sells products to clients and launders client-owned items. Most of the Company's accounts are subject to written contracts that range in duration from three to five years. The Company's products and services are distributed through its route-based distribution system comprised of 18 industrial laundry plants and 21 sales, service and distribution laundry terminals that allow the Company to provide rental services to customers in geographic areas outside of the immediate area of an industrial laundry plant. CTS manufactures shop towels, dust mops and several other products used in the laundry business at its manufacturing subsidiary, Blue Ridge Textile Manufacturing, Inc. ("Blue Ridge"), and intends to begin floormat manufacturing in fiscal 1998. The Company focuses on the value-added aspects of the textile rental business, such as the heavy soil (e.g., printing inks, oils and solvents) and protective garment sectors. The Company's products and services assist customers with their corporate image, the productivity and safety of their employees and the environmental impact of their businesses. For example, the Company has built industry-leading heavy soil laundry plants, which minimize its customers' environmental exposure and have allowed the Company to carve out a leading position in the heavy soil sector of the textile rental services industry. In addition, the Company works with clients to design, source and manage protective uniform programs for specific applications, such as flame or chemical retardant clothing for industrial workers. Further, the Company is one of the first launderers to offer garment tracking technologies that provide its customers with superior accountability for rented garments. The Company's customer base is diversified across a variety of industries. Customers range in size from large nationally-recognized businesses such as ALCOA, Eckerd Drugs, Hershey, Oneida, United Technologies and Xerox, to smaller businesses such as gas stations and other retail businesses. In particular, the Company is a leading provider of textile rental services to the printing industry throughout its service area, with customers including The New York Times and USA Today. For the year ended October 31, 1997, the Company had net sales and EBITDA of $122.9 million and $15.5 million, respectively, and for the twelve months ended April 30, 1998, the Company had net sales and EBITDA of $129.0 million and $15.6 million, respectively. The Company was founded and incorporated in New York in 1929 and has been owned and operated by the Coyne family since its inception. 1 INDUSTRY OVERVIEW The textile rental industry in the United States, which had 1997 revenues in excess of $9 billion, consists of two segments: the industrial segment (uniforms, protective clothing, shop towels, floormats and dust control products) and the linen segment (sheets, tablecloths and other linen items). In 1997, approximately 96% of the Company's business was derived from the industrial segment. The primary product in the industrial segment is uniforms which accounted for approximately one-half of the Company's revenues in 1997. According to industry data compiled by the Uniform and Textile Service Association ("UTSA"), approximately 46 million of the 128 million people in the United States civilian workforce at the beginning of 1997 wore some form of specialized work clothing. Of this total, only 15.4 million people or 33.5% wore employer-owned uniforms and only 6.5 million people or 14.1% wore employer-rented uniforms. The UTSA estimated that uniform rental services alone generated approximately $4.8 billion and $5.3 billion in revenues during 1996 and 1997, respectively, and that this industry has grown at a compound annual rate of approximately 7.2% since 1983. The Company believes that much of the uniform industry's overall growth has resulted from an increasing number of companies choosing to use uniform rental services to maintain a high-quality corporate image, improve employee safety, productivity and morale and reduce costs. In addition, the growth in jobs, particularly in the service sector, has increased the number of potential uniform wearers. In 1996 alone, more than ten million new jobs were created in the United States with an estimated 65-70% of these jobs accounted for by service industries whose employees tend to wear uniforms. CTS also believes that growth in the rental segment of the industry in particular will be driven by the broad trends to outsource non-core business functions. Growing markets for uniforms identified by the Company include building services, communications, food processing, heating/ventilation/air conditioning, landscaping, pest control, pharmaceuticals, security and trucking. In addition, the Company believes its industry-leading environmental capabilities and protective clothing expertise strategically position it to realize long-term benefits from continuing government regulation of the environment and the workplace. Increasingly stringent environmental regulations have been and continue to be the catalyst for a shift toward the outsourcing of the laundering of heavy soil items. Additionally, government mandated safety regulations for reflective wear and flame retardant garments and the most recent report to Congress under The Workers' Family Protection Act from the National Institute for Occupational Safety and Health ("NIOSH"), which states that home laundering is inadequate in decontaminating work clothes, are creating new opportunities for uniform service companies like CTS. The market for flame retardant clothing has been fueled by Occupational Safety and Health Agency ("OSHA") regulations holding employers responsible for supplying appropriate clothing based on an evaluation of potential workplace hazards. Employers are prohibited from supplying clothing that, when exposed to flames or arcs, could increase the extent of wearer injury. Growth in demand for environmental services and protective clothing is particularly valuable to the Company because these markets involve long-term relationships with customers and make use of the Company's technical knowledge of regulations, products, fabric types, climatic conditions and job functions. Although the industrial textile rental industry includes several national companies, the industry remains highly fragmented. Based on information obtained from Cleary Gull Reiland & McDevitt, an investment firm that closely follows the uniform rental industry, there are currently over 700 uniform rental businesses in operation, the majority of which are single facility operators. The Company believes that many of these smaller companies are being forced to exit the market due to a lack of economies of scale and the cost of complying with increasingly stringent environmental standards. The Company further believes that the industry will continue to experience consolidation in the future and that strategic acquisition opportunities will become available. 2 COMPETITIVE STRENGTHS The Company believes it has the following competitive strengths: Superior Environmental Capabilities. The Company has built industry-leading laundry waste-water treatment facilities and has developed a reputation as an environmental leader. As a result, the Company believes that it is a leading provider of heavy soil textile services to manufacturing and printing businesses in the eastern United States. The Company also believes that it is the largest provider of shop towels within its service area. Shop towels are reusable cotton industrial wiping cloths that are essential to the printing and furniture finishing industries and many manufacturing operations. Products such as shop towels contaminated with petroleum, chemical solvents or printing inks require specialized cleaning services that comply with environmental regulations. The Company's industry-leading waste-water treatment equipment recovers and recycles waste for use in fuel blending programs, thereby reducing the amount of hazardous substances sent to landfills for disposal and minimizing its customers' environmental exposure. The Company has built a strong environmental team that is directed by a senior manager with extensive experience both in the textile rental industry and as a former appointed official of the Environmental Protection Agency ("EPA"). CTS has been endorsed by many of the state and regional printing associations and services large printing operations such as The New York Times and USA Today. As an extension to its product line, the Company pioneered its Reusable Absorbent System ("RAS") products, which are used to absorb free liquids, such as lubricating oils, around machines and equipment. The Company's RAS products are an environmentally responsible and cost-effective alternative to traditional disposable absorbents, and promote the EPA policy of waste minimization. Finally, the Company processes heavy soil work for many of its competitors that lack the same waste-water treatment capabilities as CTS. By providing heavy soil laundry services to other industrial laundry facilities, CTS is able to develop relationships with launderers that may be sold in the ongoing market consolidation. Protective Clothing Expertise. The Company believes that it is a recognized leader in the rental and servicing of protective garments and has substantial experience in designing, sourcing and managing these garments. Applications for these protective garments include airplane refueling, metal and glass manufacturing, oil refineries, petrochemical companies, pyrotechnic and munitions companies and utilities. These garments are specially manufactured to protect the wearer from a variety of workplace dangers. OSHA regulations hold employers responsible for supplying appropriate clothing based on an evaluation of potential workplace hazards. The protective clothing market requires knowledge of regulations, products, fabric types, climatic conditions and job functions. CTS has the expertise to help its customers conform to OSHA regulations, the technical knowledge required to evaluate different types of protective garments and the laundering capabilities to process the garments in a manner that ensures the garments retain their protective properties over their expected wear-life. The Company believes that its expertise in protective garments in conjunction with the high-level of control provided by its garment tracking capabilities gives it a significant advantage in the protective garment market. ALCAN, ALCOA and Virginia Power are just a few of the major accounts whose employees wear protective garments provided by CTS. Garment Tracking Capabilities. The Company believes that it is one of the first industrial launderers to implement bar-coding technologies, which provide customers with superior accountability for rented garments and more economical administration. CTS has invested in both bar-coding and radio frequency identification technologies that give each rented garment a specific identity. As a result, both CTS and its customers save time and money while promoting productivity and improving inventory control. Garment tracking is particularly important for protective clothing because of its higher replacement cost and the necessity to closely monitor garment use compared to expected wear-life to ensure the continued protective properties of the clothing. Further, the Company provides both on-line and printed reporting to its customers. Bar- coding is in place at most major accounts whose employees wear protective garments provided by CTS, including ALCOA, Wyeth-Ayerst and Xerox. 3 Platform for Growth. The Company's recent investments in plants and equipment have created laundry plant capacity to support growth without commensurate increases in cost. In particular, the Company has introduced high-speed, automated equipment in a majority of its laundry facilities. As a result, the Company believes its existing plants and equipment could process approximately 25% more volume without significant increases in plant and equipment costs. The Company believes that this capacity will allow it to support increased business generated by its recently expanded sales force, respond faster to major account installations, open laundry terminals in contiguous areas and take advantage of acquisition opportunities. Superior Fleet and Distribution Capabilities. The Company has developed a superior fleet of approximately 450 trucks which provides a cost-effective link among the Company's laundry plants, laundry terminals and customers. The Company's fleet leverages existing laundry plant capacity by allowing the Company to allocate work among its laundry plants in response to cost factors and fluctuations in volume or capacity, and to enter into new contiguous markets with minimal capital expenditures. The Company's trucks are a key tool in projecting the Company's image, by displaying the corporate name, logo and slogan "WE RENT CLEAN!" These trucks, which are custom-built in the Company's Syracuse transportation facility, enhance productivity, quality of service and safety. In addition, CTS saves approximately half of the costs associated with purchasing a comparable fleet. Further, CTS has transportation facilities throughout its service area that allow the fleet to be maintained at very high standards. The Company has received multiple National Private Truck Council Awards for the quality of its fleet and related maintenance. BUSINESS STRATEGY The Company intends to continue to grow its business by focusing on the following strategies: Leverage Competitive Strengths. The Company's superior environmental capabilities, protective garment expertise and garment tracking capabilities have enabled it to secure leadership positions in the heavy soil and protective garment sectors of the market. CTS intends to focus on these sectors and then leverage client relationships to sell additional products and generate additional laundering service contracts. CTS believes that leveraging its leadership position in these areas and expanding the number of services provided to existing customers is an efficient and cost-effective method for achieving future growth. Leverage Existing Route System. The Company believes it can significantly increase revenues and improve profitability by increasing sales along its existing routes. Most of the geographic areas in which the Company has laundry plants and truck routes contain a significant number of potential customers. The Company intends to continue its penetration of these geographic areas by using its recently increased sales force to aggressively market its expertise in the heavy soil and protective garment niches of the market. Over the last two years, the Company has increased the number of dedicated sales associates from 25 to approximately 100 to ensure that all potential customers in existing geographic areas are actively marketed. The Company also utilizes its route salespeople to maximize sales to existing customers and develop new customer relationships along existing routes. Expand Geographic Scope in Contiguous Markets. The Company seeks to obtain new business by utilizing its recently increased sales force to expand into contiguous market areas that can be serviced from existing Company facilities. The Company identifies attractive geographic markets for its services based on the size of the market, the number and type of available customers and the presence of existing competitors. Typically, the Company has expanded by opening a laundry terminal location to service a new major account or buying a small competitor and building the business over time, thereby leveraging the Company's existing laundry plant investment. In addition, the Company has a national account sales organization which targets larger customers with nationwide operations that the Company can serve as the primary supplier of textile rental services. 4 Provide Superior Customer Service. The Company seeks to distinguish itself from its competitors by providing superior customer service. The Company serves its customers with approximately 300 route salespersons, who generally interact on a weekly basis with their customers, and more than 150 service support people, who are responsible for expeditiously handling customer requirements regarding the outfitting of new customer employees, garment repair and replacement, billing inquiries and other matters. In addition, the Company offers its customers a range of service options, including full-service rental programs in which rental products are cleaned and maintained by the Company, leasing programs in which these products are cleaned and maintained by individual employees and direct sales of garments and other textile items. The Company's newly-implemented Customer Management Program ("CMP") is a computerized management tool used to measure and direct customer service activities. This program gathers and organizes customer service data, delivers key information regarding customer satisfaction to management and helps ensure more targeted service to address customer preferences. Compensation of the Company's managers in the laundry business is directly tied to their business units' financial performance and customer satisfaction as determined by the Company's CMP. Pursue Strategic Acquisitions. The Company seeks to acquire textile rental businesses that have customer accounts under contract, excellent service reputations, and the size and quality of routes to serve as the Company's base for expansion in an existing or new geographic market. In many cases, the Company has purchased customer contracts and routes without buying fixed assets normally associated with such contracts or routes. The textile rental industry has experienced significant consolidation in recent years but remains highly fragmented. The Company believes that increasingly stringent environmental regulations are forcing many smaller companies to exit the market, which provides the Company with significant opportunities for acquisitions and expansion. 5 THE OFFERING Initial Notes............... The Initial Notes were sold by the Company on June 26, 1998 pursuant to a Purchase Agreement dated June 23, 1998 (the "Purchase Agreement"). The Initial Purchasers subsequently resold the Initial Notes in the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act. Registration Rights Pursuant to the Purchase Agreement, the Company Agreement ................. and the Initial Purchasers entered into a Registration Rights Agreement, dated June 26, 1998 (the "Registration Rights Agreement"), which grants the holders of the Initial Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such exchange rights which terminate upon the consummation of the Exchange Offer. THE EXCHANGE OFFER Securities Offered.......... $75,000,000 in aggregate principal amount of 11 1/4% Series B Senior Subordinated Notes of the Company due 2008. The Exchange Offer.......... $1,000 principal amount of the Exchange Notes in exchange for each $1,000 principal amount of Initial Notes. As of the date hereof, $75,000,000 aggregate principal amount of Initial Notes are outstanding. The Company will issue the Exchange Notes to holders on or promptly after the Expiration Date. Based on no-action letters issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties, the Company believes the Exchange Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. Each Participating Broker-Dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other 6 trading activities. The Company has agreed that for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective, and (ii) the date on which a Participating Broker- Dealer is no longer required to deliver a prospectus in connection with market making or other trading activities, it will make this Prospectus available to any Participating Broker- Dealer for use in connection with any such resale; provided, however, that the Company and the Guarantors will have no obligation to amend or supplement this Prospectus unless the Company has received written notice from a Participating Broker-Dealer of their prospectus delivery requirements under the Securities Act within fifteen (15) business days following consummation of the Exchange Offer. See "Plan of Distribution." Any holder who tenders in the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the Exchange Notes cannot rely on the position of the staff of the Commission enunciated in no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Failure to comply with such requirements in such instance may result in such holder incurring liability under the Securities Act for which the holder is not indemnified by the Company. Expiration Date............. 5:00 p.m., New York City time, on , 1998, unless the Exchange Offer is extended by the Company in its sole discretion, in which case the term "Expiration Date" means that latest date and time to which the "Exchange Offer is extended. Accrued Interest on the Exchange Notes and Initial Interest on each Exchange Note will accrue from Notes...................... the last date on which interest was paid on the Initial Note surrendered in exchange thereof or, if no interest has been paid on the Initial Note, from the date of original issuance of such Initial Note. No interest will be paid on the Initial Notes accepted for exchange, and holders of Initial Notes whose Initial Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on the Initial Notes accrued up to the date of the issuance of the Exchange Notes. Conditions to the Exchange The Exchange Offer is subject to certain Offer...................... customary conditions, which may be waived by the Company. See "Exchange Offer--Conditions." Procedures for Tendering Each holder of Initial Notes wishing to accept Initial Notes.............. the Exchange Offer must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile thereof, together with the Initial Notes and any other required documentation to the Exchange Agent (as defined herein) at the address set forth 7 herein. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, that neither the holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. In the case of any holder that is not a broker- dealer, each such holder, by tendering, will also represent to the Company that such holder is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes. Each Participating Broker-Dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Exchange Offer--Purpose and Effect of the Exchange Offer" and "--Procedures for Tendering" and "Plan of Distribution." Untendered Initial Notes.... Following the consummation of the Exchange Offer, holders of Initial Notes eligible to participate but who do not tender their Initial Notes will not have any further exchange rights and such Initial Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Initial Notes could be adversely affected. Consequences of Failure to The Initial Notes that are not exchanged pursuant Exchange................... to the Exchange Offer will remain restricted securities. Accordingly, such Initial Notes may be resold only (i) to the Company, (ii) pursuant to an effective registration statement under the Securities Act, (iii) pursuant to Rule 144A under the Securities Act, (iv) outside the United States to a foreign person pursuant to the requirements of Rule 904 under the Securities Act, or (v) pursuant to Rule 144 under the Securities Act or pursuant to some other exemption from registration under the Securities Act . See "Exchange Offer--Consequences of Failure to Exchange." Shelf Registration In the event that any changes in law or the Statement.................. applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer or if any holder of the Initial Notes (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) is not eligible to participate in the Exchange Offer, and such holder has satisfied certain conditions relating to the provision of information to the Company for use therein, the Company will, at its cost, use its best efforts to (a) file a shelf registration statement (the "Shelf Registration Statement") covering resales of the Initial Notes, (b) 8 cause the Shelf Registration Statement to be declared effective under the Securities Act and (c) keep continuously effective the Shelf Registration Statement for a period of at least two years. Other than as set forth above, holders of Initial Notes who do not tender in the Exchange Offer will not have any continuing rights under the Registration Rights Agreement. Special Procedures for Beneficial Owners.......... Any beneficial owner whose Initial Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Initial Notes, either make appropriate arrangements to register ownership of the Initial Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Guaranteed Delivery Holders of Initial Notes who wish to tender their Procedures................. Initial Notes and whose Initial Notes are not immediately available or who cannot deliver their Initial Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent (or comply with the procedures for book-entry transfer) prior to the Expiration Date must tender their Initial Notes according to the guaranteed delivered procedures set forth in "Exchange Offer-- Guaranteed Delivery Procedures." Withdrawal Rights........... Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See "Exchange Offer--Withdrawal of Tenders" Acceptance of Initial Notes and Delivery of Exchange The Company will accept for exchange any and all Notes...................... Initial Notes which are duly tendered in the Exchange Offer and not validly withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "Exchange Offer--Terms of the Exchange Offer. Certain Tax Consequences.... The exchange pursuant to the Exchange Offer should not be a taxable event for Federal income tax purposes. See "Certain Federal Income Tax Considerations" Use of Proceeds............. There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. See "Use of Proceeds." Exchange Agent.............. IBJ Schroder Bank & Trust Company 9 THE EXCHANGE NOTES General..................... The form and terms of the Exchange Notes are the same as the form and terms of the Initial Notes (which they replace) except that (i) the Exchange Notes bear a Series B designation and a different CUSIP number from the Initial Notes, (ii) the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof and (iii) the Exchange Notes will not contain certain provisions included in the terms of the Initial Notes relating to the timing of the Exchange Offer. In addition, the holders of Exchange Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for the payment of Liquidated Damages in the event the Company fails to satisfy certain obligations under the Registration Rights Agreement, which rights will terminate when the Exchange Offer is consummated. See "Exchange Offer--Purpose and Effect of Exchange Offer." The Exchange Notes will evidence the same debt as the Initial Notes and will be entitled to the benefits of the Indenture. See "Description of Notes." Securities Offered.......... $75,000,000 in aggregate principal amount of 11 1/4% Series B Senior Subordinated Notes due 2008 of the Company. Maturity Date............... June 1, 2008. Interest Payment Dates...... June 1 and December 1 of each year, commencing December 1, 1998. Subsidiary Guarantees....... The Exchange Notes will be unconditionally guaranteed by each of the existing and future Domestic Subsidiaries (as defined herein) of the Company (each a "Guarantor" and, collectively, the "Guarantors") other than the Receivables Subsidiaries (as defined herein). Subordination............... The Exchange Notes will be general unsecured obligations of the Company, will rank subordinate in right of payment to all Senior Debt and will rank senior or pari passu in right of payment to all existing and future subordinated indebtedness of the Company. The Subsidiary Guarantees will be general unsecured obligations of the Guarantors, will rank subordinate in right of payment to all Senior Debt of the Guarantors and will rank senior or pari passu in right of payment to all existing and future subordinated indebtedness of the Guarantors. As of April 30, 1998, on an as adjusted basis, the Exchange Notes would have been subordinate to approximately $10.6 million of Senior Debt. See "Risk Factors-- Subordination." Optional Redemption......... On or after June 1, 2003, the Company may redeem the Notes, in whole or in part, at the redemption prices set forth herein, plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the date of redemption. See "Description of Notes--Optional Redemption." 10 Change of Control........... Upon a Change of Control (as defined herein), the Company will be required to make an offer to repurchase all outstanding Notes at 101% of the principal amount thereof plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the date of repurchase. See "Description of Notes--Repurchase at the Option of Holders-- Change of Control." Covenants................... The Indenture restricts, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, issue preferred stock, enter into sale and leaseback transactions, incur liens, pay dividends or make certain other restricted payments, apply net proceeds from certain asset sales, enter into certain transactions with affiliates, merge or consolidate with any other person, sell stock of subsidiaries, and assign, transfer, lease, convey or otherwise dispose of substantially all of the assets of the Company. See "Description of Notes--Certain Covenants." Use of Proceeds............. The net proceeds of the Offering were used to repay certain indebtedness, to repurchase outstanding common stock warrants and for working capital and general corporate purposes. See "Use of Proceeds." 11 SUMMARY UNAUDITED AS ADJUSTED FINANCIAL INFORMATION The unaudited financial information set forth in the following table is adjusted to give effect to the sale of the Initial Notes and the application of the proceeds therefrom as described in "Use of Proceeds" as if such transactions had been consummated on the first day of each period presented. The unaudited as adjusted financial information is presented for illustrative purposes only and is not necessarily indicative of results that would have been reported had such transactions actually occurred on the date specified, nor is it indicative of the Company's future results. Operating results for the six month period ended April 30, 1998 are not necessarily indicative of the results that may be expected for the year ending October 31, 1998. All financial information in this table should be read in conjunction with the notes below and the Company's Consolidated Financial Statements, the related notes, and other information contained elsewhere in this Prospectus.
TWELVE MONTHS SIX MONTHS ENDED YEAR ENDED ENDED APRIL 30, OCTOBER 31, 1997 APRIL 30, 1998 1998 ---------------- -------------- ------------- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net revenue.................... $122,935 $ 67,028 $129,004 Gross profit................... 30,147 16,175 31,585 Income from operations......... 10,792 4,979 10,699 Interest expense (1)........... 26,743 22,214 26,870 Loss before income taxes and extraordinary charge (2)...... $(15,951) $(17,235) $(16,171) OTHER DATA: Capital expenditures........... $ 2,584 $ 2,951 $ 4,313 Depreciation and amortization.. 5,004 2,617 5,171 EBITDA (3)..................... 15,496 7,446 15,570 EBITDA margin (3).............. 12.6% 11.1% 12.1% Ratio of earnings to fixed charges (4)................... -- -- -- Ratio of debt to EBITDA........ 5.3x 5.7x 5.3x BALANCE SHEET DATA (AT PERIOD END): Working capital................ $ 11,297 Total assets................... 113,726 Total debt..................... 83,067 Shareholders' equity (deficit) (5)........................... (8,910)
- ------- (1) Reflects an interest rate of 11 1/4% on the Initial Notes. Included in interest expense, for each respective period, is a $17,257 charge for the cost to redeem common stock warrants held by Capital Resource Lenders II and Exeter Venture Lenders (the "Warrants") over their book carrying value. The Warrants were redeemed with a portion of the proceeds of the Offering. The Warrants were issued in 1994 in connection with the issuance of subordinated notes having a face value of $12,000 (the "Old Notes") which were also redeemed with a portion of the proceeds of the Offering. (2) Excludes extraordinary charges attributable to the Old Notes of $1,292, $1,013, and $1,150, respectively, for the write-off of unamortized financing charges and original issue discount, net of taxes. (3) The term EBITDA as used herein represents income from operations plus depreciation and amortization, excluding amortization associated with rental merchandise. EBITDA has been presented because the Company believes it is commonly used in this or a similar format by investors to analyze and compare operating performance and to determine a company's ability to service and/or incur debt. However, EBITDA should not be considered in isolation or as a substitute for net income, cash flow from operations or any other measure of income or cash flow that is prepared in accordance with generally accepted accounting principles, or as a measure of a company's profitability or liquidity. EBITDA margin represents the percentage of EBITDA to net revenue. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and the related notes thereto included elsewhere in this Prospectus. (4) The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. Earnings consist of income (loss) before income taxes plus fixed charges, excluding capitalized interest. Earnings include a $17,257 pretax charge for the redemption of the Warrants. Fixed charges include interest, whether expensed or capitalized, amortization of deferred financing costs and that portion of rental expense estimated to be attributable to interest. For the fiscal year ended October 31, 1997, the six-months ended April 30, 1998 and the twelve-months ended April 30, 1998, earnings were insufficient to cover fixed charges by $15,951, $17,235 and $16,171, respectively. (5) Shareholders' deficit includes a one-time charge of $17,257 incurred to redeem the Warrants and reflects charges of $1,150, net of tax, associated with the repayment of the Old Notes and various senior debt obligations as of May 1, 1997. The amount of the shareholders' deficit varies in other tables presented herein as a result of different effective dates of these transactions for presentation purposes. 12 SUMMARY HISTORICAL FINANCIAL INFORMATION The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company as of October 31, 1996 and 1997 and for each of the three years in the period ended October 31, 1997, including the notes thereto, appearing elsewhere herein.
SIX MONTHS YEAR ENDED OCTOBER 31, ENDED APRIL 30, ------------------------------------------------ ----------------- 1993 1994 1995 1996 1997 1997 1998 -------- -------- -------- -------- -------- ------- -------- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net revenue............ $107,745 $110,407 $117,768 $119,085 $122,935 $60,959 $67,028 Gross profit........... 24,221 23,003 25,231 25,737 30,147 14,737 16,175 Income from operations (1)................... 7,222 5,292 7,595 8,179 10,792 5,072 4,979 Interest expense (2)... 4,659 5,516 6,254 6,786 6,715 3,410 20,652 Income (loss) before income taxes and cumulative effect of change in accounting principle............. 2,563 (224) 1,341 1,393 4,077 1,662 (15,673) Provision for income taxes................. 1,425 413 890 847 2,025 826 237 Income (loss) before cumulative effect of change in accounting principles............ 1,138 (637) 451 546 2,052 836 (15,910) Cumulative effect of change in accounting for income taxes (3).. -- (829) -- -- -- -- -- Net income (loss)...... $ 1,138 $ (1,466) $ 451 $ 546 $ 2,052 $ 836 $(15,910) OTHER DATA: Capital expenditures (4)................... $ 4,745 $ 9,915 $ 8,731 $ 9,820 $ 2,584 $ 1,222 $ 2,951 Depreciation and amortization.......... 3,366 3,780 4,416 4,779 5,289 2,596 2,755 EBITDA (5)............. 10,367 8,804 11,463 12,370 15,496 7,372 7,446 EBITDA margin (5)...... 9.6% 8.0% 9.7% 10.4% 12.6% 12.1% 11.1% Ratio of earnings to fixed charges (6)..... 1.4x -- 1.2x 1.2x 1.5x 1.4x -- BALANCE SHEET DATA (AT PERIOD END): Working capital........ $ 4,763 $ 8,812 $ 11,255 $ 6,608 $ 6,769 $ 6,877 $ 5,427 Total assets........... 77,478 85,001 93,170 97,432 102,621 95,573 110,116 Total debt............. 45,435 48,020 56,680 58,051 58,557 56,510 58,816 Warrants............... -- 1,743 1,743 1,743 1,743 1,743 19,000 Shareholders' equity (deficit) (7)......... 7,978 6,996 7,373 7,845 9,897 8,681 (6,014)
- -------- (1) Income from operations for 1993 and 1994 includes gains from property insurance claims of $364 and $828, respectively. (2) Included in the six months ended April 30, 1998 is $17,257 of cost to redeem the Warrants over their book carrying value. The Warrants were issued in connection with the issuance of the Old Notes which were also redeemed with a portion of the proceeds of the Offering. (3) Attributable to the Company's adoption of Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes," effective November 1, 1993. (4) Capital expenditures in 1993 through 1996 included costs associated with the construction of laundry plants in Buffalo, NY, Richmond, VA and New Bedford, MA. (5) The term EBITDA as used herein represents income from operations plus depreciation and amortization, excluding amortization associated with rental merchandise. EBITDA has been presented because the Company believes it is commonly used in this or a similar format by investors to analyze and compare operating performance and to determine a company's ability to service and/or incur debt. However, EBITDA should not be considered in isolation or as a substitute for net income, cash flow from operations or any other measure of income or cash flow that is prepared in accordance with generally accepted accounting principles, or as a measure of a company's profitability or liquidity. EBITDA margin represents the percentage of EBITDA to net revenue. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and the related notes thereto included elsewhere in this Prospectus. (6) The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. Earnings consist of income (loss) before income taxes plus fixed charges, excluding capitalized interest. Earnings for the six months ended April 30, 1998 include a $17,257 pretax charge for the redemption of the Warrants. Fixed charges include interest, whether expensed or capitalized, amortization of deferred financing costs and original issue discount attributable to the Old Notes, and that portion of rental expense estimated to be attributable to interest. For the year ended October 31, 1994 and the six months ended April 30, 1998, earnings were insufficient to cover fixed charges by $224 and $15,673, respectively. (7) Shareholders' deficit at April 30, 1998 includes a one-time charge of $17,257 incurred to redeem the Warrants. 13 RISK FACTORS This Prospectus includes "forward looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). Although the Company believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from the Company's forward-looking statements are set forth below and elsewhere in this Prospectus. All forward- looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth below and elsewhere in this Prospectus. LEVERAGE The Company is highly leveraged. After giving an as adjusted effect to the Offering and the application of the proceeds therefrom as of April 30, 1998, the Company would have had total indebtedness of approximately $85.6 million and shareholders' deficit of approximately $6.9 million. The Company and its subsidiaries will be permitted to incur substantial additional indebtedness in the future. See "Capitalization" and "Selected Financial and Operating Data" and "Description of Notes." The Company's ability to make scheduled payments of principal of, or to pay the interest or Liquidated Damages, if any, on, or to refinance, its indebtedness (including the Notes), or to fund planned capital expenditures and research and development expense will depend on its future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. Based upon the current level of operations, anticipated cost savings and revenue growth, management believes that cash flow from operations and available cash, together with available borrowings under the New Credit Facility (as defined herein), will be adequate to meet the Company's future liquidity needs for the next several years. The Company may, however, need to refinance all or a portion of the principal of the Notes on or prior to maturity. There can be no assurance that the Company's business will generate sufficient cash flow from operations, that anticipated revenue growth and operating improvements will be realized or that future borrowings will be available under the New Credit Facility in an amount sufficient to enable the Company to service its indebtedness, including the Notes, or to fund its other liquidity needs. In addition, there can be no assurance that the Company will be able to effect any such refinancing on commercially reasonable terms or at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." The degree to which the Company is leveraged could have important consequences to holders of the Notes, including, but not limited to: (i) making it more difficult for the Company to satisfy its obligations with respect to the Notes, (ii) increasing the Company's vulnerability to general adverse economic and industry conditions, (iii) limiting the Company's ability to obtain additional financing to fund future working capital, capital expenditures, research and development and other general corporate requirements, (iv) requiring the dedication of a substantial portion of the Company's cash flow from operations to the payment of principal of, and interest on, its indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, research and development or other general corporate purposes, (v) limiting the Company's flexibility in planning for, or reacting to, changes in its business and the industry and (vi) placing the Company at a competitive disadvantage vis-a-vis less leveraged competitors. In addition, the Indenture and the New Credit Facility contain financial and other restrictive covenants that will limit the ability of the Company to, among other things, borrow additional funds. Failure by the Company to comply with such covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on the Company. In addition, the degree to which the Company is leveraged could prevent it from repurchasing all of the Notes tendered to it upon the occurrence of a Change of Control. See "Description of Notes--Repurchase at Option of Holder--Change of Control" and "Description of Other Indebtedness-- New Credit Facility." 14 SUBORDINATION The Notes and the Subsidiary Guarantees are subordinated in right of payment to all existing and future Senior Debt of the Company and the Guarantors. However, the Indenture will provide that the Company will not, and will not permit any of the Guarantors to, incur or otherwise become liable for any indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes or any of the Subsidiary Guarantees. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, the holders of Senior Debt will be entitled to be paid in full before any payment may be made with respect to the Notes. In addition, the subordination provisions of the Indenture will provide that payments with respect to the Notes will be blocked in the event of a payment default on Senior Debt and may be blocked for up to 179 days each year in the event of certain non-payment defaults on Senior Debt. In the event of a bankruptcy, liquidation or reorganization of the Company, holders of the Notes will participate ratably with all holders of subordinated indebtedness of the Company that is deemed to be of the same class as the Notes, and potentially with all other general creditors of the Company, based upon the respective amounts owed to each holder or creditor, in the remaining assets of the Company. In any of the foregoing events, there can be no assurance that there would be sufficient assets to pay amounts due on the Notes. As a result, holders of Notes may receive less, ratably, than the holders of Senior Debt. As of April 30, 1998, on an as adjusted basis after giving effect to the Offering and the application of the proceeds therefrom, the aggregate amount of Senior Debt of the Company and its subsidiaries would have been approximately $10.6 million, and giving effect to borrowing restrictions, approximately $44 million would have been available for additional borrowing under the New Credit Facility. The Indenture permits the incurrence of substantial additional indebtedness, including Senior Debt, by the Company and its subsidiaries in the future. See "Description of Other Indebtedness--New Credit Facility." POSSIBLE INABILITY TO FUND A CHANGE OF CONTROL OFFER Upon a Change of Control, the Company will be required to offer to repurchase all outstanding Notes at 101% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of repurchase. However, there can be no assurance that sufficient funds will be available at the time of any Change of Control to make any required repurchases of Notes tendered or that restrictions in the New Credit Facility will allow the Company to make such required repurchases. Notwithstanding these provisions, the Company could enter into certain transactions, including certain recapitalizations, that would not constitute a Change of Control but would increase the amount of debt outstanding at such time. See "Description of Notes--Repurchase at Option of Holders." FRAUDULENT CONVEYANCE Under applicable provisions of federal bankruptcy law or comparable provisions of state fraudulent transfer law, if, among other things, the Company or any Guarantor, at the time it incurred the indebtedness evidenced by the Notes or its Subsidiary Guarantee, (i) (a) was or is insolvent or rendered insolvent by reason of such occurrence or (b) was or is engaged in a business or transaction for which the assets remaining with the Company or such Guarantor constituted unreasonably small capital or (c) intended or intends to incur, or believed or believes that it would incur, debts beyond its ability to pay such debts as they mature, and (ii) the Company or such Guarantor received or receives less than reasonably equivalent value or fair consideration for the incurrence of such indebtedness, then the Notes and the Subsidiary Guarantees, and any pledge or other security interest securing such indebtedness, could be voided, or claims in respect of the Notes or the Subsidiary Guarantees could be subordinated to all other debts of the Company or such Guarantor, as the case may be. In addition, the payment of interest and principal by the Company pursuant to the Notes or the payment of amounts by a Guarantor pursuant to a Subsidiary Guarantee could be voided and required to be returned to the person making such payment, or to a fund for the benefit of the creditors of the Company or such Guarantor, as the case may be. 15 The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the foregoing. Generally, however, the Company or Guarantor would be considered insolvent if (i) the sum of its debts, including contingent liabilities, were greater than the saleable value of all of its assets at a fair valuation or if the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature or (ii) it could not pay its debts as they become due. On the basis of historical financial information, recent operating history and other factors, the Company and each Guarantor believes that, after giving effect to the indebtedness incurred in connection with the Offering and the New Credit Facility, it is not insolvent, does not have unreasonably small capital for the business in which it is engaged and has not incurred debts beyond its ability to pay such debts as they mature. There can be no assurance, however, as to what standard a court would apply in making such determinations or that a court would agree with the Company's or the Guarantors' conclusions in this regard. COMPETITION The textile rental industry is highly competitive and several firms in the industry are larger and have substantially greater financial and other resources than the Company. The Company's leading competitors include ARAMARK Corporation, Cintas Corporation, G&K Services, Inc., Unifirst Corp. and Unitog Company. The Company also competes with numerous local and regional companies, many of which enjoy cost advantages in their respective markets. In addition, the Company may increasingly face competition in the future from businesses that focus on selling uniforms and other related items. The Company believes that the primary competitive factors that affect its operations are price and its ability to meet customer specifications, which include design, quality and service. To the extent existing or future competitors seek to gain or retain market share by reducing prices, the Company may be required to lower its prices, thereby adversely impacting operating results. As a result of these factors, there can be no assurance that competition from existing or potential competitors will not have a materially adverse effect on the Company's results of operations. The Company's competitors also generally compete with the Company for acquisition candidates, which has the effect of increasing the price for acquisitions and reducing the number of available acquisition candidates. See "Business--Competition." GENERAL ECONOMIC CONDITIONS The Company's business may be adversely affected by national or regional economic slowdowns or by certain industry specific slowdowns. The Company's operating results may also be adversely affected by events or conditions in a particular area, such as adverse weather and other factors. In addition, the Company's operating results may be adversely affected by increases in interest rates that may lead to a decline in economic activity, while simultaneously resulting in a higher interest expense to the Company under its New Credit Facility. SEASONALITY AND QUARTERLY FLUCTUATIONS Historically, the Company's revenues and operating results have varied from quarter to quarter and are expected to continue to fluctuate in the future. These fluctuations have been due to a number of factors including: general economic conditions in the Company's markets; the timing of acquisitions and of commencing start-up operations and related costs; the effectiveness of integrating acquired businesses and start-up operations; the timing of capital expenditures; seasonal rental and purchasing patterns of the Company's customers; and price changes in response to competitive factors. In addition, the Company's operating results historically have been seasonally lower during the third fiscal quarter (May, June and July) than during the other quarters of the fiscal year. The Company incurs various costs in integrating or establishing newly acquired businesses or start-up operations, and the profitability of a new location is generally expected to be lower in the initial period of its operation than in subsequent periods. Start-up operations in particular lack the support of an existing customer base and require a significantly longer period to develop sales opportunities and meet targeted operating results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Seasonality." 16 ENVIRONMENTAL REGULATION The Company and its operations are subject to various federal, state and local laws and regulations governing, among other things, the generation, handling, storage, transportation, treatment and disposal of hazardous wastes and other substances. In particular, the Company generates and must dispose of significant quantities of laundry waste-water including detergent, petroleum and other residues. In the past, the Company has settled or contributed to the settlement of actions or claims brought against the Company relating to the disposal of hazardous materials and there can be no assurance that the Company will not have to expend material amounts to remediate the consequences of any such disposal in the future. Further, under environmental laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in or emanating from such property, as well as related costs of investigation and property damage. Such laws often impose liability without regard to whether the owner or lessee knew of or was responsible for the presence of such hazardous or toxic substances. There can be no assurance that acquired or leased locations have been operated in compliance with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon the Company under such laws or expose the Company to third-party actions such as tort suits. In addition, the EPA has recently proposed a federal environmental regulatory framework applicable to industrial laundry operations, called categorical pre-treatment standards, which would replace local regulations. These regulations, scheduled to take effect in 1999, if implemented as proposed, would require the Company and its competitors to expend substantial amounts on compliance, thereby increasing operating costs and capital expenditures. To the extent such costs and expenses could not be offset by price increases, the Company's results of operations could be adversely affected. Further, there can be no assurance of the final form of these regulations or of the future course of environmental regulations in general. Until such regulations are finalized, the Company is not able to determine the cost of compliance. The Company also believes that a substantial amount of its revenues are attributable to customers that are concerned about environmental issues and are seeking an environmentally responsible solution to their laundry needs. Any changes in existing environmental regulations could affect such customer's perceived value of the Company's services, possibly to a material degree. ACQUISITIONS The Company intends in the future to selectively pursue acquisitions of textile rental businesses, routes and customer contracts, although the Company has no present understandings, commitments or agreements with respect to any such acquisitions. Future acquisitions by the Company could result in the incurrence of debt and contingent liabilities and an increase in amortization expenses related to goodwill and other intangible assets, which could have a material adverse effect upon the Company's business, financial condition and results of operations. Acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies, services and products of the acquired assets and the diversion of management's attention from other business concerns. In the event that any such acquisition were to occur, there can be no assurance that the Company's business, financial condition and results of operations would not be materially adversely affected. In addition, attractive acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers. There can be no assurance that the Company will be able to complete future acquisitions. In order to finance such acquisitions, it may be necessary for the Company to obtain additional funds either through public or private financings, including bank and other secured and unsecured borrowings and the issuance of debt or equity securities. CONTROLLING SHAREHOLDERS All of the Company's equity securities are owned of record by J. Stanley Coyne or trusts established by him. See "Principal Shareholders." As a result, J. Stanley Coyne and such trusts have the ability to elect the Board of Directors of the Company, to approve or disapprove other matters requiring shareholder approval, and to control the affairs and policies of the Company. The interests of J. Stanley Coyne and such trusts as the sole equity holders of the Company may differ from the interests of holders of the Notes. 17 DEPENDENCE ON SENIOR MANAGEMENT; ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL The Company's success is largely dependent on the skills, experience and efforts of its senior management and certain other key personnel. If, for any reason, one or more senior executives or key personnel were not to remain active in the Company, the Company's results of operations could be adversely affected. The Company's future success also depends upon its ability to attract and retain qualified managers and technical and marketing personnel, as well as a sufficient number of hourly workers. There is competition in the market for the services of such qualified personnel and hourly workers and the Company's failure to attract and retain such personnel or workers could adversely affect the Company's results of operations. See "Business-- Employees" and "Management." INFORMATION SYSTEMS; YEAR 2000 The Company has made a substantial investment in its information systems and intends to spend significant amounts on its information systems in the future. In particular, the Company is currently implementing new billing and route accounting systems which are millennium ("Year 2000") compliant. Additionally the Company is currently evaluating the programming code in its other existing computer and software systems. The issue with respect to Year 2000 is whether systems will properly recognize date sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause complete system failures. There can be no assurance that the Year 2000 problem will not have a material adverse effect on the results of operations of the Company. UNIONIZED WORK FORCE As of April 30, 1998 the Company was subject to 29 collective bargaining agreements covering approximately 800 of the Company's 1700 employees and the number of employees of the Company covered by collective bargaining agreements could increase in the future. There can be no assurance that the unions will not engage in a work stoppage or strike in the future. Although the Company believes that relations with the unions are satisfactory, a prolonged work stoppage or strike by its unionized work force could have a material adverse effect on the Company's results of operations. See "Business--Employees." Certain employees of the Company are covered by union sponsored, collectively bargained, multiemployer pension plans (the "Union Plans") which may be subject to the withdrawal liability provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). In the event that the Company incurs a complete or partial withdrawal from any of the Union Plans, either by reducing or completely terminating all contributions to a Union Plan or by permanently ceasing to have a legal obligation to contribute to such Union Plan, the Company may be liable for its share of unfunded vested benefits, if any, related to such Union Plan. Information from the administrators of the Union Plans is not available to permit the Company to determine its share of unfunded vested benefits, if any, related to the Union Plans. The Company does not believe that it will incur such liability and, as such, the Company has not recorded a charge for such liability. There can be no assurance, however, that the Company will not be liable for any such withdrawal liability, which liability could have a material adverse effect on the Company's financial condition and results of operations. Such liability may also cause an Event of Default under the Indenture and a default under the Company's other indebtedness, including the New Credit Facility. ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF NOTES Prior to the Exchange Offer, there has not been any public market for the Exchange Notes. The Initial Notes have not been registered under the Securities Act and are subject to restrictions on transferability to the extent that they are not exchanged for Exchange Notes by holders who are entitled to participate in this Exchange Offer. The holders of Initial Notes who are not eligible to participate in the Exchange Offer are entitled to certain registration rights, and the Company is required to file a Shelf Registration Statement with respect to such Initial Notes. However, to the extent the Initial Notes are tendered and accepted in the Exchange Offer, the trading 18 market for the remaining untendered Initial Notes could be adversely affected. The Exchange Notes will constitute a new issue of securities with no established trading market. The Company does not intend to list the Exchange Notes on any national securities exchange or to seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Initial Purchasers have advised the Company that they currently intend to make a market in the Exchange Notes, but they are not obligated to do so and may discontinue such market making at any time. In addition, such market making activity will be subject to the limits imposed by the Securities Act and the Exchange Act and may be limited during the Exchange Offer and the pendency of any Shelf Registration Statements. Accordingly, no assurance can be given that an active public or other market will develop for the Exchange Notes or as to the liquidity of the trading market for the Exchange Notes. If a trading market does not develop or is not maintained, holders of the Exchange Notes may experience difficulty in reselling the Exchange Notes or may be unable to sell them at all. If a market for the Exchange Notes develops, any such market may be discontinued at any time. If a public trading market develops for the Exchange Notes, future trading prices of the Exchange Notes will depend on many factors, including, among other things, prevailing interest rates, the Company's operating results and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and other factors, including the financial condition of the Company, the Exchange Notes may trade at a discount from their principal amount. FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS Issuance of the Exchange Notes in exchange for the Initial Notes pursuant to the Exchange Offer will be made only after a timely receipt by the Company of such Initial Notes, a properly completed and duly executed Letter of Transmittal and all other required documents. Therefore, holders of the Initial Notes desiring to tender such Initial Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. Neither the Company nor the Exchange Agent is under any duty to give notification of defects or irregularities with respect to the tenders of Initial Notes for exchange. Initial Notes that are not tendered or are tendered but not accepted will, following the consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof and, upon consummation of the Exchange Offer, certain registration rights under the Registration Rights Agreement will terminate. In addition, any holder of Initial Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transactions. Each Participating Broker-Dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. Subject to certain exceptions, the Company has agreed that for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective, and (ii) the date on which a Participating Broker-Dealer is no longer required to deliver a prospectus in connection with market making or other trading activities, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale; provided, however, that the Company and the Subsidiary Guarantors will have no obligation to amend or supplement this Prospectus unless the Company has received written notice from a Participating Broker-Dealer of their prospectus delivery requirements under the Securities Act within fifteen business days following consummation of the Exchange Offer. See "Plan of Distribution." To the extent that Initial Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Initial Notes could be adversely affected. See "Exchange Offer." 19 USE OF PROCEEDS This Exchange Offer is intended to satisfy certain of the Company's obligations under the Purchase Agreement and the Registration Rights Agreement. The Company will not receive any cash proceeds from the issuance of the Exchange Notes offered hereby. In consideration for issuing the Exchange Notes contemplated in this Prospectus, the Company will receive Initial Notes in like principal amount, the form and terms of which are the same as the forms and terms of the Exchange Notes (which they replace), except as otherwise described herein. The Initial Notes surrendered in exchange for Exchange Notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes will not result in any increase or decrease in the indebtedness of the Company. As such, no effect has been given to the Exchange Offer in the summary unaudited as adjusted financial information or capitalization tables. The proceeds received by the Company from the Offering were used principally to repay certain indebtedness, repurchase the Warrants and pay transaction fees and expenses relating thereto. The following table and footnotes thereto set forth the source and uses of funds in connection with the Offering (dollars in thousands): SOURCE OF FUNDS: Initial Notes........................................................ $75,000 USES OF FUNDS: Repayment of old credit facilities (1)............................... $31,952 Redemption of Old Notes (2).......................................... 12,000 Redemption of Warrants (3)........................................... 19,000 Repayment of other debt.............................................. 5,092 Working capital and general corporate purposes....................... 3,956 Transaction fees and expenses........................................ 3,000 ------- Total Uses......................................................... $75,000 =======
- -------- (1) Includes repayment of old credit facilities consisting of loans payable to NationsBank, N.A. (the "Bank"), an affiliate of NationsBanc Montgomery Securities LLC, and the other lender thereto as follows: (a) a term loan in the amount of $5,900 with interest payable monthly at an annual interest rate equal to the Bank's prime rate plus 1.25%; (b) a term loan in the amount of $10,000 with interest payable monthly at an annual interest rate equal to the Bank's prime rate plus 1.5%; (c) an acquisition facility in the amount of $1,047 with interest payable monthly at an annual interest rate equal to the Bank's prime rate plus 1.75%; and (d) a revolving credit facility in the amount of $15,005 with interest payable monthly at an annual interest rate equal to the Bank's prime rate plus 1.0%. The Bank's prime rate was 8.5% at April 30, 1998. (2) The Old Notes were payable to Capital Resource Lenders II and Exeter Venture Lenders with interest payable quarterly at an annual interest rate of 12.0%. (3) Represents amounts paid or payable in connection with the redemption of the Warrants as follows: $6,000 for the Warrants, $11,000 for an early termination fee and $2,000 for a management fee. The $2,000 management fee is payable over an 18 month period. 20 CAPITALIZATION The following table sets forth (i) the capitalization of the Company as of April 30, 1998 and (ii) the capitalization of the Company on an as adjusted basis to give effect to the Offering of the Initial Notes and the application of the proceeds therefrom. This table should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
AT APRIL 30, 1998 -------------------- ACTUAL AS ADJUSTED ------- ----------- (DOLLARS IN THOUSANDS) Long-term debt, including current maturities: Senior debt: Old credit facilities (1).............................. $31,952 -- Other debt (2)......................................... 15,676 $ 10,584 Subordinated debt: Old Notes (2)(3)....................................... 11,188 -- Initial Notes.......................................... -- 75,000 ------- -------- Total long-term debt..................................... 58,816 85,584 Warrants (2)............................................... 19,000 -- Shareholders' equity (deficit) (4)......................... (6,014) (6,860) ------- -------- Total capitalization................................... $71,802 $ 78,724 ======= ========
- -------- (1) Contemporaneously with the completion of the Offering, the Company's old credit facility was amended. See "Description of Other Indebtedness--New Credit Facility." (2) Reflects repayment of certain existing obligations from the proceeds of the Offering. See "Use of Proceeds." For presentation purposes, this assumes the payment of the entire $19,000 Warrant redemption obligation on April 30, 1998. The management fee portion of this obligation ($2,000) is payable over 18 months commencing on the closing of the Offering. (3) Represents the carrying value of "Old Notes" having a face value of $12,000. (4) Shareholders' deficit includes a one-time charge of $17,257 incurred to redeem the Warrants and reflects an after-tax extraordinary charge of approximately $846 associated with the repayment of the Old Notes and various senior debt obligations as of April 30, 1998. The amount of the shareholders' deficit varies in other tables presented herein as a result of different effective dates of these transactions for presentation purposes. 21 SELECTED FINANCIAL AND OPERATING DATA The selected financial data set forth below for the Company as of October 31, 1997 and 1996 and for each of the three years in the period ended October 31, 1997 are derived from the audited Consolidated Financial Statements included elsewhere herein. The selected financial data for the years ended October 31, 1993 and 1994 and for the six month period ended April 30, 1997 and 1998 are derived from unaudited Consolidated Financial Statements. The unaudited Consolidated Financial Statements include all adjustments consisting of normal recurring accruals, which the Company considers necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the six months ended April 30, 1998 are not necessarily indicative of the results that may be expected for the entire year ended October 31, 1998. The data should be read in conjunction with the Consolidated Financial Statements and related notes, and other financial information included herein.
YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30, ---------------------------------------------------------------- --------------------------------- 1993 1994 1995 1996 1997 1997 1998 -------- -------- -------- -------- ------------------------ ------- ------------------------ ACTUAL AS ADJUSTED(8) ACTUAL ACTUAL AS ADJUSTED(8) -------- -------------- ------- -------- -------------- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net revenue........ $107,745 $110,407 $117,768 $119,085 $122,935 $122,935 $60,959 $ 67,028 $ 67,028 Gross profit....... 24,221 23,003 25,231 25,737 30,147 30,147 14,737 16,175 16,175 Income from operations (1).... 7,222 5,292 7,595 8,179 10,792 10,792 5,072 4,979 4,979 Interest expense (2)............... 4,659 5,516 6,254 6,786 6,715 26,743 3,410 20,652 22,214 Income (loss) before provision for income taxes, extraordinary item and cumulative effect of change in accounting principles........ 2,563 (224) 1,341 1,393 4,077 (15,951) 1,662 (15,673) (17,235) Provision for income taxes...... 1,425 413 890 847 2,025 116 826 237 (388) Income (loss) before extraordinary item and cumulative effect of change in accounting principles........ 1,138 (637) 451 546 2,052 (16,067) 836 (15,910) (16,847) Extraordinary item, net of tax (3).... -- -- -- -- -- 1,292 -- -- 1,013 Cumulative effect of change in accounting for income taxes (4).. -- (829) -- -- -- -- -- -- -- Net income (loss).. $ 1,138 $ (1,466) $ 451 $ 546 $ 2,052 $(17,359) $ 836 $(15,910) $(17,860) OTHER DATA: Capital expenditures (5).. $ 4,745 $ 9,915 $ 8,731 $ 9,820 $ 2,584 $ 2,584 $ 1,222 $ 2,951 $ 2,951 Depreciation and amortization...... 3,366 3,780 4,416 4,779 5,289 5,004 2,596 2,755 2,617 EBITDA (6)......... 10,367 8,804 11,463 12,370 15,496 15,496 7,372 7,446 7,446 EBITDA margin (6).. 9.6% 8.0% 9.7% 10.4% 12.6% 12.6% 12.1% 11.1% 11.1% Ratio of earnings to fixed charges (7)............... 1.4x -- 1.2x 1.2x 1.5x -- 1.4x -- -- BALANCE SHEET DATA (AT PERIOD END): Working capital.... $ 4,763 $ 8,812 $ 11,255 $ 6,608 $ 6,769 $ 10,822 $ 6,877 $ 5,427 $ 14,530 Total assets....... 77,478 85,001 93,170 97,432 102,621 105,488 95,573 110,116 115,937 Total debt......... 45,435 48,020 56,680 58,051 58,557 81,500 56,510 58,816 85,192 Warrants........... -- 1,743 1,743 1,743 1,743 -- 1,743 19,000 -- Shareholders' equity (deficit) (9)............... 7,978 6,996 7,373 7,845 9,897 (9,515) 8,681 (6,014) (7,963)
- ------- (1) Income from operations for 1993 and 1994 includes gains from property insurance claims of $364 and $828, respectively. (2) Included in the as adjusted columns and the six months ended April 30, 1998 is a $17,257 charge for the cost to redeem the Warrants over their book carrying value. The Warrants were redeemed with a portion of the proceeds of the Offering. The Warrants were issued in connection with the issuance of the Old Notes which were also redeemed with a portion of the proceeds of the Offering. (3) Represents the extraordinary charge attributable to the write-off of unamortized financing charges and original issue discount, net of taxes. (4) Attributed to the Company's adoption of Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes," effective November 1, 1993. (5) Capital expenditures in 1993 through 1996 included costs associated with the construction of laundry plants in Buffalo, NY, Richmond, VA and New Bedford, MA. (6) The term EBITDA as used herein represents income from operations plus depreciation and amortization, excluding amortization associated with rental merchandise. EBITDA has been presented because the Company believes it is commonly used in this or a similar format by investors to analyze and compare operating performance and to determine a company's ability to service and/or incur debt. However, EBITDA should not be considered in isolation or as a substitute for net income, cash flow from operations or any other measure of income or cash flow that is prepared in accordance with generally accepted accounting principles, or as a measure of a company's profitability or liquidity. EBITDA margin represents the percentage of EBITDA to net revenue. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and the related notes thereto included elsewhere in this Prospectus. (7) The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. Earnings consist of income (loss) before income taxes plus fixed charges, excluding capitalized interest. Earnings for the six months ended April 30, 1998 and as adjusted earnings for the year ended October 31, 1997 and six months ended April 30, 1998 include a $17,257 pretax charge for the redemption of the Warrants (see notes to the Consolidated Financial Statements). Fixed charges include interest, whether expensed or capitalized, amortization of deferred financing costs and original issue discount attributable to the Old Notes, and that portion of rental expense estimated to be attributable to interest. On an as adjusted basis, earnings were insufficient to cover fixed charges for the fiscal year ended October 31, 1997 and the six months ended April 30, 1998 by $15,951 and $17,235, respectively. Actual earnings for the fiscal year ended October 31, 1994 and the six months ended April 30, 1998 were insufficient to cover fixed charges by $224 and $15,673 , respectively . (8) The "As Adjusted" amounts give effect to the sale of the Initial Notes and the application of proceeds as described in "Use of Proceeds," as if such transactions had been consummated on the first day of the period presented. (9) Actual shareholders' deficit at April 30, 1998 includes a one-time charge of $17,257 incurred to redeem the Warrants. Shareholders' deficit, as adjusted includes the $17,257 charge and $1,150 of charges net of tax associated with the repayment of the Old Notes and various senior debt obligations. The amount of the shareholders' deficit varies in other tables presented herein as a result of different effective dates of these transactions for presentation purposes. 22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following should be read in conjunction with the "Selected Financial and Operating Data," the Company's Consolidated Financial Statements and the related notes thereto contained in this Prospectus. The Company was founded in 1929 and currently provides textile rental products and laundering services from 40 locations to approximately 40,000 accounts in diversified industries. Historically, the Company has grown through a combination of internal growth at its existing locations, new location start-ups and acquisitions. The Company has financed its new location start-ups and acquisitions principally with internally generated cash flow, secured borrowings and seller financing. Since the beginning of fiscal 1995, the Company has completed various small acquisitions of routes and customer contracts from local laundry companies, which in the aggregate have contributed modestly to revenues. The Company has recently focused on increasing revenues and profitability across its locations through investments in sales force personnel and training, information systems, facilities and equipment designed to improve asset utilization and through targeted marketing efforts. The Company's principal business is the rental and servicing of workplace uniforms, protective clothing, industrial shop towels and other textile rental products such as floormats and dust mops. The Company typically serves its customers pursuant to written service contracts that range in duration from three to five years. For fiscal 1995, 1996 and 1997, the Company's garment rental operations (which include laundry services) produced approximately 48% of its revenues, the rental of shop towels produced approximately 26% of its revenues, and the rental of other products accounted for approximately 19% of revenue in each of those years. In addition, the Company sells a full range of garments, towels and other items directly to customers. These sales produced on average approximately 7% of the Company's revenues in each of fiscal 1995, 1996 and 1997. Although the Company's revenues grew modestly from $118 million in fiscal 1995 to $123 million in fiscal 1997, a compound annual rate of 2.1%, the Company achieved a higher rate of earnings growth through the realization of operating efficiencies and cost controls. EBITDA increased $4.0 million and EBITDA as a percentage of revenue increased from 9.7% in fiscal 1995 to 12.6% in fiscal 1997. The improved performance resulted, in large part, from the realization of operating efficiencies and cost controls achieved in connection with the Company's strategic management program initiated in 1996. Additionally, the Company began compensating key personnel based on EBITDA performance. RESULTS OF OPERATIONS The following table presents certain statements of historical operations data as a percentage of sales for the periods indicated and should be read in conjunction with the other financial information of CTS contained elsewhere in this Prospectus.
SIX MONTHS YEAR ENDED OCTOBER 31, ENDED APRIL 30, ------------------------- ---------------- 1995 1996 1997 1997 1998 ------- ------- ------- ------- ------- Net revenue...................... 100.0% 100.0% 100.0% 100.0% 100.0% Gross profit..................... 21.4 21.6 24.5 24.2 24.1 Selling expense.................. 2.0 1.7 2.6 2.3 4.1 Income from operations........... 6.4 6.9 8.8 8.3 7.4 Interest expense................. 5.3 5.7 5.5 5.6 5.1 Income before redemption of War- rants and income taxes.......... 1.1% 1.2% 3.3% 2.7% 2.3%
Six Months Ended April 30, 1998 Compared to the Six Months Ended April 30, 1997 Net Revenue. Net revenues were $67.0 million for the six months ended April 30, 1998, representing an increase of $6.0 million or approximately 10.0% as compared to $61.0 million for the six months ended April 23 30, 1997. The increase can be attributed to growth from existing operations (6.2%), due substantially to the Company's recent investment in its sales organization, and acquisitions (3.8%) of several small routes subsequent to the first half of fiscal 1997. Gross Profit. Gross profit for the six months ended April 30, 1998 of $16.2 million was $1.4 million or 9.8% greater than the same period last year. The increase in gross profit was due to the increase in revenue. Gross margin was 24.1% for the period as compared with 24.2% for the same period last year. Gross margin declined due to one-time costs associated with certain process improvement initiatives, start-up activities in Florida and the Company catalog business, each implemented in 1998. Selling, General and Administrative Expense. Selling, general and administrative expense was $11.2 million for the six months ended April 30, 1998, representing an increase of $1.5 million or 15.8% over the same period in 1997. This increase was due primarily to selling expense which increased $1.4 million or 93.5% to $2.7 million for the six months ended April 30, 1998. The increase can be attributed to the significant expansion of the Company's sales organization during fiscal 1998. This expansion included increases in the number of personnel and related training costs, as well as related sales and marketing costs. The Company anticipates that this expansion will generate additional revenues; the Company began to see the impact of increased sales during the first and second quarters of fiscal 1998. Growth in revenues is expected to lag behind new selling costs, as it takes time for new sales personnel to build books of long-term contracts. Income from Operations. Income from operations was $5.0 million for the six months ended April 30, 1998 as compared to $5.1 million for the six months ended April 30, 1997. This nominal decrease resulted from an increase in one- time costs associated with the significant investment in the sales organization. Interest Expense. Interest expense was $3.4 million for the six months ended April 30, 1998 and for the six months ended April 30, 1997. Interest expense remained at 1997 levels due to comparable rates and outstanding borrowings during the periods. In May 1998, the Company entered into an agreement to redeem the Warrants for $19.0 million. The excess of the redemption payment over the book value of the Warrants of $17.3 million has been included in interest expense for the six months ended April 30, 1998. Income Taxes. The Company's tax provision of $0.2 million for the six month period ended April 30, 1998 was $0.6 million less than the tax provision for the same period in 1997. This reduction was due to the one-time charge associated with management fees under the Warrant redemption agreement. Net Income (Loss). Net loss was ($15.9) million for the six months ended April 30, 1998, compared with net income of $0.8 million for the six months ended April 30, 1997. This decrease was due to the one-time charge of $17.3 million associated with the Warrant redemption agreement. Excluding the repurchase of the Warrants, net income for the six months ended April 30, 1998 would have been $0.8 million. Fiscal Year 1997 Compared to Fiscal Year 1996 Net Revenue. Net revenue was $122.9 million in fiscal 1997, representing an increase of $3.8 million or 3.2% as compared to $119.1 million in fiscal 1996. The increase can be attributed to growth from existing operations (2.2%) and acquisitions (1.0%). Several small acquisitions, primarily in the Atlanta and Charlotte markets, during fiscal 1997 contributed $1.2 million during the period. Gross Profit. Gross profit for fiscal 1997 of $30.1 million was $4.4 million greater than fiscal 1996. Gross margin improved to 24.5% for fiscal 1997 as compared with 21.6% in fiscal 1996. This significant increase was due primarily to the realization of operating efficiencies and cost controls resulting from process improvement initiatives implemented in connection with the Company's strategic management program. Selling, General and Administrative Expense. Selling, general and administrative expense was $19.4 million in fiscal 1997, representing an increase of $1.8 million or 10.2% as compared to $17.6 million in fiscal 1996. This increase was due primarily to selling expense which increased $1.2 million or 57.3% to $3.2 million 24 in fiscal 1997 as compared to $2.0 million in fiscal 1996. The increase can be attributed to the significant expansion of the Company's sales organization during fiscal 1997. This expansion included increases in the number of personnel and related sales and marketing costs. Income from Operations. Income from operations was $10.8 million in fiscal 1997, representing an increase of $2.6 million or 31.9% as compared to $8.2 million in fiscal 1996. This increase was due to both the revenue increase and specific cost control programs in the laundering plants and in the corporate offices implemented in fiscal 1997 which allowed for more efficient operations and effective cost control. Interest Expense. Interest expense remained at 1997 levels due to comparable rates and outstanding borrowings during the years. Income Taxes. The Company's effective tax rate for fiscal 1997 was approximately 49.7% compared to an effective tax rate of approximately 60.8% in fiscal 1996. This reduction in rate was due primarily to the significant increase in taxable income during the period in relation to certain non- deductible expenses such as the amortization of goodwill and meal and entertainment costs. Net Income. Net income was $2.1 million in fiscal 1997, representing an increase of $1.6 million as compared to $0.5 million in fiscal 1996. The improvement in net income was due to increased revenue in conjunction with certain cost control initiatives which were part of the Company's strategic management program. Fiscal Year 1996 Compared to Fiscal Year 1995 Net Revenue. Net revenue was $119.1 million in fiscal 1996, representing an increase of $1.3 million or 1.1% as compared to $117.8 million in fiscal 1995. Revenues improved slightly due to price increases during fiscal 1996. Gross Profit. Gross profit for fiscal 1996 of $25.7 million was $0.5 million greater than fiscal 1995. Gross margin was 21.6% in fiscal 1996 compared with 21.4% in fiscal 1995. This modest increase was attributable to increased revenue. Selling, General and Administrative Expense. Selling, general and administrative expense was $17.6 million in fiscal 1996, representing an increase of $.4 million or 2.3% as compared to $17.2 million in fiscal 1995. Income from Operations. Income from operations was $8.2 million in fiscal 1996, representing an increase of $0.6 million or 7.7% as compared to $7.6 million in fiscal 1995. Interest Expense. Interest expense was $6.8 million in fiscal 1996, representing an increase of $0.5 million or 8.5% as compared to $6.3 million in fiscal 1995. The increase was due to a corresponding increase in debt outstanding. Income Taxes. The Company's effective tax rate in fiscal 1996 was approximately 60.8% compared to an effective tax rate of approximately 66.4% in fiscal 1995. This reduction in rate was primarily due to the effect of permanent differences relating to the amortization of route intangibles. Net Income. Net income was $0.5 million in fiscal 1996 and 1995. SEASONALITY The Company's operating results historically have been seasonally lower during the third fiscal quarter (May, June and July) primarily because the Company's floormat business is lower during this period than during the other quarters of the fiscal year. Certain customers of CTS arrange to have the floormats removed from their 25 accounts during the late spring and early summer months. In addition, schools reduce or curtail their business during these months. See "Risk Factors-- Seasonality." LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity have been cash flow from operations and borrowings under the old revolving credit facilities. For information concerning the Company's old credit facilities and New Credit Facility, see "Use of Proceeds" and "Description of Indebtedness--New Credit Facility." Net income was $2.1 million in fiscal 1997, representing an increase of $1.6 million as compared to $0.5 million in fiscal 1996. Cash provided by operating activities of $6.3 million in fiscal 1997 was $1.3 million less than fiscal 1996 due to the significant investment in uniforms in service, as a result of new rental contracts. Further, the cash used in investing activities of $2.2 million was approximately $1.7 million lower than the prior year. This reduction was due to financing activities that allowed for investments to be transacted with debt rather than cash. These investments included seller financed acquisitions of $3.5 million, net of cash acquired, and purchases of property, plant and equipment of $1.5 million. Net cash used in financing activities of $3.1 million was $0.9 million less than fiscal 1996. The primary financing activity in fiscal 1996 was repayment of long-term debt. During fiscal 1997 the Company's repayments of long-term debt increased by $1.1 million. Cash at the end of fiscal 1997 of $1.3 million was $0.9 million greater than at the beginning of the year. During fiscal 1997, total capital expenditures amounted to $2.6 million, primarily for laundry equipment and route vehicles. Capital expenditures were $9.8 million in fiscal 1996 and $8.8 million in fiscal 1995. During fiscal 1996, the Company completed construction of its Buffalo, New York laundry plant. During fiscal 1995, the Company completed construction of its New Bedford, Massachusetts laundry plant. Maintenance capital expenditures are expected to be approximately $4.0 million per year for the next several years. During fiscal 1997, the Company acquired certain assets of several industrial laundries which were accounted for as purchase transactions. The aggregate purchase price of $4.6 million consisted of cash of $1.1 million and notes payable of $3.5 million. The purchase price was allocated to various assets, consisting primarily of purchased routes ($3.2 million). On June 26, 1998, the Company sold to the Initial Purchasers $75,000,000 principal amount of the Initial Notes. The Initial Notes bear interest at 11 1/4% per annum from June 26, 1998, payable semiannually on June 1 and December 1 of each year, commencing on December 1, 1998. Under the terms of the Registration Rights Agreement, the Company is obligated to consummate the Exchange Offer pursuant to an effective registration statement or to cause resales of the Initial Notes to be registered under the Securities Act pursuant to an effective Shelf Registration Statement. If the Exchange Offer Registration Statement or the Shelf Registration Statement is not filed or declared effective, or if the Exchange Offer is not consummated within the time periods set forth in the Registration Rights Agreement, the Company will be required to pay Liquidated Damages to each holder of Initial Notes. See "Description of Notes-- Registration Rights; Liquidated Damages." The Initial Notes are general unsecured obligations of the Company, rank subordinate in right of payment to all Senior Debt and rank senior or pari passu in right of payment to all existing and future subordinated indebtedness of the Company. The Initial Notes are unconditionally guaranteed on a senior subordinated basis by all of the Company's current and future Domestic Subsidiaries other than Receivables Subsidiaries. The Subsidiary Guarantees are general unsecured obligations of the Guarantors, rank subordinate in right of payment to all Senior Debt of the Guarantors and rank senior or pari passu in right of payment to all existing and future subordinated indebtedness of the Guarantors. The Initial Notes are redeemable at the option of the Company, in whole or in part, on or after June 1, 2003, at the redemption prices set forth herein, plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the redemption date. Upon a Change of Control, the Company will be required to make an offer to repurchase all outstanding Initial Notes at 101% of the principal 26 amount thereof plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the date of repurchase. The Company's ability to make scheduled payments of principal of, or to pay the interest on, or to refinance, its indebtedness (including the Notes), or to fund planned capital expenditures and research and development expense will depend on its future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. Based upon the current level of operations and anticipated revenue growth, management believes that cash flow from operations and available cash, together with the proceeds from the Offering and available borrowings under the New Credit Facility, will be adequate to meet the Company's future liquidity needs for the next several years. The Company may, however, need to refinance all or a portion of the principal of the Notes on or prior to maturity. There can be no assurance that the Company's business will generate sufficient cash flow from operations, that anticipated revenue growth and operating improvements will be realized or that future financings, including borrowings will be available under the New Credit Facility in an amount sufficient to enable the Company to service its indebtedness, including the Notes, or to fund its other liquidity needs. In addition, there can be no assurance that the Company will be able to effect any such refinancing on commercially reasonable terms or at all. The degree to which the Company is leveraged could have important consequences to holders of the Notes, including, but not limited to: (i) making it more difficult for the Company to satisfy its obligations with respect to the Notes, (ii) increasing the Company's vulnerability to general adverse economic and industry conditions, (iii) limiting the Company's ability to obtain additional financing to fund future working capital, capital expenditures, research and development and other general corporate requirements, (iv) requiring the dedication of a substantial portion of the Company's cash flow from operations to the payment of principal of, and interest on, its indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, research and development or other general corporate purposes, (v) limiting the Company's flexibility in planning for, or reacting to, changes in its business and the industry and (vi) placing the Company at a competitive disadvantage vis-a-vis less leveraged competitors. In addition, the Indenture and the New Credit Facility will contain financial and other restrictive covenants that will limit the ability of the Company to, among other things, borrow additional funds. Failure by the Company to comply with such covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on the Company. In addition, the degree to which the Company is leveraged could prevent it from repurchasing all of the Notes tendered to it upon the occurrence of a Change of Control. See "Description of Notes--Repurchase at Option of Holder--Change of Control" and "Description of Other Indebtedness-- New Credit Facility." INFORMATION SYSTEMS; YEAR 2000 The Company intends to invest approximately $2.0 million during each of fiscal 1998 and 1999 on information systems hardware and software to upgrade certain of its Company-wide systems. In particular, the Company is currently implementing new billing and route accounting systems which are millennium ("Year 2000") compliant. Additionally, the Company is currently evaluating the programming code in its other existing computer and software systems. The issue with respect to Year 2000 is whether systems will properly recognize date sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause complete system failures. There can be no assurance that the Year 2000 problem will not have a material adverse effect on the results of operations of the Company. EFFECTS OF INFLATION Inflation has had the effect of increasing the reported amounts of the Company's revenues and costs. However, the Company believes that it has been able to recover increases in costs attributable to inflation through increases in its prices and improvements in its productivity. 27 BUSINESS GENERAL The Company provides textile rental products and laundering services from 40 locations to approximately 40,000 accounts in diversified industries throughout the eastern United States. Textile rental products provided by the Company include workplace uniforms, protective clothing, shop towels and other reusable absorbent products, floormats and treated mops and other dust control products. The Company primarily rents textile products to clients under laundry service contracts, but also sells products to clients and launders client-owned items. Most of the Company's accounts are subject to written contracts that range in duration from three to five years. The Company's products and services are distributed through its route-based distribution system comprised of 18 industrial laundry plants and 21 sales, service and distribution laundry terminals that allow the Company to provide rental services to customers in geographic areas outside of the immediate area of an industrial laundry plant. CTS manufactures shop towels, dust mops and several other products used in the laundry business at its Blue Ridge manufacturing subsidiary and intends to begin floormat manufacturing in fiscal 1998. The Company focuses on the value-added aspects of the textile rental business, such as the heavy soil (e.g., printing inks, oils and solvents) and protective garment sectors. The Company's products and services assist customers with their corporate image, the productivity and safety of their employees and the environmental impact of their businesses. For example, the Company has built industry-leading heavy soil laundry plants, which minimize its customers' environmental exposure and have allowed the Company to carve out a leading position in the heavy soil sector of the textile rental services industry. In addition, the Company works with clients to design, source and manage protective uniform programs for specific applications, such as flame or chemical retardant clothing for industrial workers. Further, the Company is one of the first launderers to offer garment tracking technologies that provide its customers with superior accountability for rented garments. The Company's customer base is diversified across a variety of industries. Customers range in size from large nationally-recognized businesses such as ALCOA, Eckerd Drugs, Hershey, Oneida, United Technologies and Xerox, to smaller businesses, such as gas stations and other retail businesses. In particular, the Company is a leading provider of textile rental services to the printing industry throughout its service area, with customers including The New York Times and USA Today. For the year ended October 31, 1997, the Company had net sales and EBITDA of $122.9 million and $15.5 million, respectively, and for the twelve months ended April 30, 1998, the Company had net sales and EBITDA of $129.0 million and $15.6 million, respectively. The Company was founded and incorporated in New York in 1929 and has been owned and operated by the Coyne family since its inception. The Company's principal executive offices are located at 140 Cortland Avenue, Syracuse, New York, 13221 and its telephone number is (315) 475-1626. INDUSTRY OVERVIEW The textile rental industry in the United States, which had 1997 revenues in excess of $9 billion, consists of two segments: the industrial segment (uniforms, protective clothing, shop towels, floormats and dust control products) and the linen segment (sheets, tablecloths and other linen items). In 1997, approximately 96% of the Company's business was derived from the industrial segment. The primary product in the industrial segment is uniforms which accounted for approximately 50.0% of the Company's revenues in 1997. According to industry data compiled by the UTSA, approximately 46 million of the 128 million people in the United States civilian workforce at the beginning of 1997 wore some form of specialized work clothing. Of this total, only 15.4 million people or 33.5% wore employer-owned uniforms and only 6.5 million people or 14.1% wore employer-rented uniforms. The UTSA estimated that uniform rental services alone generated approximately $4.8 billion and $5.3 billion in revenues during 1996 and 1997, respectively, and that this industry has grown at a compound annual rate of approximately 7.2% since 1983. The Company believes that much of the uniform industry's overall growth has resulted from an increasing number of companies choosing to use uniform rental services to maintain a high-quality corporate image, 28 improve employee safety, productivity and morale and reduce costs. In addition, the growth in jobs, particularly in the service sector, has increased the number of potential uniform wearers. In 1996 alone, more than ten million new jobs were created in the United States with an estimated 65- 70% of these jobs accounted for by service industries whose employees tend to wear uniforms. CTS also believes that growth in the rental segment of the industry in particular will be driven by the broad trends to outsource non- core business functions. Growing markets for uniforms identified by the Company include building services, communications, food processing, heating/ventilation/air conditioning, landscaping, pest control, pharmaceuticals, security and trucking. In addition, the Company believes its industry-leading environmental capabilities and protective clothing expertise strategically position it to realize long-term benefits from continuing government regulation of the environment and the workplace. Increasingly stringent environmental regulations have been and continue to be the catalyst for a shift toward the outsourcing of the laundering of heavy soil items. Additionally, government mandated safety regulations for reflective wear and flame retardant garments and the most recent report to Congress under The Workers' Family Protection Act from the NIOSH, which states that home laundering is inadequate in decontaminating work clothes, are creating new opportunities for uniform service companies like CTS. The market for flame retardant clothing has been fueled by OSHA regulations holding employers responsible for supplying appropriate clothing based on an evaluation of potential workplace hazards. Employers are prohibited from supplying clothing that, when exposed to flames or arcs, could increase the extent of wearer injury. Growth in demand for environmental services and protective clothing is particularly valuable to the Company because these markets involve long-term relationships with customers and make use of the Company's technical knowledge of regulations, products, fabric types, climatic conditions and job functions. Although the industrial textile rental industry includes several national companies, the industry remains highly fragmented. Based on information obtained from Cleary Gull Reiland & McDevitt, an investment firm that closely follows the uniform rental industry, there are currently over 700 uniform rental businesses in operation, the majority of which are single facility operators. The Company believes that many of these smaller companies are being forced to exit the market due to a lack of economies of scale and the cost of complying with increasingly stringent environmental standards. The Company further believes that the industry will continue to experience consolidation in the future and that strategic acquisition opportunities will become available. COMPETITIVE STRENGTHS The Company believes it has the following competitive strengths: Superior Environmental Capabilities. The Company has built industry-leading laundry waste-water treatment facilities and has developed a reputation as an environmental leader. As a result, the Company believes that it is a leading provider of heavy soil textile services to manufacturing and printing businesses in the eastern United States. The Company also believes that it is the largest provider of shop towels within its service area. Shop towels are reusable cotton industrial wiping cloths that are essential to the printing and furniture finishing industries and many manufacturing operations. Products such as shop towels contaminated with petroleum, chemical solvents or printing inks require specialized cleaning services that comply with environmental regulations. The Company's industry-leading waste-water treatment equipment recovers and recycles waste for use in fuel blending programs, thereby reducing the amount of hazardous substances sent to landfills for disposal and minimizing its customers' environmental exposure. The Company has built a strong environmental team that is directed by a senior manager with extensive experience both in the textile rental industry and as a former appointed official of the EPA. CTS has been endorsed by many of the state and regional printing associations and services large printing operations such as The New York Times and USA Today. As an extension to its product line, the Company pioneered its Reusable Absorbent System ("RAS") products, which are used to absorb free liquids, such as lubricating oils, around machines and equipment. The Company's RAS products are an environmentally responsible and cost- effective alternative to traditional disposable absorbents, and promote the EPA policy of waste minimization. Finally, the Company processes heavy soil work for many of its competitors that lack the same waste-water treatment capabilities as CTS. By providing heavy soil laundry 29 services to other industrial laundry facilities, CTS is able to develop relationships with launderers that may be sold in the ongoing market consolidation. Protective Clothing Expertise. The Company believes that it is a recognized leader in the rental and servicing of protective garments and has substantial experience in designing, sourcing and managing these garments. Applications for these protective garments include airplane refueling, metal and glass manufacturing, oil refineries, petrochemical companies, pyrotechnic and munitions companies and utilities. These garments are specially manufactured to protect the wearer from a variety of workplace dangers. OSHA regulations hold employers responsible for supplying appropriate clothing based on an evaluation of potential workplace hazards. The protective clothing market requires knowledge of regulations, products, fabric types, climatic conditions and job functions. CTS has the expertise to help its customers conform to OSHA regulations, the technical knowledge required to evaluate different types of protective garments and the laundering capabilities to process the garments in a manner that ensures the garments retain their protective properties over their expected wear-life. The Company believes that its expertise in protective garments in conjunction with the high-level of control provided by its garment tracking capabilities gives it a significant advantage in the protective garment market. ALCAN, ALCOA and Virginia Power are just a few of the major accounts whose employees wear protective garments provided by CTS. Garment Tracking Capabilities. The Company believes that it is one of the first industrial launderers to implement bar-coding technologies, which provide customers with superior accountability for rented garments and more economical administration. CTS has invested in both bar-coding and radio frequency identification technologies that give each rented garment a specific identity. As a result, both CTS and its customers save time and money while promoting productivity and improving inventory control. Garment tracking is particularly important for protective clothing because of its higher replacement cost and the necessity to closely monitor garment use compared to expected wear-life to ensure the continued protective properties of the clothing. Further, the Company provides both on-line and printed reporting to its customers. Bar-coding is in place at most major accounts whose employees wear protective garments provided by CTS, including ALCOA, Wyeth-Ayerst and Xerox. Platform for Growth. The Company's recent investments in plants and equipment have created laundry plant capacity to support growth without commensurate increases in cost. In particular, the Company has introduced high-speed, automated equipment in a majority of its laundry facilities. As a result, the Company believes its existing plants and equipment could process approximately 25% more volume without significant increases in plant and equipment costs. The Company believes that this capacity will allow it to support increased business generated by its recently expanded sales force, respond faster to major account installations, open laundry terminals in contiguous areas and take advantage of acquisition opportunities. Superior Fleet and Distribution Capabilities. The Company has developed a superior fleet of approximately 450 trucks which provides a cost-effective link among the Company's laundry plants, laundry terminals and customers. The Company's fleet leverages existing laundry plant capacity by allowing the Company to allocate work among its laundry plants in response to cost factors and fluctuations in volume or capacity, and to enter into new contiguous markets with minimal capital expenditures. The Company's trucks are a key tool in projecting the Company's image, by displaying the corporate name, logo and slogan "WE RENT CLEAN!" These trucks, which are custom-built in the Company's Syracuse transportation facility, enhance productivity, quality of service and safety. In addition, CTS saves approximately half of the costs associated with purchasing a comparable fleet. Further, CTS has transportation facilities throughout its service area that allow the fleet to be maintained at very high standards. The Company has received multiple National Private Truck Council Awards for the quality of its fleet and related maintenance. BUSINESS STRATEGY The Company intends to continue to grow its business by focusing on the following strategies: 30 Leverage Competitive Strengths. The Company's superior environmental capabilities, protective garment expertise and garment tracking capabilities have enabled it to secure leadership positions in the heavy soil and protective garment sectors of the market. CTS intends to focus on these sectors and then leverage client relationships to sell additional products and generate additional laundering service contracts. CTS believes that leveraging its leadership position in these areas and expanding the number of services provided to existing customers is an efficient and cost-effective method for achieving future growth. Leverage Existing Route System. The Company believes it can significantly increase revenues and improve profitability by increasing sales along its existing routes. Most of the geographic areas in which the Company has laundry plants and truck routes contain a significant number of potential customers. The Company intends to continue its penetration of these geographic areas by using its recently increased sales force to aggressively market its expertise in the heavy soil and protective garment niches of the market. Over the last two years, the Company has increased the number of dedicated sales associates from 25 to approximately 100 to ensure that all potential customers in existing geographic areas are actively marketed. The Company also utilizes its route salespeople to maximize sales to existing customers and develop new customer relationships along existing routes. Expand Geographic Scope in Contiguous Markets. The Company seeks to obtain new business by utilizing its recently increased sales force to expand into contiguous market areas that can be serviced from existing Company facilities. The Company identifies attractive geographic markets for its services based on the size of the market, the number and type of available customers and the presence of existing competitors. Typically, the Company has expanded by opening a laundry terminal location to service a new major account or buying a small competitor and building the business over time, thereby leveraging the Company's existing laundry plant investment. In addition, the Company has a national account sales organization which targets larger customers with nationwide operations that the Company can serve as the primary supplier of textile rental services. Provide Superior Customer Service. The Company seeks to distinguish itself from its competitors by providing superior customer service. The Company serves its customers with approximately 300 route salespersons, who generally interact on a weekly basis with their customers, and more than 150 service support people, who are responsible for expeditiously handling customer requirements regarding the outfitting of new customer employees, garment repair and replacement, billing inquiries and other matters. In addition, the Company offers its customers a range of service options, including full- service rental programs in which rental products are cleaned and maintained by the Company, leasing programs in which these products are cleaned and maintained by individual employees and direct sales of garments and other textile items. The Company's newly-implemented Customer Management Program ("CMP") is a computerized management tool used to measure and direct customer service activities. This program gathers and organizes customer service data, delivers key information regarding customer satisfaction to management and helps ensure more targeted service to address customer preferences. Compensation of the Company's managers in the laundry business is directly tied to their business units' financial performance, and customer satisfaction as determined by the Company's CMP. Pursue Strategic Acquisitions. The Company seeks to acquire textile rental businesses that have customer accounts under contract, excellent service reputations, and the size and quality of routes to serve as the Company's base for expansion in an existing or new geographic market. In many cases, the Company has purchased customer contracts and routes without buying fixed assets normally associated with such contracts or routes. The textile rental industry has experienced significant consolidation in recent years but remains highly fragmented. The Company believes that increasingly stringent environmental regulations are forcing many smaller companies to exit the market, which provides the Company with significant opportunities for acquisitions and expansion. 31 PRODUCTS AND SERVICES The Company provides its customers with personalized workplace uniforms and protective work clothing in a broad range of styles, colors, sizes and fabrics. The Company's uniform products include shirts, pants, jackets, coveralls, jumpsuits, smocks, aprons and specialized protective wear, such as fire retardant and chemical protective garments. The Company also offers non- garment items and services, such as shop towels, floormats, dust-control mops and other textile products. Below is a chart displaying the approximate percentages of revenues, by product-type:
UNIFORM & RAS & DUST CONTROL & DIRECT HOSPITAL & PERIOD GARMENT RENTALS SHOP TOWELS MAT PRODUCTS SALES LINEN PRODUCTS - ------ --------------- ----------- -------------- ------ -------------- Fiscal 1995............. 49.5% 27.2% 14.5% 5.6% 3.2% Fiscal 1996............. 48.7 27.0 14.2 6.7 3.4 Fiscal 1997............. 48.8 27.3 13.9 6.8 3.2 Fiscal 1998(1).......... 47.2 27.9 14.6 6.5 3.8
- -------- (1)For the six month period ended April 30, 1998. The Company offers its customers a range of garment service options, including full-service rental programs in which garments are owned, cleaned and serviced by the Company and lease programs in which garments are cleaned and maintained by its customers' individual employees. The Company also offers the opportunity to purchase garments and related items directly. As part of its full-service rental business, the Company picks up a customer's soiled uniforms or other items on a periodic basis (usually weekly) and, at the same time, delivers cleaned and processed replacement items. The Company's centralized services, specialized equipment and economies of scale generally allow it to be more cost-effective in providing garment services than customers could be by themselves, particularly those customers with high employee turnover rates. Accordingly, the Company believes its services are appealing to customers who seek to outsource non-core functions. The Company's uniform programs help customers foster greater corporate identity, present a consistent, high-quality image and improve employee safety, productivity and morale. The Company offers its customers "green" programs which focus on pollution prevention. These programs are based on the Company's shop towel product which is highly absorbent and reusable. CTS is endorsed by many of the state and regional printing associations and services large printing operations such as The New York Times and USA Today. Further, the Company offers its customers Reusable Absorbent Systems ("RAS") socks and pads. RAS products provide customers with environmentally responsible alternatives to single-use disposable absorbents and promote the EPA policy of waste minimization. RAS programs are in place at many large national accounts such as Crouse Hinds, General Motors and United Technologies. In recent years, the Company has made a significant corporate investment in waste-water treatment in 10 of its 18 laundry plants. The Company's industry- leading waste-water treatment capabilities allow it to process textiles contaminated with petroleum, chemical solvents or printing inks that require specialized cleaning services that comply with environmental regulations. These facilities capture more than 98% of the waste solvents and oils in liquid form and then recycle this liquid waste as a supplemental fuel in a secondary fuel recycling program. This technology reduces the amount of waste- water sludge sent to landfills for disposal and minimizes a customer's future environmental liabilities. As a result of the Company's superior environmental capabilities in the heavy soil sector market, the Company estimates that most of the printing associations in the eastern United States have endorsed CTS as the preferred provider of heavy soil textile services. CTS provides such services to approximately 75% of the printing accounts in the eastern United States. All CTS environmental matters are managed by the Company's environmental team that is directed by a senior manager with extensive experience both in the industry and as a former appointed official of the EPA. This individual is recognized by both the TRSA and UTSA as a leading industry expert in environmental matters and serves on their respective environmental committees. 32 Finally, the Company processes heavy soil textile products for many of its competitors because these competitors do not have the same waste treatment capabilities as CTS. This permits the Company to develop relationships with laundries that may be sold in the ongoing market consolidation. Most of the Company's accounts are subject to written service contracts. The Company's typical service contract ranges in duration from three to five years with automatic "evergreen" renewals, except upon prior written notice, and provides for significant liquidated damages upon early termination by the customer. The Company believes that it is one of the first industrial launderers to implement bar-coding and radio frequency garment identification technologies. These technologies allow the Company and its customers to track a garment from pick-up at the customer's location through processing at the Company and delivery back to the customer. Garment tracking is particularly important for protective clothing because of its higher replacement cost and the need to closely monitor garment use compared to expected wear-life. Garments can be tracked by the use of bar code labels, which are permanently affixed to the garment and which can be read by route salespeople using hand-held laser scanners. The Company is able to provide reports to customers detailing the status of every garment at all times. In addition, customized reports are available and customers have the option to have direct-link PC capability, allowing them access to real-time information about individual employee garments. The Company believes that its tracking system improves inventory control and efficiency by reducing human error that results in missing uniforms and incomplete deliveries. Soiled textile items are returned to the laundry plant directly from the route system. These items are sorted by soil type and water washed in highly automated industrial laundry equipment using customized wash formulas that insure the cleanliness of these products while maximizing wear-life. Items are then dried, sorted, folded and moved to the route staging area in the plant or sent back to the terminal for distribution to the customer. In addition to water washing, a small number of specialty items such as leather gloves are dry cleaned. Chemicals used in dry cleaning operations are recycled. Waste- water from water washing is processed in plant waste-water treatment facilities and discharged in accordance with local municipal requirements. SOURCING ACTIVITIES The Company actively manages its supply chain and has, from time to time, brought certain items in-house for manufacture on an opportunistic basis. For example, due to the cost and inconsistent quality of shop towels available, the Company began manufacturing shop towels in 1992. All of the shop towels used in the Company's laundry business are produced at the Company's Blue Ridge manufacturing facility and are marketed under the Blue Ridge name. Approximately two-thirds of Blue Ridge manufactured shop towels are sold to customers other than CTS. Although other sources of shop towels are available, the Company believes that the superior performance of the Blue Ridge shop towel, particularly in terms of durability and absorption, is a significant advantage in securing heavy soil business. Blue Ridge manufactures dust mops, aprons, laundry bags and RAS socks and pads and intends to begin floormat production in late 1998. The Blue Ridge operations represented approximately 5.0% of the Company's revenues in fiscal 1997. In order to take advantage of the opportunities presented by the North American Free Trade Agreement, the Company manufactures work pants and shirts in Mexico under agreements with several Mexican manufacturers. While the Company does not anticipate substantial growth in its manufacturing operations, it continues to consider manufacturing opportunities in order to gain an advantage in the marketplace. The Company has also developed, in conjunction with a New Zealand based manufacturer, chemically protective and flame retardant garments that comply with American National Standards Institute ("ANSI") standards for exclusive distribution by CTS in the United States. The Company purchases other rental merchandise from a variety of sources including Garment Corporation of America, Perfect Jacket, RedKap and Universal Overall. The Company believes that it is not dependent on any one supplier and that alternative sources are available at comparable prices. The availability of alternative 33 manufacturers and the Company's ability to change suppliers and manufacture textile products allow it to optimally meet its merchandise requirements in terms of quantity, quality and price. CUSTOMERS The Company's customer base is diversified across a variety of industries and customers range in size from large nationally-recognized businesses such as ALCOA, Eckerd Drugs, Hershey, Oneida, United Technologies and Xerox, to smaller businesses, such as gas stations and other retail businesses. Typical customers include automobile service centers and dealers, delivery services, food and general merchandise retailers, food processors and service operations, light manufacturers, maintenance facilities, printers and publishers, restaurants, service companies, soft and durable goods wholesalers, transportation companies, and others who require employee clothing for image, identification, protection or utility purposes. The Company currently services approximately 40,000 accounts in diversified industries from 40 locations throughout the eastern United States. During the past five years, no single customer accounted for more than 5.0% of total revenues in any year. SALES, MARKETING AND DISTRIBUTION In 1996, the Company made a strategic decision to increase its sales force from 25 to its current level of approximately 100 dedicated sales associates to leverage its investment in laundry plants, laundry terminals and their waste-water treatment facilities. Sales associates market the Company's products and services to potential customers and develop new accounts. The selling efforts of the sales force are managed by regional sales managers who are also responsible for major account relationships within their region. Rental and direct sales programs on the national level are handled by the National Account Marketing Department, which call directly on existing and prospective rental and direct sale national accounts. The regional sales managers and National Account Marketing Department report directly to the Vice President of Sales. The Company's route salespeople continue to be an integral component of the Company's sales and marketing efforts. Route salespeople have responsibility for increasing sales to existing customers and establishing new customer relationships along their routes. All of the Company's route salespeople are paid commissions based on the weekly revenue of their route. Further, route salespeople are incented to obtain an executed written contract from every customer. CTS believes that its approach results in a professional sales team that is highly motivated. Each of the Company's dedicated sales associates and route salespeople is a member of a laundry plant team. The compensation of each member is tied to the collective performance of the laundry plant team. The Company's catalog business operates under the Blue Ridge name and distributes over 150,000 catalogs each season. This catalog offers a variety of industrial garments and image apparel that is personalized with the logos and names of its customers. The focus of the catalog is to facilitate the growth of the Company's direct sales business and to establish relationships with accounts currently under contract with competitors. COMPETITION The industrial segment of the textile rental industry is highly competitive. The Company believes that the top five companies (ARAMARK Corporation, Cintas Corporation, G&K Services, Inc., Unifirst Corporation and Unitog Company) in the industrial segment of the industry currently account for approximately half of the industry's sales. The Company believes that it is one of a small group of companies that have revenues of approximately $50 million up to $200 million and which collectively account for approximately 25% of revenues from the industrial segment. Within the industrial segment of the textile rental industry, the Company believes it has established itself as a leader in the heavy soil sector. The remainder of the industry is made up of over 700 smaller businesses, many of which serve one or a limited number of markets or geographic service areas and generate annual revenues of less than $1.0 million. The Company believes that the primary competitive factors that affect its operations are price and its ability to meet customers' product specifications, which include design, 34 quality and service. The Company believes it maintains prices comparable to those of its major competitors. The Company also believes that its ability to compete effectively is enhanced by its environmental capabilities and its superior customer service and support. EMPLOYEES As of April 30, 1998, the Company had approximately 1,700 employees. CTS is a party to 29 collective bargaining agreements covering approximately 800 employees. These bargaining agreements expire periodically through 2001. The Company's only work stoppage in the last ten years occurred in 1994 with respect to one bargaining unit of one Company facility. This stoppage represented a limited number of employees and had no material impact on the Company's operations. The Company believes that its relationships with both its union and non-union employees are good. FACILITIES As of April 30, 1998, the Company provided textile rental services from 40 facilities. The Company owns 21 of its facilities, including its corporate headquarters in Syracuse, New York, and leases the balance of its facilities pursuant to leases expiring between October 1998 and December 1999 with options to renew in most cases, except for leases for certain garages and small distribution facilities which are leased on a month-to-month basis. The following table summarizes certain information concerning the Company's facilities.
APPROXIMATE LOCATION PRINCIPAL USE SQUARE FOOTAGE - -------- ------------- -------------- Atlanta, GA* Laundry Plant/Laundry Terminal 18,000 Baltimore, MD** Laundry Plant/Laundry Terminal 85,000 Beckley, WV* Laundry Terminal 7,500 Belleville, NJ** Laundry Plant/Laundry Terminal 22,800 Betsy Layne, KY* Laundry Terminal 6,500 Blue Ridge, GA Manufacturing 42,500 Bristol, TN Laundry Plant/Laundry Terminal 27,200 Buffalo, NY*** Laundry Plant/Laundry Terminal 92,000 Burlington, VT Laundry Terminal 9,180 Cinnaminson, NJ* Laundry Terminal 10,000 Charlotte, NC* Laundry Terminal 7,500 Chattanooga, TN* Laundry Terminal 8,200 Cleveland, OH Laundry Plant/Laundry Terminal 85,000 Erie, PA Laundry Terminal 47,000 Evansville, IN* Laundry Terminal 7,500 Fairmont, WV* Laundry Terminal 6,500 Greenville, SC* Laundry Terminal 5,000 Hazleton, PA* Laundry Terminal 7,500 Huntington, WV Laundry Plant/Laundry Terminal 180,000 Joliet, IL* Laundry Terminal 8,000 Lakeland, FL* Laundry Plant/Laundry Terminal 12,000 Lewiston, ME* Laundry Terminal 6,500 London, KY** Laundry Plant/Laundry Terminal 24,000 Long Island, NY* Laundry Terminal 6,500 Nashville, TN* Laundry Terminal 7,500 New Bedford, MA** Laundry Plant/Laundry Terminal 85,000 Philadelphia, PA Laundry Plant 85,000 Pittsburgh, PA* Laundry Terminal 6,500 Raleigh, NC* Laundry Terminal 8,200 Richmond, VA Laundry Plant/Laundry Terminal 49,000
35
APPROXIMATE LOCATION PRINCIPAL USE SQUARE FOOTAGE - -------- ------------- -------------- Schenectady, NY** Laundry Plant/Laundry Terminal 25,000 Seaford, DE* Laundry Terminal 6,200 Smithboro, NY Laundry Terminal 6,500 Syracuse, NY Laundry Plant/Corporate Headquarters 220,000 Toledo, OH Laundry Plant/Laundry Terminal 65,000 Waterbury, CT Laundry Plant/Laundry Terminal 108,000 Winchester, VA* Laundry Terminal 9,200 Woodbridge, NJ* Corporate Sales Office 900 Worcester, MA Laundry Plant/Laundry Terminal 75,000 York, PA** Laundry Plant/Laundry Terminal 34,000
- -------- * Indicates leased facility. ** Company owns laundry plant but leases garage. *** Financed by industrial revenue bonds. LEGAL PROCEEDINGS The Company is a party to various litigation matters incidental to the conduct of its business. The Company does not believe that the outcome of any of the matters in which it is currently involved will have a material adverse effect on its financial condition, results of operations or cash flows. ENVIRONMENTAL MATTERS The Company and its operations are subject to various federal, state and local laws and regulations governing, among other things, the generation, handling, storage, transportation, treatment and disposal of hazardous wastes and other substances. In particular, industrial laundries use and must dispose of detergent waste-water and other residues. The Company is attentive to the environmental concerns surrounding the disposal of these materials and has through the years taken measures to avoid their improper disposal. In the past, the Company has settled, or contributed to the settlement of, actions or claims brought against the Company relating to the disposal of hazardous materials and there can be no assurance that the Company will not have to expend material amounts to remediate the consequences of any such disposal in the future. There have been no environmental claims brought against the Company that have had a material adverse effect. Further, under environmental laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in or emanating from such property, as well as related costs of investigation and property damage. Such laws often impose liability without regard to whether the owner or lessee knew of or was responsible for the presence of such hazardous or toxic substances. There can be no assurances that acquired or leased locations have been operated in compliance with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon the Company under such laws or expose the Company to third-party actions such as tort suits. In addition, the EPA has recently proposed categorical pre-treatment standards, which form the basis for a federal environmental regulatory framework applicable to industrial laundry operations that would replace local regulations. Scheduled to take effect in 1999, these regulations, if implemented as proposed, would require the Company, and its competitors, to expend substantial amounts on compliance, thereby increasing the Company's operating costs and capital expenditures. To the extent such costs and expenses could not be offset through price increases, the Company's results of operations could be adversely affected. Until such regulations are finalized, the Company is not able to determine the cost of compliance. 36 MANAGEMENT DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES The following table sets forth certain information regarding the Company's directors, executive officers and key employees:
NAME AGE POSITION ---- --- -------- Thomas M. Coyne......... 60 Chairman of the Board, President and Chief Executive Officer J. Patrick Barrett...... 61 Director Thomas C. Crowley (1)(2)................. 51 Director James W. Maher.......... 63 Director William D. Matthews..... 63 Director Wallace J. McDonald (1).................... 57 Director David P. O'Hara......... 51 Director and Assistant Secretary Raymond T. Ryan (1)(2).. 69 Director Dennis J. Bossi......... 53 Vice President of Operations Paul H. Briele.......... 35 Director of Information Systems John G. Harshall........ 50 Vice President of Operations Donald F. X. Keegan..... 36 Vice President, Chief Financial Officer & Treasurer Thomas E. Krebbeks...... 44 Corporate Controller David I. Murray......... 48 Senior Vice President of Laundry Operations Maher M. Najjar......... 36 Director of Technology Stephen P. Naughton..... 42 Vice President, Reusable Absorbent Systems Anthony F. O'Connor..... 48 Vice President of Sales & Marketing Alexander Pobedinsky.... 36 General Counsel and Secretary Paul E. Rebuck.......... 53 Director of Transportation Frank E. Reid........... 81 Vice President of Operations Robert E. Rudd.......... 44 Vice President of Engineering Robert B. Schaffer...... 63 Director of Environmental Affairs Timothy O. Taylor....... 44 Vice President of Blue Ridge Textile Manufacturing, Inc.
- -------- (1) Member of the Audit and Finance Committee. (2) Member of the Human Resource and Compensation Committee. Thomas M. Coyne is Chairman of the Board, President and Chief Executive Officer of the Company. Mr. Coyne joined the Company in 1977 after spending 17 years with an engineering and construction company. He has served in various positions responsible for plant operations and sales before his promotion to President in 1982. Mr. Coyne currently serves on the Board of the Textile Rental Services Association. J. Patrick Barrett has been a director since July, 1998. He has been President of Telergy, Inc., a telecommunication company, since April, 1998; Chairman of Carpat Investments, a private investment firm, since 1987; was Chairman and CEO of Avis Inc. from 1981 to 1987 and has been a director of Lincoln National Corp. since 1990. Thomas C. Crowley has been a Director of the Company since 1993. Mr. Crowley has been the Executive Vice President of Evergreen Bancorp, Inc. in Glenn Falls, New York since 1994. From 1979 to 1993, Mr. Crowley was an executive with Fleet Bank. James W. Maher has been a Director of the Company since 1995. From 1980 to 1995, Mr. Maher was the Chief Executive Officer and President of Crouse Irving Memorial Hospital in Syracuse, New York. William D. Matthews has been a Director of the Company since January 1997. Mr. Matthews has been the Chairman of the Board and Chief Executive Officer of Oneida, Ltd. in Oneida, New York since 1986. Oneida, Ltd. is listed on The New York Stock Exchange. Mr. Matthews has been a director of CONMED Corporation since 1997. 37 Wallace J. McDonald has been a Director of the Company since 1987. Mr. McDonald has been a partner with the law firm of Bond, Schoeneck & King, LLP based in Syracuse, New York since 1967. David P. O'Hara has been a Director of the Company since 1982. Mr. O'Hara was General Counsel and Secretary of the Company from 1981 to 1997. He currently is Assistant Secretary of the Company and a partner with the law firm of O'Hara, Hanlon, Knych & Pobedinsky, LLP based in Syracuse, New York. Raymond T. Ryan has been a Director of the Company since 1991. From March 1991 through July 1995 he served as Chief Financial Officer of the Company. He is currently Assistant Treasurer of the Company. Mr. Ryan has been an employee of the Outaouais Group, Inc. since 1991. Mr. Ryan is a retired partner of Coopers and Lybrand, LLP and was the tax partner for Coyne for 16 years. Dennis J. Bossi has been a Vice President of Operations of the Company since January 1984. From 1976 to 1983, Mr. Bossi was the Vice President of Administration for Fisher Foods, Inc. where he served in various positions of increasing responsibility. Paul H. Briele joined the Company's MIS Department in September 1986. In March 1996, he was promoted to his current position of Director of Information Systems. John G. Harshall joined the Company in October 1986 as General Manager of the York, Pennsylvania laundry operation. In February 1995, Mr. Harshall was promoted to his current position of Vice President of Operations. From 1984 to 1986, Mr. Harshall was a consultant to the grocery industry. From 1979 to 1983, he was the Senior Vice President of Store Operations for Fisher Foods, Inc. Donald F. X. Keegan has served as Vice President, Chief Financial Officer and Treasurer of the Company since August 1995. From 1990 to 1995, Mr. Keegan was Vice President of Operations and Chief Financial Officer of Jos. J. Pietrafesa Co., a private label manufacturer of men's fine tailored clothing. Mr. Keegan is a certified public accountant who began his career with Arthur Andersen & Co. in New York, New York in 1983. Thomas E. Krebbeks has been the Corporate Controller of the Company since 1991. Mr. Krebbeks began his career with Ernst & Young and is a certified public accountant. David I. Murray joined the Company in June 1998 as the Senior Vice President of Operations. Prior to joining Coyne, Mr. Murray was employed with The Budget Corporation from August 1993 to September 1997 as Vice President and General Manager in the Rental Car Division. From November of 1991 to July 1997, Mr. Murray was President/CEO of Consumers Auto Choice of Fresno, California. Maher M. Najjar joined the Company's MIS Department in 1989. In August 1995 he was promoted to his current position of Director of Technology. He currently serves on the Research Development Committee of the Textile Rental Services Association. Stephen P. Naughton joined the Company in 1989 as Director of Environmental Affairs. In 1994, he assumed his current position of Vice President, Reusable Absorbent Systems with direct responsibility for RAS marketing. Anthony F. O'Connor joined the Company in October 1992 as General Manager of the Belleville, New Jersey laundry operation. In February 1995, Mr. O'Connor was promoted to Vice President of Operations. In July 1996, Mr. O'Connor was promoted to his current position of Vice President of Sales & Marketing. From 1983 to 1992, Mr. O'Connor was a General Manager with ARAMARK Corporation. Alexander Pobedinsky has been the General Counsel and Secretary of the Company since 1997. Mr. Pobedinsky has been associated with the law firm of O'Hara, Hanlon, Knych and Pobedinsky, LLP based in Syracuse, New York since 1991 and became a partner in 1996. 38 Paul E. Rebuck joined the Company in February 1996 as Director of Transportation. From 1990 to 1996, Mr. Rebuck was the Director of Transportation for P&C Supermarkets, a Penn Traffic Company. Frank E. Reid has been a Vice President of Operations of the Company since 1995. Prior to joining the Company, Mr. Reid was a General Manager for 20 years with Unifirst Corporation in Springfield, Massachusetts. Robert E. Rudd joined the Company in 1979. Since then he has held positions in various aspects of plant operations, including plant redesign, automation and construction. He was promoted to his current position of Vice President of Engineering in October 1996. Robert B. Schaffer joined the Company in 1993 as Director of Environmental Affairs. Mr. Schaffer currently serves on the Environmental Committees of both the Uniform and Textile Service Association and the Textile Rental Services Association. From 1980 through 1992, Mr. Schaffer was a consultant with Ogden Corp. where he was the leading environmental consultant to the UTSA and TRSA. Prior to becoming a consultant, he worked for the EPA for 11 years. Timothy O. Taylor joined the Company in October 1992 as General Manager of Blue Ridge Textile Manufacturing, Inc. In 1995, he was promoted to his current position of Vice President of Blue Ridge Textile Manufacturing, Inc. COMPENSATION OF DIRECTORS The Company pays each director a fee of $2,500 for each Board meeting attended and $500 for each Committee meeting attended. The Board normally meets four times per year and Committees meet two times per year. Directors who are also employees of the Company or who provide other paid consulting or advisory services to the Company do not receive compensation as directors. The Company also reimburses each director for ordinary and necessary travel expenses related to such directors attendance at Board of Directors and Committee meetings. EXECUTIVE COMPENSATION The following table sets forth the compensation earned by the Company's President and each of the other four most highly compensated officers of the Company (collectively, the "Named Executive Officers") for services rendered in all capacities to the Company during the fiscal year ended October 31, 1997:
ANNUAL COMPENSATION -------------------- ALL OTHER NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION (1) --------------------------- ---------- --------- ---------------- Thomas M. Coyne Chairman of the Board, President and Chief Executive Officer................. $ 206,507 $ 50,000 $3,381 Donald F. X. Keegan Vice President, Chief Financial Officer and Treasurer........................... $ 130,000 $ 27,500 $2,827 Dennis J. Bossi Vice President of Operations............. $ 115,000 $ 20,000 $2,785 Anthony F. O'Connor Vice President of Sales and Marketing.... $ 85,231 $ 15,000 $1,518 John G. Harshall Vice President of Operations............. $ 84,327 $ 20,000 $1,590
- -------- (1) Consists of premiums for disability policies paid by the Company of $981, $427, $991, $0 and $0 and the Company matching contributions under the 401(k) Plan of $2,400, $2,400, $1,794, $1,518 and $1,590 for the benefit of Messrs. Coyne, Keegan, Bossi, O'Connor and Harshall, respectively. 39 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS The Company's Human Resources and Compensation Committee consists of Messrs. Crowley and Ryan. Mr. Ryan served as Chief Financial Officer of the Company from March 1991 through July 1995 and is currently Assistant Treasurer of the Company. Except as described above, no officer of the Company serves as a member of the Human Resources and Compensation Committee. Transactions with certain of the members of such committee are discussed below under "Professional Services." Robert C. Ammerman was a director of the Company and a member of the Human Resources and Compensation Committee from 1994 until May 1998. Mr. Ammerman is a partner of Capital Resource Partners, L.P. which is an affiliate of one of the holders of the Old Notes and the Warrants. The Old Notes and the Warrants were redeemed with a portion of the proceeds from the Offering. CERTAIN TRANSACTIONS WITH MEMBERS OF THE COYNE FAMILY At the Company's discretion, the Company has made salary continuation payments totaling $100,000 per year to each of J. Stanley Coyne, a principal shareholder of the Company, and Gerald Coyne, a son of J. Stanley Coyne, including payments of such amounts in each of the last three fiscal years. In addition, the Company has paid certain medical and personal expenses of J. Stanley Coyne aggregating $74,104, $36,048, $93,451 and $38,021 during the fiscal years ended October 31, 1995, 1996, and 1997 and the six months ended April 30, 1998, respectively. The Company has an outstanding note receivable from J. Stanley Coyne in the amount of $1,256,250. This note bears interest at the applicable federal rate as determined by the Internal Revenue Service (6.4% at October 31, 1997). This note will become payable, with accrued interest, upon the death of J. Stanley Coyne. The Company has guaranteed the obligations of J. Stanley Coyne under a promissory note payable in 2003 in the approximate amount of $2.0 million, including accrued interest. The Company makes advancements of $2,500 per month to Susan Whitney, the daughter of J. Stanley Coyne. As of April 30, 1998, the total amount outstanding was $20,000. The Company is also making advancements of $2,231 per month to Gerald Coyne, a son of J. Stanley Coyne, to be used as mortgage payments on his home. As of April 30, 1998, the total amount outstanding was $68,000. These advancements will continue for thirty years or until the death of Gerald Coyne and his wife. All advancements will be repaid to the Company from such person's share of The J. Stanley Coyne Inter Vivos Irrevocable Trust with interest at an annual rate of 9.5%. The Company acquired certain residential property in central New York in 1995 at a cost of $320,000 for use by Thomas M. Coyne, Chairman of the Board, President of the Company and Chief Executive Officer. Mr. Coyne paid the down payment of $75,000 and the Company assumed a mortgage of $245,000 payable at $2,900 per month for ten years. The mortgage bears interest at 7.5%. The Company made mortgage payments of $0, $34,898, $34,898, and $17,449 during the fiscal years ended October 31, 1995, 1996, and 1997 and the six months ended April 30, 1998, respectively. The balance of the mortgage at April 30, 1998 was $203,217. Thomas M. Coyne has an option to acquire this property any time for the unpaid balance of the mortgage, but in no event less than $100,000. The Company approved a loan of $110,000 to Thomas M. Coyne in December 1997 at an interest rate of 9.5%. As of April 30, 1998, the total amount advanced and outstanding was $75,000. This loan is payable at a rate of $2,000 per month beginning January 1999, plus mandatory prepayments of principal equal to Thomas M. Coyne's after-tax bonuses received from the Company. 40 PROFESSIONAL SERVICES Raymond T. Ryan, a director of the Company, member of the Human Resources and Compensation Committee, Audit and Finance Committee, and the Assistant Treasurer of the Company, is an employee of The Outaouais Group, Inc., a consulting firm, which provides various accounting, tax and financial services to the Company. The Company paid fees of $0, $77,421, $68,662, and $32,496 to The Outaouais Group, Inc. for various services during the fiscal years ended October 31, 1995, 1996, and 1997 and the six months ended April 30, 1998, respectively. David P. O'Hara, a director and Assistant Secretary of the Company and Alexander Pobedinsky, General Counsel and Secretary of the Company, are partners with the law firm of O'Hara, Hanlon, Knych & Pobedinsky, LLP, which provides legal services for the Company, including services in each of the last three fiscal years. The Company paid fees of $623,456, $621,410, $519,287, and $261,929 to O'Hara, Hanlon, Knych & Pobedinsky, LLP for various services during the fiscal years ended October 31, 1995, 1996, and 1997 and the six months ended April 30, 1998, respectively. Wallace J. McDonald, a director of the Company and member of the Audit and Finance Committee, is a partner in the law firm of Bond, Schoeneck & King, LLP, which provides legal services for the Company, including services in each of the last three fiscal years. 41 PRINCIPAL SHAREHOLDERS The Company is authorized to issue 100,000 shares of Class A Common Stock, par value $.01 per share ("Class A Common Stock"), 99,000 shares of Class B Common Stock, par value $.01 ("Class B Common Stock"), 30,000 shares of Class A Preferred Stock, par value $100 per share ("Class A Preferred Stock"), and 5,000 shares of Class B Preferred Stock, par value $500 per share ("Class B Preferred Stock"). As of the date of this Prospectus, 2,923 shares of Class A Common Stock, 74,030 shares of Class B Common Stock, 23,107 shares of Class A Preferred Stock and 2,991 shares of Class B Preferred Stock were issued and outstanding. The shares of Class A Common Stock and Class B Common Stock are identical in all respects, except for voting rights and certain conversion rights. Each share of Class A Common Stock is entitled to one vote on all matters submitted to a vote of the Company's shareholders. The shares of Class A Common Stock are not convertible. The shares of Class B Common Stock do not have voting rights, except as provided by applicable law. Each share of Class B Common Stock will convert automatically into one share of Class A Common Stock upon the happening of a sale of substantially all of the assets of the Company, any sale of common stock, merger, consolidation, recapitalization or other change in ownership of the capital stock of the Company that results in the shareholders of the Company as of October 7, 1994 owning less than 51% of the voting power of the Company, or the initial public offering of the Company's Common Stock. The shares of Class A Preferred Stock and Class B Preferred Stock are identical in all respects, except for their stated par value and dividends. The holders of both Class A and Class B Preferred Stock are entitled to non- cumulative dividends at a rate of 5% per annum as and when such dividends are declared by the Board of Directors out of funds legally available therefor. No dividends may be declared or paid on the Class B Preferred Stock unless the full 5% dividend for the current year shall have been declared and paid on the Class A Preferred Stock. Historically, the Company has not paid dividends on its preferred stock. All of the Company's equity securities are owned of record by the Coyne family or trusts established by them.
COMMON STOCK PREFERRED STOCK ------------------------------------------------- ------------------------------------------------- CLASS A (VOTING) CLASS B (NON-VOTING) CLASS A (NON-VOTING) CLASS B (NON-VOTING) ------------------------ ------------------------ ------------------------ ------------------------ NUMBER OF NUMBER OF NUMBER OF NUMBER OF SHARES SHARES SHARES SHARES BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE OWNED(1) OF CLASS OWNED (1) OF CLASS OWNED (1) OF CLASS OWNED (1) OF CLASS ------------ ---------- ------------ ---------- ------------ ---------- ------------ ---------- J. Stanley Coyne Revocable Trust (2)(3).. -- -- 63,305 85.5% 19,745 85.5% 2,272 80.0% J. Stanley Coyne Inter Vivos Irrevocable Trust (2)(4)................. 1,020 34.9% -- -- -- -- -- -- Thomas M. Coyne Blue Ridge Trust (2)(5)..... 1,903 65.1% -- -- -- -- -- -- J. Stanley Coyne (2).... 1,020 (6) 34.9% 74,030 (7) 100% 23,107 (8) 100% 2,991 (9) 100%
- -------- (1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the "SEC") and includes voting or investment power with respect to the securities. Accordingly they may include securities owned by or for, among others, the spouse and/or minor children or the individual and any other relative who has the same home as such individual, as well as other securities as to which the individual has or shares voting or investment power or has the right to acquire under outstanding stock option within 60 days after the date of this table. (2) The address of such beneficial owner is c/o Coyne International Enterprises Corp., 140 Cortland Avenue, P.O. Box 4854, Syracuse, New York 13221. (3) The trustees of this trust are J. Stanley Coyne, David P. O'Hara, Thomas M. Coyne, Raymond T. Ryan and Wallace J. McDonald, who share voting and investment power with respect to the shares held by this trust 42 and who may be deemed to be the beneficial owner of all such shares. Such trustees disclaim beneficial ownership of these shares. (4) The trustees of this trust are J. Stanley Coyne, David P. O'Hara, Thomas M. Coyne, Raymond T. Ryan and Wallace J. McDonald, who share voting and investment power with respect to the shares held by this trust and who may be deemed to be the beneficial owner of all such shares. Such trustees disclaim beneficial ownership of these shares. (5) The trustees of this trust are Raymond T. Ryan and David P. O'Hara, who share voting and investment power with respect to the shares held by this trust and who may be deemed to be the beneficial owner of all such shares. Such trustees disclaim beneficial ownership of these shares. (6) Includes 1,020 shares owned by the J. Stanley Coyne Inter Vivos Irrevocable Trust, of which J. Stanley Coyne is a co-trustee. (7) Includes 63,305 shares owned by the J. Stanley Coyne Revocable Trust, of which J. Stanley Coyne is a co-trustee. (8) Includes 19,745 shares owned by the J. Stanley Coyne Revocable Trust, of which J. Stanley Coyne is a co-trustee. (9) Includes 2,272 shares owned by the J. Stanley Coyne Revocable Trust, of which J. Stanley Coyne is a co-trustee. 43 DESCRIPTION OF OTHER INDEBTEDNESS NEW CREDIT FACILITY Contemporaneously with the completion of the Offering , the Company amended its old credit facility led by NationsBank, N.A. (the "Bank") (as amended, the "New Credit Facility") to provide for (i) a $25.0 million revolving credit facility, subject to availability as described below, (ii) a $20.0 million capital expenditure facility and (iii) a $10.0 million acquisition facility. All loans under the New Credit Facility will bear interest, at the Company's option, at either (i) the Bank's prime rate plus 0.375% (in the case of the revolving credit facility) or 0.625% (in the case of the capital expenditure and acquisition facilities) or (ii) the London Interbank Offered Rate ("LIBOR") plus 2.25% (in the case of the revolving credit facility) or 2.5% (in the case of the capital expenditure and acquisition facilities). Advances under the revolving credit facility will be limited to (a) up to 85% of the Company's eligible accounts receivable plus (b) the lesser of (i) the sum of 50% of the amount of eligible inventory consisting of new merchandise plus 25% of the amount of eligible inventory consisting of in-service inventory or (ii) $12.5 million. Additionally, the Company is required to maintain a minimum available balance under the revolving credit facility of $1.0 million. Advances under the capital expenditure facility will be based on up to 100% of the net purchase price of the fixed assets for the first $4.0 million in any year and 80% thereafter. Interest only is payable on the capital expenditure facility during the first two years; thereafter, principal is payable in 20 quarterly payments, provided that all loans will come due upon termination of the revolving credit facility. Advances under the acquisition facility will be based on reasonable purchase price multiples provided that the proposed acquisition generates sufficient cash flow to service the acquisition debt and provided further that acquisitions in excess of $3.5 million in any fiscal year will require the Bank's consent. Interest only is payable on the acquisition facility during the first year; thereafter, principal will be payable in 12 quarterly payments; provided that all loans will come due upon termination of the revolving credit facility. The Company shall be required to make annual mandatory prepayments in an amount equal to the lesser of (i) $2,000,000 or (ii) 35% of the Company's excess cash flow, payable with delivery of the Company's annual financial statements, to be applied to reduce acquisition loans and capital expenditure loans. The initial term of the New Credit Facility is five years and will renew for additional one year periods thereafter unless terminated by either party. In the event that the New Credit Facility is terminated by the Company prior to the end of the original term, the Company will pay a fee of $262,500 except in certain circumstances. The Company will pay an unused line fee of 0.375% per year on the unused portion of the revolving credit facility up to $15.0 million and 0.25% per year on the unused portion in excess of $15.0 million, payable monthly in arrears. The Company will pay letter of credit fees of 2.0% per year on all outstanding letters of credit. Borrowings under the New Credit Facility will be secured by a first priority lien on the Company's accounts receivable and inventory as well as assets financed under the capital expenditure facility and assets acquired through acquisitions. The New Credit Facility will contain customary covenants and restrictions on the Company's ability to engage in certain activities. In addition, the New Credit Facility will provide that the Company must meet certain financial conditions including (i) a minimum fixed charge coverage ratio, (ii) a maximum ratio of funded debt to EBITDA, (iii) a minimum EBITDA requirement and (iv) certain limitations on capital expenditures. The New Credit Facility also will include customary events of default. INDUSTRIAL REVENUE BOND FINANCING In 1994, Midway-CTS Buffalo, Ltd. ("Midway"), a wholly-owned subsidiary of the Company, entered into a $2.6 million industrial revenue bond financing (the "IRB Financing") relating to the Company's Buffalo, New York facility (the "Buffalo Facility"). In connection with the IRB Financing, Midway is party to a lease-purchase agreement with the Erie County Industrial Development Agency pertaining to the Buffalo Facility and 44 is a guarantor of the industrial revenue development bonds issued by the Erie County Industrial Development Agency that financed such facility. The Buffalo Facility lease payments equal the interest and principal payments due under the related industrial development revenue bonds. The IRB Financing expires in 2005, bears a variable interest rate (which was 10% at April 30, 1998), and has a 20 year amortization schedule with a bullet payment due at expiration. 45 EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Initial Notes were originally sold by the Company on June 26, 1998 to the Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers subsequently resold the Initial Notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act. As a condition to the Purchase Agreement, the Company entered into the Registration Rights Agreement pursuant to which the Company agreed, for the benefit of the holders of the Initial Notes, at the Company's cost to (i) file an Exchange Offer Registration Statement with the Commission on or prior to 45 days after the date of the original issuance of the Initial Notes, (ii) use its best efforts to have the Exchange Offer Registration declared effective by the Commission on or prior to 135 days after the date of the original issuance of the Initial Notes, and (iii) cause the Exchange Offer to be consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 business days after the effective date. Upon the Exchange Offer Registration Statement being declared effective, the Company will offer the Exchange Notes in exchange for surrender of the Initial Notes. The Company will keep the Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date on which notice of the Exchange Offer is mailed to the holders of the Initial Notes. For each Initial Note validly tendered to the Company pursuant to the Exchange Offer and not withdrawn by the holder thereof, the holder of such Initial Note will receive an Exchange Note having a principal amount equal to that of the tendered Initial Note. Based on no-action letters issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties, the Company believes the Exchange Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. Each holder of the Initial Notes (other than certain specified holders) who wishes to exchange Initial Notes for Exchange Notes in the Exchange Offer will be required to represent to the Company in the Letter of Transmittal, that, among other things, the Exchange Notes acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, that neither the holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that neither the holder nor any such other person in an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. In the case of any holder that is not a broker-dealer, each such holder, by tendering, will also represent to the Company that such holder is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes. Each Participating Broker-Dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Commission has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the Exchange Notes (other than a resale of an unsold allotment from the original sale of the Initial Notes), with the prospectus contained in the Exchange Offer Registration Statement so long as the prospectus otherwise meets the requirements of the Securities Act. Under the Registration Rights Agreement, the Company is required to allow Participating Broker-Dealers and other persons subject to similar prospectus delivery requirements, if any, to use the prospectus contained in the Exchange Offer Registration Statement in connection with the resale of such Exchange Notes. Subject to the exception described in the next paragraph, the Company has agreed that for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective, and (ii) the date on which a Participating Broker-Dealer is no longer required to deliver a prospectus in connection with market making or other trading activities, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale; provided, however, that the Company and the Guarantors will 46 have no obligation to amend or supplement this Prospectus unless the Company has received written notice from a Participating Broker-Dealer of their prospectus delivery requirements under the Securities Act within fifteen (15) business days following consummation of the Exchange Offer. See "Plan of Distribution." The Company shall not be required to amend or supplement the Exchange Offer Registration Statement if (i) in the judgment of the Company's Board of Directors exercised reasonably and in good faith the use of the Exchange Offer Registration Statement and the disclosure required to be made therein would materially interfere with a valid business purpose of the Company or the Guarantors and (ii) the Company delivers a notice to such effect to such Broker-Dealers setting forth the period of time (which shall not be greater than 60 days) for which the Company's obligation to so amend or supplement the Exchange Offer Registration Statement will be suspended. In the event that any changes in law or the applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer or if any holder of the Initial Notes is not eligible to participate in the Exchange Offer, and subject to the exception described in the next paragraph, the Company will, at its cost (a) file the Shelf Registration Statement covering resales of the Initial Notes, (b) use its best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act and (c) use its best efforts to keep continuously effective the Shelf Registration Statement for a period of at least two years. The Company will, in the event of the filing of a Shelf Registration Statement, provide to each holder of the Initial Notes copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement for the Initial Notes has become effective and take certain other actions as are required to permit unrestricted resales of the Initial Notes. A holder of Initial Notes that sells such Initial Notes pursuant to the Shelf Registration Statement generally will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a holder (including certain indemnification obligations). In addition, each holder of the Initial Notes will be required to deliver information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Initial Notes included in the Shelf Registration Statement and to benefit from the provisions regarding Liquidated Damages set forth below. If in the judgment of the Company's Board of Directors exercised reasonably and in good faith the use of the Shelf Registration Statement and the disclosure required to be made therein would materially interfere with a valid business purpose of the Company or the Guarantors, the Company may deliver a notice to such effect to the holders, and upon receipt of such notice, the holders shall cease distribution of the Notes under a Shelf Registration Statement for the period of time set forth in such notice (which shall not be greater than 60 days). If (a) the Company fails to file any of the Registration Statements required by the Registration Rights Agreement on or before the date specified for such filing, (b) any of such Registration Statements is not declared effective by the Commission on or prior to the date specified for such effectiveness (the "Effectiveness Target Date"), (c) the Company fails to consummate the Exchange Offer within 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement, or (d) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (a) through (d) above a "Registration Default"), then the Company and the Guarantors will pay Liquidated Damages to each Holder of Initial Notes, with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Initial Notes held by such Holder. The amount of the Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of Initial Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.30 per week per $1,000 principal amount of Initial Notes. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. 47 This summary of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, all the provisions of the Registration Rights Agreement, a copy of which is available upon request to the Company. Following the consummation of the Exchange Offer, holders of the Initial Notes who were eligible to participate in the Exchange Offer but who did not tender their Initial Notes will not have any further registration rights and such Initial Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Initial Notes could be adversely affected. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Company will accept any and all Initial Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of outstanding Initial Notes accepted in the Exchange Offer. Holders may tender some or all of their Initial Notes pursuant to the Exchange Offer. However, Initial Notes may be tendered only in integral multiples of $1,000. The form and terms of the Exchange Notes are the same as the form and terms of the Initial Notes (which they replace), except that (i) the Exchange Notes will bear a Series B description and a different CUSIP number from the Initial Notes, (ii) as of the date hereof the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and (iii) the Exchange Notes will not contain certain provisions included in the terms of the Initial Notes relating to the timing of the Exchange Offer. In addition, the holders of Exchange Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for the payment of Liquidated Damages in the event the Company fails to satisfy certain obligations under the Registration Rights Agreement, which rights will terminate when the Exchange Offer is consummated. The Exchange Notes will evidence the same debt as the Initial Notes and will be entitled to the benefits of the Indenture. As of the date of this Prospectus, $75,000,000 aggregate principal amount of Initial Notes were outstanding. The Company has fixed the close of business on [ ], 1998 as the record date for the Exchange Offer for purposes of determining the persons to whom this Prospectus and the Letter of Transmittal will be mailed initially. Holders of the Initial Notes do not have any appraisal or dissenters' rights under the New York Business Corporation Law or the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Initial Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the Exchange Notes from the Company. If any tendered Initial Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, the certificates for any such unaccepted Initial Notes will be returned to the tendering holder thereof, at the Company's expense, as promptly as practicable after the Expiration Date. Holders who tender Initial Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Initial Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the Exchange Offer. See "--Fees and Expenses." 48 EXPIRATION DATE; EXTENSION; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1998, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "'Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the registered holders an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. The Company reserves the right, in its sole discretion, (i) to delay accepting any Initial Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under "Conditions" shall not have been satisfied prior to the Expiration Date, by giving oral or written notice of such delay, extension or termination to the Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders. INTEREST ON THE EXCHANGE NOTES Interest on each Exchange Note will accrue from the last date on which interest was paid on the Initial Note surrendered in exchange therefor or, if no interest has been paid on the Initial Note, from the date of original issuance of Initial Note. No interest will be paid on the Initial Notes accepted for exchange, and holders of Initial Notes whose Initial Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on the Initial Notes accrued up to the date of the issuance of the Exchange Notes. Interest on the Exchange Notes is payable semi-annually on each June 1 and December, commencing on December 1, 1998. PROCEDURES FOR TENDERING Only a holder of Initial Notes may tender such Initial Notes in the Exchange Offer. For a holder to validly tender Initial Notes pursuant to the Exchange Offer, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantee, or (in the case of a book-entry transfer) an Agent's Message (as defined below) in lieu of the Letter of Transmittal, and any other required documents, must be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. The tender of Initial Notes via Agent's Message will not constitute notice to the Company of a holder's status as a Participating Broker-Dealer. Participating Broker-Dealers desiring to provide such notice must still do so in writing within fifteen business days following the consummation of the Exchange Offer. See "--Resale of the Exchange Notes." To be tendered effectively, the Initial Notes, the Letter of Transmittal (or Agent's Message) and other required documents must be completed and received by the Exchange Agent at the address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the Initial Notes may be made by book entry transfer in accordance with the procedures described below. Confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility (as defined below) to and received by the Exchange Agent and forming a part of a book- entry confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Company may enforce the terms of the Letter of Transmittal against such participant. By executing the Letter of Transmittal or delivering an Agent's Message, each holder will make to the Company the representations set forth above in the fourth paragraph under "Purpose and Effect of the Exchange Offer." 49 The tender by a holder and the acceptance thereof by the Company will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF INITIAL NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR INITIAL NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner whose Initial Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner" included with the Letter of Transmittal. Signatures on the Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Initial Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on the Letter of Transmittal or the notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member firm of the Medallion System (an "Eligible Institution"). If the Letter of Transmittal is signed by a person other than the registered holder of any Initial Notes listed therein, such Initial Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Initial Notes with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any Initial Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Initial Notes at the book-entry transfer facility, The Depository Trust Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Initial Notes by causing such Book-Entry Transfer Facility to transfer such Initial Notes into the Exchange Agent's account with respect to the Initial Notes in accordance with the Book-Entry Transfer Facility's procedures for such transfer. Although delivery of the Initial Notes may be effected through book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly completed and duly executed with any required signature guarantee or Agent's Message and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Delivery of documents to the Book- Entry Transfer Facility does not constitute delivery to the Exchange Agent. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Initial Notes will be determined by the Company in its sole discretion, which determination will be 50 final and binding. The Company reserves the absolute right to reject any and all Initial Notes not properly tendered or any Initial Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right in its sole discretion to waive any defects, irregularities or conditions of tender as to particular Initial Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Initial Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Initial Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Initial Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Initial Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Initial Notes and (i) whose Initial Notes are not immediately available, (ii) who cannot deliver their Initial Notes, the Letter of Transmittal or any other required documents to the Exchange Agent or (iii) who cannot complete the procedures for book-entry transfer, prior to the Expiration Date, may effect a tender if: (a) the tender is made through an Eligible Institution; (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Initial Notes and principal amount of Initial Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Initial Notes (or a confirmation of book- entry transfer of such Initial Notes into the Exchange Agent's account at the Book-Entry Transfer Facility), and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal or facsimile thereof, as well as the certificate(s) representing all tendered Initial Notes in proper form for transfer (or a confirmation of book-entry transfer of such Initial Notes into the Exchange Agent's account at the Book-Entry Transfer Facility), and all other documents required by the Letter of Transmittal are received by the Exchange Agent upon three New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Initial Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Initial Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Initial Notes in the Exchange Offer, a telegram, telex, facsimile transmission or letter must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Initial Notes to be withdrawn (the "Depositor"), (ii) identify the Initial Notes to be withdrawn (including the certificate number(s) and principal amount of such delivered Initial Notes, or, in the case of Initial Notes transferred by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited and the transaction code number), (iii) state that such Depositor is withdrawing its election to have the Initial Notes exchanged and specify the name in which any such Initial Notes are to be registered and (iv) be 51 signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Initial Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Initial Notes register the transfer of such Initial Notes into the name of the person withdrawing the tender. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Initial Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Initial Notes so withdrawn are validly retendered. Any Initial Notes which have been tendered but which are not accepted for exchange will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Initial Notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the Expiration Date. CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange Exchange Notes for, any Initial Notes, and may terminate or amend the Exchange Offer as provided herein prior to the Expiration Date, if: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or any material adverse development has occurred in any existing action or proceeding with respect to the Company or any of its subsidiaries; or (b) any law, statute, rule, regulation or interpretation by the staff of the Commission is proposed, adopted or enacted, which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; or (c) any governmental approval has not been obtained, which approval the Company shall, in its reasonable discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby. If the Company determines in its sole discretion that any of the conditions are not satisfied, the Company may (i) refuse to accept any Initial Notes and return all tendered Initial Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Initial Notes theretofore tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Initial Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Initial Notes which have not been withdrawn. EXCHANGE AGENT IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: By registered or certified mail: IBJ Schroder Bank & Trust Company P.O. Box 84 Bowling Green Station New York, NY 10274-0084 Attention: Reorganization Department 52 By overnight or hand delivery: IBJ Schroder Bank & Trust Company One State Street New York, NY 10004 Attention: Securities Processing Window, Subcellar 1 (SCI) By Facsimile: (212) 858-2611 Confirm: (212) 858-2103 DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, facsimile, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers, or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. ACCOUNTING TREATMENT The Exchange Notes will be recorded at the same carrying value as the Initial Notes, which is face value, as reflected in the Company's accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Company. The expenses of the Exchange Offer will be expensed over the term of the Exchange Notes. CONSEQUENCES OF FAILURE TO EXCHANGE The Initial Notes that are not exchanged for Exchange Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Initial Notes may be resold only (i) to the Company, (ii) pursuant to a registration statement which has been declared effective under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States, (iii) so long as the Initial Notes are eligible for resale pursuant to Rule 144A, to a person inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, (iv) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act or (vi) in accordance with Rule 144 under the Securities Act, or pursuant to another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel reasonably acceptable to the Company), in each case in accordance with any applicable securities laws of any state of the United States and in accordance with the Indenture. Holders of Initial Notes not tendered in the Exchange Offer will not retain any rights under the Registration Rights Agreement, except in limited circumstances. RESALE OF THE EXCHANGE NOTES With respect to resales of Exchange Notes, based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that a holder or other person who receives 53 Exchange Notes, whether or not such person is the holder (other than a person that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who receives Exchange Notes in exchange for Initial Notes in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement or understanding with a person to participate, in the distribution of the Exchange Notes, will be allowed to resell the Exchange Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the Exchange Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires Exchange Notes in the Exchange Offer for the purpose of distributing or participating in a distribution of the Exchange Notes, such holder cannot rely on the position of the staff of the Commission enunciated in such no-action letters or any similar interpretive letters, and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Further, each Participating Broker- Dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. Subject to the exceptions described in the next paragraph, the Company has agreed that for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective, and (ii) the date on which a Participating Broker-Dealer is no longer required to deliver a prospectus in connection with market making or other trading activities, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale; provided, however, that the Company and the Guarantors will have no obligation to amend or supplement this Prospectus unless the Company has received written notice from a Participating Broker-Dealer of their prospectus delivery requirements under the Securities Act within fifteen (15) business days following consummation of the Exchange Offer. The Company shall not be required to amend or supplement the Exchange Offer Registration Statement if (i) in the judgment of the Company's Board of Directors exercised reasonably and in good faith the use of the Exchange Offer Registration Statement and the disclosure required to be made therein would materially interfere with a valid business purpose of the Company or the Guarantors and (ii) the Company delivers a notice to such effect to such Broker-Dealers setting forth the period of time (which shall not be greater than 60 days) for which the Company's obligation to so amend or supplement the Exchange Offer Registration Statement will be suspended. 54 DESCRIPTION OF NOTES GENERAL The Initial Notes were issued, and the Exchange Notes will be issued, pursuant to an Indenture (the "Indenture") among the Company, the Guarantors and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), in a private transaction that is not subject to the registration requirements of the Securities Act. See "Notice to Investors." The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary of the material provisions of the Indenture and the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Indenture and the Registration Rights Agreement, including the definitions therein of certain terms used below. Copies of the proposed form of Indenture and Registration Rights Agreement are available as set forth below under "--Additional Information." The definitions of certain terms used in the following summary are set forth below under "--Certain Definitions." For purposes of this Description of Notes, the term "Company" refers only to Coyne International Enterprises Corp. and not to any of its Subsidiaries. The Notes will be general unsecured obligations of the Company and will be subordinated in right of payment to all current and future Senior Debt including obligations under the New Credit Facility and the IRB Financing. As of April 30, 1998, on an as adjusted basis giving effect to the Offering and the application of the proceeds therefrom, the Company and its subsidiaries would have had Senior Debt of approximately $10.6 million. The Indenture will permit the incurrence of additional Senior Debt in the future. The form and terms of the Exchange Notes are the same as the form and terms of the Initial Notes (which they replace), except that (i) the Exchange Notes will bear a Series B description and a different CUSIP number from the Initial Notes, (ii) as of the date hereof, the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and (iii) the Exchange Notes will not contain certain provisions included in the terms of the Initial Notes relating to the timing of the Exchange Offer. In addition, the holders of Exchange Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for the payment of Liquidated Damages in the event the Company fails to satisfy certain obligations under the Registration Rights Agreement, which rights will terminate when the Exchange Offer is consummated. PRINCIPAL, MATURITY AND INTEREST The Notes are limited in aggregate principal amount to $150.0 million, of which $75.0 million were issued in the Offering, and will mature on June 1, 2008. Interest on the Notes will accrue at the rate of 11.25% per annum and will be payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 1998, to Holders of record on the immediately preceding May 15 and November 15. Additional Notes may be issued from time to time, subject to the provisions of the Indenture described below under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal, premium, if any, and interest and Liquidated Damages on the Notes will be payable at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium, interest and Liquidated Damages with respect to Notes the Holders of which have given wire transfer instructions to the Company will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. 55 SUBSIDIARY GUARANTEES The Company's payment obligations under the Notes are jointly and severally guaranteed (the "Subsidiary Guarantees") by each of the Company's current and future Domestic Subsidiaries other than Receivables Subsidiaries. The Subsidiary Guarantee of each Guarantor is subordinated to the prior payment in full of all Senior Debt of such Guarantor, which, on an as adjusted basis giving effect to the Offering and the application of the proceeds therefrom, would include approximately $2.5 million of Senior Debt outstanding as of April 30, 1998, and the amounts for which the Guarantors will be liable under the guarantees issued from time to time with respect to Senior Debt. The obligations of each Guarantor under its Subsidiary Guarantee is limited so as not to constitute a fraudulent conveyance under applicable law. See, however, "Risk Factors--Fraudulent Conveyance." The Indenture provides that no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another corporation, Person or entity whether or not affiliated with such Guarantor unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture, the Registration Rights Agreement and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. The Indenture provides that in the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture. See "Redemption or Repurchase at Option of Holders--Asset Sales." SUBORDINATION The payment of principal of, premium, if any, and interest and Liquidated Damages on the Notes is subordinated in right of payment, as set forth in the Indenture, to the prior payment in full of all Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. The subordination is for the benefit of the holders of Senior Debt. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities, the holders of Senior Debt will be entitled to receive payment in full of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before the Holders of Notes will be entitled to receive any payment with respect to the Notes, and until all Obligations with respect to Senior Debt are paid in full, any distribution to which the Holders of Notes would be entitled shall be made to the holders of Senior Debt (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from the trust described under "--Legal Defeasance and Covenant Defeasance"). The Company also may not make any payment upon or in respect of the Notes (except in Permitted Junior Securities or from the trust described under "-- Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of the principal of, premium, if any, or interest on Designated Senior Debt occurs and is continuing beyond any applicable period of grace or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the Company or the holders of any Designated Senior Debt. Payments on the Notes may and shall be resumed 56 (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No new period of payment blockage may be commenced unless and until (i) 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium, if any, and interest on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived for a period of not less than 90 days. The Indenture further requires that the Company promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a liquidation or insolvency, Holders of Notes may recover less ratably than creditors of the Company who are holders of Senior Debt. On an as adjusted basis, after giving effect to the Offering and the application of the proceeds therefrom, the principal amount of Senior Debt outstanding at April 30, 1998 would have been approximately $10.6 million. The Indenture limits, subject to certain financial tests, the amount of additional Indebtedness, including Senior Debt, that the Company and its subsidiaries can incur. See "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." OPTIONAL REDEMPTION The Notes are not redeemable at the Company's option prior to June 1, 2003. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below:
YEAR PERCENTAGE - ---- ---------- 2003................................................................. 105.625% 2004................................................................. 103.750% 2005................................................................. 101.875% 2006 and thereafter.................................................. 100.000%
SELECTION AND NOTICE If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. MANDATORY REDEMPTION The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. 57 REPURCHASE AT THE OPTION OF HOLDERS Change of Control Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within thirty (30) days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. On the Change of Control Payment Date, the Company will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Indenture provides that, prior to complying with the provisions of this covenant, but in any event within 90 days following a Change of Control, the Company will either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this covenant. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The New Credit Facility limits the ability of the Company to purchase Notes and also provides that certain change of control events with respect to the Company would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Debt to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when the Company is prohibited from purchasing Notes, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company's failure to purchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, constitute a default under the New Credit Facility. In such circumstances, the subordination provisions in the Indenture would likely restrict payments to the Holders of Notes. See "Risk Factors--Change of Control." The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. 58 The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of the Company and its Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain. Asset Sales The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 80% of the consideration therefor received by the Company or such Subsidiary is in the form of cash; provided that the amount of (x) any liabilities (as shown on the Company's or such Subsidiary's most recent balance sheet) of the Company or any Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Guarantee thereof) that are assumed by the transferee of any such assets and either (1) such assumption is evidenced by a customary novation agreement that releases the Company or such Subsidiary from further liability or (2) all such liabilities are paid in full within five days of such Asset Sale by the transferee of such assets and (y) any securities, notes or other obligations received by the Company or any such Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by the Company or such Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 180 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to repay Senior Debt (and to correspondingly reduce lending commitments with respect thereto in the case of Senior Debt that is term Indebtedness or revolving credit Indebtedness and was incurred pursuant to a Credit Facility), (b) to the acquisition of a majority of the assets of, or a majority of the Voting Stock of, another Permitted Business, the making of a capital expenditure or the acquisition of other long-term assets that are used or useful in a Permitted Business or (c) reimburse the Company or its Subsidiaries for expenditures made, and costs incurred to repair, rebuild, replace or restore property subject to loss, damage or taking to the extent that Net Proceeds consist of insurance proceeds received on account of such loss, damage or taking. Pending the final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be required to make an offer to all Holders of Notes and all holders of other Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture and such other Indebtedness. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. 59 CERTAIN COVENANTS Restricted Payments The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Subsidiaries) or to the direct or indirect holders of the Company's or any of its Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company (other than any such Equity Interests owned by the Company or any Subsidiary of the Company that is a Guarantor); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (vii) and (viii) of the next succeeding paragraph), is less than the sum, without duplication, of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company since the date of the Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company), plus (iii) to the extent that any Restricted Investment that was made after the date of the Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment, plus (iv) $2.0 million. The foregoing provisions will not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any pari passu or subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from 60 clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of pari passu or subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; (v) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Subsidiary of the Company held by any member of the Company's (or any of its Subsidiaries') management pursuant to any management equity subscription agreement or stock option agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $250,000 in any twelve-month period and no Default or Event of Default shall have occurred and be continuing immediately after such transaction; (vi) Permitted Payments; (vii) the Distribution and (viii) in the event the Company is converted into an entity that is not subject to income taxation by a government authority, the payment of dividends to reimburse holders of the Company's equity interests for any income taxes owed and payable to such governmental authority incurred by such holders solely as a result of their status as holders of the Company's Equity Interests; provided that such amounts shall not exceed the tax liability of the Company had it been subject to corporate income taxation of such governmental authority for the corresponding period; and provided further that any such payment shall be used by such holder of the Company's Equity Interests to pay such taxes owed and payable. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $1.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "Restricted Payments" were computed, together with a copy of any fairness opinion or appraisal required by the Indenture. Incurrence of Indebtedness and Issuance of Preferred Stock The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company will not issue any Disqualified Stock and will not permit any of its Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1; determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period; The provisions of the first paragraph of this covenant will not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company of Indebtedness and letters of credit pursuant to Credit Facilities; provided that the aggregate principal amount of all Indebtedness and letters of credit (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder) outstanding under all Credit Facilities after giving effect to such incurrence does not exceed the greater of (x) $55.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied to repay Indebtedness under a Credit Facility and reduce lending commitments with respect thereto pursuant to the covenant described above under the caption "-- Repurchase at the Option of Holders--Asset Sales" and (y) the Borrowing Base as of the date of any such incurrence; 61 (ii) the incurrence by the Company and the Guarantors of the Existing Indebtedness; (iii) the incurrence by the Company and the Guarantors of up to $75.0 million in aggregate principal amount of Notes and the issuance of the Exchange Notes; (iv) the incurrence by the Company or any of its Subsidiaries of additional Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Subsidiary, in an aggregate principal amount at any one time outstanding under this clause (iv), including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (iv), not to exceed $3.0 million; (v) the incurrence by the Company or any of its Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the Indenture to be incurred under the first paragraph hereof or clauses (iii), (iv) or (v) of this paragraph; (vi) the incurrence by the Company or any of its Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding; (vii) the guarantee by the Company or any Guarantor of Indebtedness of the Company or a Subsidiary of the Company that was permitted to be incurred by another provision of this covenant; (viii) the incurrence by the Company or any of its Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned Subsidiaries (other than Receivables Subsidiaries) or any of the Guarantors; provided, however, that (i) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly-Owned Subsidiary thereof (other than a Receivables Subsidiary) or a Guarantor and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly-Owned Subsidiary thereof (other than a Receivables Subsidiary) or a Guarantor shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Subsidiary, as the case may be, that was not permitted by this clause (viii); (ix) the incurrence by the Company or any of its Subsidiaries of Indebtedness incurred in respect of performance, surety and similar bonds provided by the Company or any of its Subsidiaries in the ordinary course of business; (x) the incurrence by the Company or any of its Subsidiaries of Indebtedness in respect of letters of credit relating to workers' compensation claims and self-insurance or similar requirements in the ordinary course of business; (xi) the incurrence of Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any such obligations of the Company or any such Subsidiary pursuant to such agreements, in each case incurred in connection with the disposition of any business, assets or Subsidiary of the Company, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition, provided that none of the foregoing results in Indebtedness required to be reflected as indebtedness on the balance sheet of the Company, or any such Subsidiary in accordance with GAAP and the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed 100% of the gross proceeds actually received by the Company and its Subsidiaries in connection with such disposition; and 62 (xii) the incurrence by the Company or any of its Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (xii), not to exceed $3.0 million. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xii) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify (or later reclassify, but only among clauses (i) through (xii) of the definition of Permitted Debt) such item of Indebtedness in any manner that complies with this covenant. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued. The Company shall not be deemed to be in breach of this covenant solely as the result of fluctuations in currency exchange rates or as a result of changes in accounting principles that become effective after the date of the Indenture. Liens The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness or trade payables on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. Dividend and Other Payment Restrictions Affecting Subsidiaries The Indenture provides that the Company will not, and will not permit any of its 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 Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or advances to the Company or any of its Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Subsidiaries. However, the foregoing restrictions will not apply to encumbrances or restrictions existing under or by reason of (a) the New Credit Facility as in effect as of the date of the Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the New Credit Facility as in effect on the date of the Indenture, (b) the Indenture and the Notes, (c) applicable law, (d) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred, (e) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices, (f) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (g) any agreement for the sale of a Subsidiary that restricts distributions by that Subsidiary pending its sale, (h) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced, (i) secured Indebtedness otherwise permitted to be incurred pursuant to the provisions of the covenant described above under the caption "--Liens" that limits the right of 63 the debtor to dispose of the assets securing such Indebtedness, (j) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements entered into in the ordinary course of business, and (k) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. Merger, Consolidation, or Sale of Assets The Indenture provides that the Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Registration Rights Agreement, the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Wholly Owned Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption " Incurrence of Indebtedness and Issuance of Preferred Stock." Transactions with Affiliates The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. Notwithstanding the foregoing, the following items shall not be deemed to be Affiliate Transactions: (i) any employment agreement or arrangement entered into by the Company or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Subsidiary, (ii) transactions between or among the Company and/or its Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not otherwise Affiliates of the Company, (iv) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption "--Restricted Payments," (v) the Distribution, (vi) Permitted Payments, (vii) reasonable and customary indemnification of any officer, director or employee of the Company or any of its Subsidiaries in accordance with any applicable law, and (viii) the conversion of the Company into an entity which is not subject to income taxation by a governmental authority. 64 Sale and Leaseback Transactions The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company may enter into a sale and leaseback transaction if (i) the Company could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant described above under the caption "-- Liens," (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described above under the caption "--Optional Redemption--Asset Sales." Additional Subsidiary Guarantees The Indenture provides that if the Company or any of its Subsidiaries shall acquire or create another Domestic Subsidiary after the date of the Indenture, or if any current or future Subsidiary becomes a Domestic Subsidiary of the Company after the date of the Indenture, then such newly acquired or created Subsidiary shall become a Guarantor and execute a Supplemental Indenture and deliver an Opinion of Counsel, in accordance with the terms of the Indenture; provided that this provision shall not be applicable to a Subsidiary that has been properly designated as a Receivables Subsidiary. No Senior Subordinated Debt The Indenture provides that (i) the Company will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes, and (ii) no Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Guarantees and senior in any respect in right of payment to the Subsidiary Guarantees. Payments for Consent The Indenture provides that neither the Company nor any of its Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Reports The Indenture provides that, whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Notes are outstanding and commencing with information relating to the fiscal quarter ended July 31, 1998, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports, in each case within the time periods specified in the Commission's rules and regulations. In addition, following the consummation of the Exchange Offer, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the 65 Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company and the Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. The Company and the Guarantors shall at all times comply with Section 314(a) of the Trust Indenture Act of 1939, as amended. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company or any of its Subsidiaries to comply with the provisions described under the captions "--Change of Control," "--Asset Sales," "--Restricted Payments" or "-- Incurrence of Indebtedness and Issuance of Preferred Stock," (iv) failure by the Company or any of its Subsidiaries for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acing on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to June 1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to June 1, 2003 then the premium specified 66 in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of the Company or any Guarantor , as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes ("Legal Defeasance") except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest and Liquidated Damages on such Notes when such payments are due from the trust referred to below, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to 67 the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (viii) the Company must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the time for payment of interest on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption "--Repurchase at the Option of Holders") or (viii) make any change in the foregoing amendment and waiver provisions. In addition, any amendment to the provisions of Article 10 of the Indenture (which relate to 68 subordination) will require the consent of the Holders of at least 75% in aggregate principal amount of the Notes then outstanding if such amendment would adversely affect the rights of Holders of Notes. Notwithstanding the foregoing, without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. ADDITIONAL INFORMATION Anyone who receives this Prospectus may obtain a copy of the Indenture and Registration Rights Agreement without charge by writing to Coyne International Enterprises Corp., 140 Cortland Avenue, Syracuse New York 13221, Attention: Chief Financial Officer. BOOK-ENTRY, DELIVERY AND FORM The Initial Notes are represented by one Note in registered, global form without interest coupons(the "Initial Global Note"). The Exchange Notes initially will be represented by one or more Notes in registered, global form without interest coupons (collectively, the "Exchange Global Notes" and, together with the Initial Global Note, the "Global Notes"). The Global Notes are deposited upon issuance with the Trustee as custodian for The Depository Trust Company ("DTC"), in New York, New York, and registered in the name of DTC or its nominee, in each case for credit to an account of a direct or indirect participant in DTC as described below. Except as set forth below, the Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for Notes in certificated form except in the limited circumstances described below. See "--Exchange of Book-Entry Notes for Certificated Notes." Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of Certificated Notes (as defined below). Transfers of beneficial interests in the Global Notes will be subject to the applicable rules and procedures of DTC and its direct or indirect participants, which may change from time to time. 69 Initially, the Trustee will act as Paying Agent and Registrar. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. DEPOSITORY PROCEDURES The following description of the operations and procedures of DTC are provided solely as a matter of convenience. These operations and procedures are solely within the control of DTC and are subject to changes by DTC from time to time. The Company takes no responsibility for these operations and procedures and urges investors to contact DTC or their participants directly to discuss these matters. DTC has advised the Company that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book- entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants. DTC has also advised the Company that, pursuant to procedures established by it, (i) upon deposit of the Exchange Global Notes, DTC will credit the accounts of Participants with portions of the principal amount of the Exchange Global Notes equal to the principal amount of the Initial Notes tendered in the Exchange Offer and (ii) ownership of such interests in the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interest in the Exchange Global Notes). All interests in a Global Note may be subject to the procedures and requirements of DTC. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants and certain banks, the ability of a person having beneficial interests in a Global Note to pledge such interests to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests. EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL NOTES WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. Payments in respect of the principal of, and premium, if any, Liquidated Damages, if any, and interest on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee will treat the persons in whose names the Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, neither the Company, the Trustee nor any agent of the Company or the Trustee has or will have any responsibility or liability for (i) any aspect of DTC's records or any Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interest in the Global Notes, or for maintaining, supervising or reviewing any of DTC's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the Global Notes or (ii) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. DTC has advised the Company that its current practice, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date, in amounts proportionate to their respective holdings in the 70 principal amount of beneficial interest in the relevant security as shown on the records of DTC unless DTC has reason to believe it will not receive payment on such payment date. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee or the Company. Neither the Company nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the Notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Interest in the Exchange Global Notes are expected to be eligible to trade in DTC's Same-Day Funds Settlement System and secondary market trading activity in such interests will, therefore, settle in immediately available funds, subject in all cases to the rules and procedures of DTC and its Participants. See "-- Same Day Settlement and Payment." Transfers between Participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same day funds. DTC has advised the Company that it will take any action permitted to be taken by a Holder of Notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the Notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC reserves the right to exchange the Global Notes for legended Notes in certificated form, and to distribute such Notes to its Participants. Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among Participants,it is under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee nor any of their respective agents will have any responsibility for the performance by DTC or its respective Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations. EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES A Global Note is exchangeable for definitive Notes in registered certificated form ("Certificated Notes") if (i) DTC (x) notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes and the Company thereupon fails to appoint a successor depositary or (y) has ceased to be a clearing agency registered under the Exchange Act, (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Certificated Notes or (iii) there shall have occurred and be continuing an Event of Default with respect to the Notes. In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon request but only upon prior written notice given to the Trustee by or on behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures). SAME DAY SETTLEMENT AND PAYMENT The Indenture requires that principal, premium, if any, and interest and Liquidated Damages on the Notes will be payable at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium, interest and Liquidated Damages with respect to Notes the Holders of which have given wire transfer instructions to the Company will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. The Notes represented by the Global Notes are expected to be eligible to trade in the PORTAL market and to trade in the Depositary's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by the Depositary to be settled in immediately available funds. The Company expects that secondary trading in any certificated Notes will also be settled in immediately available funds. 71 Because of time zone differences, the securities account of a Euroclear System ("Euroclear") or Cedel S.A. ("Cedel") participant purchasing an interest in a Global Note from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Cedel participant, during the securities settlement processing day (which must be a business day for Euroclear and Cedel) immediately following the settlement date of DTC. DTC has advised the Company that cash received in Euroclear or Cedel as a result of sales of interests in a Global Note by or through a Euroclear or Cedel participant to a Participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Cedel cash account only as of the business day for Euroclear or Cedel following DTC's settlement date. REGISTRATION RIGHTS; LIQUIDATED DAMAGES The Holders of the Exchange Notes are not entitled to any registration rights with respect to the Exchange Notes. The Company and the Initial Purchasers entered into the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Company agreed to file with the Commission the Exchange Offer Registration Statement on the appropriate form under the Securities Act with respect to the Exchange Notes. The Registration Statement of which this Prospectus forms a part constitutes the Exchange Offer Registration Statement. Upon the effectiveness of the Exchange Offer Registration Statement, the Company will offer to the Holders of Transfer Restricted Securities pursuant to the Exchange Offer who are able to make certain representations the opportunity to exchange their Transfer Restricted Securities for Exchange Notes. If (i) the Company is not required to file the Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy or (ii) any Holder of Transfer Restricted Securities notifies the Company prior to the 20th day following consummation of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer or (B) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and owns Initial Notes acquired directly from the Company or an affiliate of the Company, the Company will file with the Commission a Shelf Registration Statement to cover resales of the Initial Notes by the Holders thereof who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement. The Company will use its best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. For purposes of the foregoing, "Transfer Restricted Securities" means each Initial Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of an Initial Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Initial Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act. The Registration Rights Agreement provides that (i) the Company will file an Exchange Offer Registration Statement with the Commission on or prior to 45 days after the Closing Date, (ii) the Company will use its best efforts to have the Exchange Offer Registration Statement declared effective by the Commission on or prior to 135 days after the Closing Date, (iii) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company will commence the Exchange Offer and use its best efforts to issue on or prior to 30 business days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission, Exchange Notes in exchange for all Initial Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file the Shelf Registration Statement, the Company will use its best efforts to file the Shelf Registration Statement with the Commission on or prior to 30 days after such filing obligation arises and to cause the Shelf Registration to be declared effective by the Commission on or prior to 90 days after such obligation arises. If (a) the Company fails to file any of the Registration Statements required by the Registration 72 Rights Agreement on or before the date specified for such filing, (b) any of such Registration Statements is not declared effective by the Commission on or prior to the date specified for such effectiveness (the "Effectiveness Target Date"), or (c) the Company fails to consummate the Exchange Offer within 30 business days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement, or (d) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (d) above a "Registration Default"), then the Company will pay "Liquidated Damages" to each Holder of Initial Notes, with respect to the first 90-day period immediately following the occurrence of the first Registration Default in an amount equal to $.05 per week per $1,000 principal amount of Initial Notes held by such Holder. The amount of the Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of Initial Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages for all Registration Defaults of $.30 per week per $1,000 principal amount of Notes. All accrued Liquidated Damages will be paid by the Company on each Damages Payment Date to the Global Note Holder by wire transfer of immediately available funds or by federal funds check and to Holders of Certificated Securities by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. Holders of Initial Notes will be required to make certain representations to the Company (as described in the Registration Rights Agreement) in order to participate in the Exchange Offer and will be required to deliver certain information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Notes included in the Shelf Registration Statement and benefit from the provisions regarding Liquidated Damages set forth above. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than a sale or lease of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "--Change of Control" and/or the provisions described above under the caption "--Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the issue or sale by the Company or any of its Subsidiaries of Equity Interests 73 of any of the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the following items shall not be deemed to be Asset Sales: (i) a transfer of assets (whether by sale, lease, conveyance, other disposition, merger, consolidation, division or otherwise) by the Company to a Wholly Owned Subsidiary (other than a Receivables Subsidiary) or a Guarantor by a Subsidiary to the Company or to a Wholly Owned Subsidiary (other than a Receivables Subsidiary) or a Guarantor, (ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary, (iii) a Restricted Payment that is permitted by the covenant described above under the caption "--Restricted Payments;" (iv) the sale to a Receivables Subsidiary of accounts receivables and related assets that are customarily transferred in an asset securitization transaction; and (v) the sale of up to $2.0 million of assets since the date of the Indenture. A transfer of assets by the Company or a Wholly-Owned Subsidiary (other than a Receivables Subsidiary) of the Company to a Person other than the Company or another Wholly Owned Subsidiary (other than a Receivables Subsidiary), shall be deemed an Asset Sale only to the extent of the percentage of the Equity Interests in the transferee that are owned by Persons other than the Company or Wholly Owned Subsidiaries (other than a Receivables Subsidiary) of the Company. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Borrowing Base" means, as of any date, an amount equal to the sum of (a) 85.0% of the face amount of all accounts receivable owned by the Company and the Guarantors as of such date that are not more than 90 days past due and (b) 50.0% of the book value of all inventory owned by the Company and the Guarantors as of such date, all calculated on a consolidated basis and in accordance with GAAP. To the extent that information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company may utilize the most recent available information for purposes of calculating the Borrowing Base. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any lender party to the New Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this definition. 74 "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a Principal, (ii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares), (iii) the consummation of the first transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) becomes the "beneficial owner" (as defined above), directly or indirectly, of more of the Voting Stock of the Company (measured by voting power rather than number of shares) than is at the time "beneficially owned" (as defined above) by the Principals and their Related Parties in the aggregate or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale or the disposition of securities held by such Person and its Subsidiaries (to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (v) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Subsidiary thereof that is a Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms 75 of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write- ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of the Indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of the Indenture 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 at the time of such nomination or election. "Credit Facilities" means, with respect to the Company, one or more debt facilities (including, without limitation, the New Credit Facility) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under the Indenture shall be deemed to have been incurred on such date in reliance on the exception provided by clause (i) the definition of Permitted Debt. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Designated Senior Debt" means (i) any Indebtedness outstanding under the New Credit Facility (ii) any other Senior Debt permitted under the Indenture the principal amount of which is $10.0 million or more and that has been designated by the Company as "Designated Senior Debt." "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption "--Certain Covenants--Restricted Payments." "Distribution" means the payment of amounts aggregating no more than $19.0 million to Capital Resources Lenders II and Exeter Venture Lenders in connection with the purchase of certain warrants of the Company, certain of which payments may occur as much as two years after the closing of the Offering. 76 "Domestic Subsidiary" means, with respect to the Company, any Subsidiary of the Company that was formed under the laws of the United States of America or that Guarantee or otherwise provides credit support for any Indebtedness of the Company. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the New Credit Facility) in existence on the date of the Indenture, until such amounts are repaid. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest of such Person and its Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Subsidiaries or secured by a Lien on assets of such Person or one of its Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the referent Person or any of its Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Subsidiaries following the Calculation Date. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of the Indenture. 77 "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantors" means each of (i) Blue Ridge Textile Manufacturing, Inc., Clean Towel Service, Inc., Ohio Garment Rental, Inc. and Midway--CTS Buffalo, Ltd., and (ii) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted amount thereof, in the case of any Indebtedness issued with original issue discount, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Restricted Payments." "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries and (ii) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). 78 "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non- cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness (other than under a Credit Facility) secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "New Credit Facility" means that certain Credit Facility, dated as of June 26, 1998, by and among the Company and NationsBank, N.A. and the other lenders party thereto, providing for up to $25.0 million of secured revolving credit borrowings and up to $30.0 million of secured term debt, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Permitted Business" means any business conducted by the Company or any of its Subsidiaries as of the date hereof and any business reasonably related or incidental thereto. "Permitted Investments" means (a) any Investment in the Company or in a Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Subsidiary of the Company and a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Subsidiary of the Company that is a Guarantor; (d) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "--Repurchase at the Option of Holders--Asset Sales;" (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) any Investment by the Company or a Subsidiary of the Company in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person or assets in connection with a Qualified Receivables Transaction; provided that any Investment in any such Person is in the form of a Purchase Money Note, an equity interest or interests in accounts receivables generated by the Company or a Subsidiary of the Company and transferred to any Person in connection with a Qualified Receivables Transaction or any such Person owning such accounts receivables; (g) repurchase of the Notes; (h) Investments by the Company and its Subsidiaries outstanding on the date of the Indenture; and (i) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (i) that are at the time outstanding, not to exceed $1.0 million. "Permitted Junior Securities" means Equity Interests in the Company or any Guarantor or debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Debt pursuant to Article 10 of the Indenture. "Permitted Liens" means (i) Liens existing on the date of the Indenture; (ii) Liens securing Senior Debt that was permitted to be incurred under the Indenture; (iii) Liens securing Permitted Refinancing Indebtedness that was incurred to refinance any Indebtedness that had been secured by a Lien permitted under the Indenture and that was incurred in accordance with the provisions of the Indenture, provided, however, that such Liens (a) are not materially less favorable to the Holders and are not materially more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being refinanced and (b) do not extend to or 79 cover any property or assets of the Company or any of its Subsidiaries not securing the Indebtedness so refinanced; (iv) Liens securing the Notes; (v) Liens securing Indebtedness of a Person existing at the time such Person becomes a Subsidiary, provided that such Liens were in existence prior to the contemplation of such acquisition, merger or consolidation, were not incurred in anticipation thereof, and do not extend to any other assets; (vi) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any time outstanding and that are not incurred in connection with the borrowing of money or obtaining advances or credit (other than trade credit incurred in the ordinary course of business); (vii) Liens imposed by governmental authorities for taxes, assessments or other charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or any of its Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (viii) statutory Liens of landlords, carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other like Liens arising by operation of law in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made in respect thereof; (ix) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or similar obligations, including any Lien securing letters of credit issued in the ordinary course of business in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) incurred in the ordinary course of business; (x) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (xi) easements, rights-of-way, zoning restrictions, minor defects or irregularities with title and other similar charges or encumbrances in respect of real property not materially detracting from the value of the property subject thereto and not interfering in any material respect with the ordinary conduct of business of the Company or any of its Subsidiaries; (xii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such person's obligations in respect of banker's acceptance issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business; (xiii) Liens in favor of the Company or a Guarantor; (xiv) leases or subleases granted to others not interfering in any material respects with the business of the Company or its Subsidiaries; (xv) Liens arising out of consignment or similar arrangements for the sale of goods entered into by the Company or any of its Subsidiaries in the ordinary course of business. "Permitted Payments" means payments to repurchase Equity Interests of the Company in order to satisfy certain estate planning obligations of the estate of J. Stanley Coyne, which payments will not exceed $1.0 million in each of the second, third, fourth, fifth and sixth calendar years following the death of J. Stanley Coyne and $2.25 million in each of the seventh, eighth, ninth and tenth calendar years following the death of J. Stanley Coyne, plus an additional amount of $2.0 million in the calendar year 2003; provided that no such payment shall be made prior to the death of J. Stanley Coyne; and provided further, that the maximum amount of Permitted Payments in a specified calendar year following the death of J. Stanley Coyne shall be increased by an amount equal to the difference between the maximum amount of Permitted Payments that could have been made by the Company in each of the prior specified calendar years following the death of J. Stanley Coyne and the actual amount of Permitted Payments made by the Company in each of such prior specified calendar years following the death of J. Stanley Coyne. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Subsidiaries (other than intercompany Indebtedness); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity 80 date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Principals" means J. Stanley Coyne and Thomas M. Coyne. "Purchase Money Note" means a promissory note evidencing a line of credit, which may be irrevocable, from, or evidencing other Indebtedness owed to, the Company or any Subsidiary of the Company in connection with a Qualified Receivables Transaction, which note shall be repaid from cash available to the maker of such note, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors and amounts paid in connection with the purchase of newly generated receivables. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Company or any Subsidiary of the Company pursuant to which the Company or any Subsidiary of the Company may sell, convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a transfer by the Company or any Subsidiary of the Company) and (b) any other Person (in the case of a transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivables (whether now existing or arising in the future) of the Company or any Subsidiary of the Company, and any assets related thereto including, without limitation, all collateral securing such accounts receivables, all contracts and all guarantees or other obligations in respect of such accounts receivables, proceeds of such accounts receivable and other assets that are customarily transferred, or in respect of which security interests are customarily granted, in connection with asset securitization transactions involving accounts receivable. "Receivables Subsidiary" means a Wholly Owned Subsidiary of the Company that engages in no activities other than in connection with the financing of accounts receivable and that is designated by the Board of Directors of the Company (as provided below) as a Receivables Subsidiary (a) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any other Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness)) pursuant to Standard Securitization Undertakings, (ii) is recourse to or obligates the Company or any other Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property or asset of the Company or any other Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (b) with which neither the Company nor any other Subsidiary of the Company has any material contract, agreement, arrangement or undertaking (except in connection with a Purchase Money Note or Qualified Receivables Transaction) other than on terms no less favorable to the Company or such other Subsidiary than those that might be obtained at the time from persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing accounts receivables, and (c) to which neither the Company nor any other Subsidiary of the Company has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers' Certificate certifying, to the best of such officer's knowledge and belief after consulting with counsel, that such designation complied with the foregoing conditions. "Related Party" with respect to any Principal means (i) any controlling stockholder, 80% (or more) owned Subsidiary, or spouse, ex-spouse, immediate family member or lineal descendant (in the case of an individual) 81 of such Principal or (ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of such Principal and/or such other Persons referred to in the immediately preceding clause (i). "Restricted Investment" means an Investment other than a Permitted Investment. "Senior Debt" means (i) all Indebtedness outstanding under Credit Facilities and all Hedging Obligations with respect thereto, (ii) any other Indebtedness permitted to be incurred by the Company under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or the Subsidiary Guarantees and (iii) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (w) any liability for federal, state, local or other taxes owed or owing by the Company, (x) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of the Indenture. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company that are reasonably customary in an accounts receivable transaction. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly Owned Subsidiary" of any Person means a Subsidiary (other than a Receivables Subsidiary) of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries (other than a Receivables Subsidiary) of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. 82 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury regulations, judicial authority and administrative rulings and practice. There can be no assurance that the Internal Revenue Service (the "Service") will not take a contrary view, and no ruling from the Service has been or will be sought. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conditions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences to holders. Certain holders (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. The Company recommends that each holder consult such holder's own tax advisor as to the particular tax consequences of exchanging such holder's Initial Notes for Exchange Notes, including the applicability and effect of any state, local or foreign tax laws. The exchange of the Initial Notes for Exchange Notes pursuant to the Exchange Offer will not be treated as an "exchange" for federal income tax purposes because the Exchange Notes should not be considered to differ materially in kind or extent from the Initial Notes. Rather, the Exchange Notes received by a holder will be treated as a continuation of the Initial Notes in the hands of such holder. As a result there will be no federal income tax consequences to holders exchanging Initial Notes for Exchange Notes pursuant to the Exchange Offer. If, however, the exchange of Initial Notes for Exchange Notes were treated as an "exchange" for federal income tax purposes, such exchange should constitute a recapitalization for federal income tax purposes. Holders exchanging Initial Notes for Exchange Notes pursuant to such recapitalization should not recognize any gain or loss upon the exchange. 83 PLAN OF DISTRIBUTION The Exchange Notes will be offered by the Company to the holders of the Initial Notes in exchange for the Initial Notes pursuant to the Exchange Offer. Except as described below, a broker-dealer may not participate in the Exchange Offer in connection with a distribution of the Exchange Notes. Each Participating Broker-Dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Notes were acquired as a result of market-making activities or other trading activities. Subject to the exception described in the next paragraph, the Company has agreed that for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective, and (ii) the date on which a Participating Broker-Dealer is no longer required to deliver a prospectus in connection with market making or other trading activities, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale; provided, however, that the Company and the Guarantors will have no obligation to amend or supplement this Prospectus unless the Company has received written notice from a Participating Broker- Dealer of their prospectus delivery requirements under the Securities Act within fifteen (15) business days following consummation of the Exchange Offer. In addition, until , 1998, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. The Company shall not be required to amend or supplement the Exchange Offer Registration Statement if (i) in the judgment of the Company's board of Directors exercised reasonably and in good faith the use of the Exchange Offer Registration Statement and the disclosure required to be made therein would materially interfere with a valid business purpose of the Company or the Guarantors and (ii) the Company delivers a notice to such effect to such Broker-Dealers setting forth the period of time (which shall not be greater than 60 days) for which the Company's obligation to so amend or supplement the Exchange Offer Registration Statement will be suspended. The Company will not receive any proceeds from any sales of the Exchange Notes by Participating Broker-Dealers. Exchange Notes received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over- the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker- Dealer and/or the purchasers of any such Exchange Notes. Any Participating Broker-Dealer that resells the Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Company has agreed to pay all expenses incident to the Exchange Offer other than commissions or concessions of any brokers or dealers and expenses of counsel for the holders of the Exchange Notes and will indemnify the holders of the Exchange Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 84 LEGAL MATTERS The validity of the issuance of the Exchange Notes offered by the Company hereby will be passed upon for the Company by Blank Rome Comisky & McCauley LLP, Philadelphia, Pennsylvania. INDEPENDENT AUDITORS The consolidated balance sheets as of October 31, 1997 and 1996, and the consolidated statements of operations and retained earnings and cash flows for each of the three years in the period ended October 31, 1997, included in this Prospectus and Exchange Offer Registration Statement, have been included herein in reliance on the report of PricewaterhouseCoopers, LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. 85 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES
PAGE ---- Independent Auditors' Report............................................. F-2 Consolidated Balance Sheets as of October 31, 1997 and 1996.............. F-3 Consolidated Statements of Operations and Retained Earnings for the years ended October 31, 1997, 1996 and 1995......................................... F-4 Consolidated Statements of Cash Flows for the years ended October 31, 1997, 1996 and 1995..................................................... F-5 Notes to Consolidated Financial Statements............................... F-6 Consolidated Balance Sheets as of April 30, 1998 (Unaudited) and as of October 31, 1997........................................................ F-15 Consolidated Statements of Operations and Retained Earnings (Deficit) for the six months ended April 30, 1998 and 1997 (Unaudited)............................... F-16 Consolidated Statements of Cash Flows for the six months ended April 30, 1998 and 1997 (Unaudited)............................................................. F-17 Notes to Consolidated Financial Statements (Unaudited)................... F-18
F-1 INDEPENDENT AUDITORS' REPORT Board of Directors Coyne International Enterprises Corp. We have audited the accompanying consolidated balance sheets of Coyne International Enterprises Corp. and Subsidiaries as of October 31, 1997 and 1996 and the related consolidated statements of operations and retained earnings, and cash flows for each of the three years in the period ended October 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Coyne International Enterprises Corp. and Subsidiaries as of October 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 31, 1997 in conformity with generally accepted accounting principles. PricewaterhouseCoopers LLP Syracuse, New York December 19, 1997 F-2 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
OCTOBER 31, ------------------------- 1997 1996 ------------ ----------- ASSETS Current assets: Cash and cash equivalents......................... $ 1,272,192 $ 348,134 Receivables, principally trade.................... 11,957,651 11,385,624 Inventories....................................... 5,131,861 4,744,426 Uniforms and other rental items in service, net... 23,559,751 20,751,447 Prepaid expense and other assets.................. 729,876 1,526,984 ------------ ----------- Total current assets.......................... 42,651,331 38,756,615 ------------ ----------- Property, plant and equipment, net.................. 41,799,938 43,051,847 Purchased routes and acquisition intangibles, net... 16,549,578 13,179,023 Deferred financing costs, net....................... 745,649 949,528 Deferred income tax................................. 500,000 1,160,545 Other assets........................................ 374,248 334,876 ------------ ----------- $102,620,744 $97,432,434 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt.............. $ 7,849,570 $ 6,470,035 Bank overdraft.................................... 1,700,982 Accounts payable.................................. 8,318,802 9,656,923 Accrued expenses: Salaries and employee benefits.................. 3,275,202 1,872,684 Other........................................... 6,122,105 6,468,807 Deferred income taxes............................. 8,615,000 7,681,000 ------------ ----------- Total current liabilities..................... 35,881,661 32,149,449 Long-term debt, net of current maturities........... 39,650,469 40,785,444 Subordinated debentures, net of original issue discount........................................... 11,057,144 10,795,669 Other liabilities................................... 4,391,322 4,113,302 ------------ ----------- Total liabilities............................. 90,980,596 87,843,864 ------------ ----------- Redeemable common stock warrants.................... 1,743,086 1,743,086 Shareholders' equity: Preferred stock--5% non-cumulative, non-voting, callable at par: Class A--$100 par value; authorized 30,000; issued and outstanding 23,107.................. 2,310,700 2,310,700 Class B--$500 par value; authorized 5,000; issued 4,991 and outstanding 2,991............. 2,495,500 2,495,500 Common stock--$.01 par value: Class A--voting; authorized 100,000; issued and outstanding 2,923.............................. 29 29 Class B--non-voting; authorized 99,000; issued and outstanding 74,030......................... 740 740 Additional paid-in capital........................ 849,512 849,512 Retained earnings................................. 5,663,768 3,612,190 ------------ ----------- 11,320,249 9,268,671 Less: Cost of 2,000 shares of Class B preferred stock held in treasury............................... (166,667) (166,667) Shareholder note receivable..................... (1,256,520) (1,256,520) ------------ ----------- Total shareholders' equity.................... 9,897,062 7,845,484 ------------ ----------- Commitments and contingencies $102,620,744 $97,432,434 ============ ===========
The accompanying notes are an integral part of the consolidated financial statements. F-3 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED OCTOBER 31, -------------------------------------- 1997 1996 1995 ------------ ------------ ------------ Revenue: Rental operations...................... $114,671,684 $111,090,673 $111,225,265 Direct sales........................... 8,263,079 7,994,194 6,542,956 ------------ ------------ ------------ 122,934,763 119,084,867 117,768,221 ------------ ------------ ------------ Operating expenses: Cost of rental operations.............. 86,985,898 87,721,417 88,789,230 Cost of direct sales................... 5,801,679 5,626,040 4,223,759 Selling, general and administrative.... 19,355,384 17,558,105 17,160,947 ------------ ------------ ------------ 112,142,961 110,905,562 110,173,936 ------------ ------------ ------------ Income from operations............... 10,791,802 8,179,305 7,594,285 Interest expense......................... 6,715,224 6,786,065 6,253,768 ------------ ------------ ------------ Income before income taxes........... 4,076,578 1,393,240 1,340,517 Income taxes............................. 2,025,000 847,000 890,000 ------------ ------------ ------------ NET INCOME........................... 2,051,578 546,240 450,517 Retained earnings, beginning of year..... 3,612,190 3,065,950 2,615,433 ------------ ------------ ------------ RETAINED EARNINGS, END OF YEAR....... $ 5,663,768 $ 3,612,190 $ 3,065,950 ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. F-4 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, ---------------------------------------- 1997 1996 1995 ------------ ------------ ------------ Cash flows from operating activities: Net income.......................... $ 2,051,578 $ 546,240 $ 450,517 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment......................... 4,147,655 3,688,268 3,377,967 Amortization expense............... 1,140,994 1,090,600 1,037,776 Provision for deferred income taxes............................. 1,595,000 402,000 315,000 Changes in operating assets and operating liabilities: Accounts receivable............... (271,471) 861,707 (766,598) Inventories....................... (252,128) 66,694 (2,618,312) Uniforms in service............... (2,808,304) (1,229,739) 2,163,299 Prepaid expenses and other assets........................... 778,894 825,572 (76,949) Accounts payable and other liabilities...................... (107,932) 1,309,126 (1,864,059) ------------ ------------ ------------ Net cash provided by operating activities...................... 6,274,286 7,560,468 2,018,641 ------------ ------------ ------------ Cash flows from investing activities: Purchases of property, plant and equipment.......................... (1,086,633) (3,938,734) (5,601,927) Acquisition of business, net of cash acquired........................... (1,122,101) ------------ ------------ ------------ Net cash used in investing activities...................... (2,208,734) (3,938,734) (5,601,927) ------------ ------------ ------------ Cash flows from financing activities: Proceeds from long-term borrowings.. 121,565,225 121,377,464 127,460,857 Payments under long-term debt obligations........................ (126,287,871) (125,293,673) (123,272,756) Increase in bank overdrafts......... 1,700,982 Deferred financing costs incurred... (119,830) (105,904) (534,565) ------------ ------------ ------------ Net cash (used in) provided by financing activities............ (3,141,494) (4,022,113) 3,653,536 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents............ 924,058 (400,379) 70,250 Cash and cash equivalents: Beginning of year................... 348,134 748,513 678,263 ------------ ------------ ------------ End of year...................... $ 1,272,192 $ 348,134 $ 748,513 ============ ============ ============ Supplemental disclosure of cash flow information: Interest paid....................... $ 6,204,883 $ 6,266,669 $ 5,615,797 Income taxes paid................... 514,144 446,873 796,746 Assets acquired under capital lease obligations........................ 1,497,313 5,883,197 3,189,977 Seller financed debt................ 3,469,893
The accompanying notes are an integral part of the consolidated financial statements. F-5 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Description The Company provides a highly specialized service to businesses of all types--from small service companies to major corporations that employ thousands of people. The Company designs and implements corporate identity uniform programs for its customers in connection with renting or selling its uniform services to customers and other accessories throughout the eastern United States. In addition, the Company manufactures shop towels which are sold throughout the United States. Principles of Consolidation and Revenue Recognition The consolidated financial statements include the accounts of Coyne International Enterprises Corp. and its wholly-owned Subsidiaries (the Company). All intercompany accounts have been eliminated. The Company recognizes rental revenues when the services are delivered to customers. The Company records direct sales upon shipment to the customer. Fiscal Year The Company uses a fifty-two/fifty-three week fiscal year ending on the last Saturday in October. Accordingly, the financial statements are for the 52 weeks ended October 25, 1997 and October 26, 1996 and October 28, 1995. For convenience, the dating of the accompanying financial statements, and notes herein, have been labeled as of and for the years ended October 31, 1997, 1996 and 1995 rather than the actual fiscal year end dates. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less, at date of purchase, to be cash equivalents. Inventories Inventories represent primarily new garments which are valued at the lower of average cost or market. Uniforms and Other Rental Items in Service Rental garments, mats and towels in service are carried at cost and amortized on a straight-line basis over their estimated income-producing lives, ranging principally from 10 to 60 months. Property, Plant and Equipment Property, plant and equipment items are recorded at cost with provision for depreciation by charges to operations on a straight-line basis over their estimated useful lives which range from fifteen to forty years for buildings and improvements, three to ten years for machinery and equipment and three to eight years for vehicles. F-6 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Maintenance and repairs are charged to expense when incurred. Construction in process consists primarily of capital expenditures for plant renovations and vehicle re-builds. The Company capitalizes interest during the period of major construction projects. Purchased Routes and Acquisition Intangibles The Company's acquisitions of rental operations and routes have generally been accounted for by using the purchase method. The purchase method allocates the amounts paid to the net assets acquired based on their respective fair values. The amounts paid in excess of fair value of the acquired net assets and goodwill acquired after October 31, 1970, is amortized on a straight-line basis over forty years. The Company assesses the recoverability of goodwill by determining whether the amortization of the goodwill balance over the remaining life can be recovered through undiscounted future operating cash flows and reviews for impairment whenever events or changes in circumstances (i.e. plant closure) indicate that the carrying amount of an asset may not be fully recoverable. Routes acquired before October 31, 1970 are carried at a cost of $764,310. These intangibles are also regularly evaluated and in the opinion of management have not diminished in value and accordingly have not been amortized. The Company has certain contracts with non-compete arrangements which are charged to operations on a straight-line basis over the periods of the respective agreements which range from 5 to 10 years. Deferred Financing Costs Deferred financing costs incurred in obtaining long-term debt are stated at cost less accumulated amortization. Amortization of deferred financing costs is provided using the effective interest write-off method over the term of the obligation and aggregated $324,000, $327,000 and $286,000 for the years ended October 31, 1997, 1996 and 1995. Other Liabilities The Company, under certain insurance programs, retains portions of expected losses primarily relating to workers' compensation and employees' medical insurance. A provision for claims under the self-insured program is recorded based upon the Company's estimate, after consultation with insurance advisors, of the aggregate liability for claims incurred. Advertising Costs The Company expenses advertising costs as incurred. Fair Value of Financial Instruments The carrying amount of cash, accounts receivable and trade accounts payable approximates fair value because of the short maturity of these instruments. The fair value of the Company's long-term debt approximated its carrying value at October 31, 1997, 1996 and 1995. Income Taxes The Company and its subsidiaries file a consolidated federal income tax return, and where permitted state tax returns. Provisions for deferred taxes are recognized based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. F-7 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Recent Accounting Pronouncements Financial Accounting Standards Board Statement No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income," issued in June 1997, and effective for fiscal years beginning after December 15, 1997, establishes standards for report and display of comprehensive income and its components in the financial statements. The adoption of SFAS No. 130 will have no impact on the Company's consolidated results of operations, financial position or cash flows. 2. ACQUISITIONS During 1997, the Company acquired certain assets of several industrial laundries which were accounted for as purchase transactions. The aggregate purchase price of $4,594,000 consisted of cash of $1,124,000 and notes payable of $3,470,000 at varying rates of interest and installment payments through January 2004. The purchase price was allocated to accounts receivable ($300,000) rental garments ($135,000), equipment ($312,000) covenants not to compete ($763,000), purchased routes ($3,166,000) and liabilities assumed of ($82,000). 3. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment includes:
1997 1996 ------------ ------------ Land............................................. $ 2,436,218 $ 2,520,658 Buildings and improvements....................... 37,770,291 37,298,632 Machinery and equipment.......................... 36,466,316 40,350,481 Vehicles......................................... 6,187,631 5,030,893 Construction in process.......................... 276,444 1,223,837 ------------ ------------ 83,136,900 86,424,501 Less accumulated depreciation.................... (41,336,962) (43,372,654) ------------ ------------ $ 41,799,938 $ 43,051,847 ============ ============
During 1996 approximately $97,000 of interest costs were capitalized. Amortization expense on capital leases was approximately $1,469,000, $856,000 and $553,000 in 1997, 1996 and 1995, respectively. 4. PURCHASED ROUTES AND ACQUISITION INTANGIBLES The following summarizes the individual components of purchased routes and acquisition intangibles at October 31:
1997 1996 ----------- ----------- Goodwill........................................... $ 764,310 $ 764,310 Purchased route.................................... 22,027,074 18,892,293 Covenants not to compete........................... 1,146,916 373,041 ----------- ----------- 23,938,300 20,029,644 Less: Accumulated amortization..................... (7,388,722) (6,850,621) ----------- ----------- $16,549,578 $13,179,023 =========== ===========
Amortization expense for purchased routes and acquisition intangibles aggregated $556,000, $510,000 and $593,000 for the years ended October 31, 1997, 1996 and 1995. F-8 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. LONG-TERM DEBT As of October 31, long-term debt consists of the following:
1997 1996 ----------- ----------- NationsBank, N.A. (Nations) revolver, interest payable monthly at the Bank's prime rate plus 1.0%.............................................. $13,477,683 $13,000,000 Term loan payable to Nations, with interest due monthly at the Bank's prime rate plus 1.25%. Principal payable in quarterly installments of $925,000 in fiscal year 1998 and $1,012,500 in 1999.............................................. 7,750,000 10,950,000 Term loan payable to Nations, with interest due monthly at the Bank's prime rate plus 1.5%. Principal payable upon the earlier of the expiration of the Revolving Credit Facility, or the scheduled quarterly installment due dates commencing January 1, 2000 and maturing in 2002... 10,000,000 10,000,000 Nations acquisition loan facility, interest payable monthly at the Bank's prime rate plus 1.75%....... 646,617 Capital lease obligations payable in monthly installments with interest, at rates ranging from 7.4% to 14.8%, payable through 2003, net book value of capital leases was approximately $10,344,000 and $6,431,000, respectively.......... 8,514,398 8,763,372 Industrial Development Revenue Bonds payable in monthly installments with interest, ranging from 72% of prime to prime, through 2005............... 3,289,961 3,562,726 Other debt obligations payable in monthly installments with interest, at rates ranging from 6% to 10.3%, payable through 2005................. 3,821,380 979,381 ----------- ----------- 47,500,039 47,255,479 Less current maturities............................ 7,849,570 6,470,035 ----------- ----------- $39,650,469 $40,785,444 =========== =========== Senior subordinated notes payable to Capital Resource Lenders II (Capital) and Exeter Venture Lenders (Exeter), net of unamortized debt discount of $942,856 and $1,204,331 at October 31, 1997 and 1996. Annual interest at 12%, due quarterly. Principal payable in quarterly installments commencing September 30, 1999 through maturity September 30, 2002................................ $11,057,144 $10,795,669 =========== ===========
The prime rate at October 31, 1997 and 1996 was 8.5% and 8.25%, respectively. Nations The term loans and revolving debt payable to Nations are provided for in the Financing and Security Agreement (the Nations agreement). The revolving credit under this facility is available through October 1, 1999, with one year extensions available at the discretion of Nations and is computed based on eligible accounts receivable and inventory, as defined, not to exceed $16,000,000 (1996 base was $13,000,000). The terms of the Nations agreement include various covenants, which provide, among other things, for the maintenance of certain minimum levels of net worth and cash flow, limitations on the debt leverage of the Company, and limitations on capital expenditures. F-9 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Collateral pledged under the Nations agreement includes all inventory, accounts receivable, equipment, customer lists, and real property. As permitted under the agreement, certain equipment and real property is subject to first security interests in favor of other lenders. The Nations agreement provides for an Acquisition Loan Facility of up to $6,000,000. Borrowings under this facility totalled $647,000 at October 31, 1997. There were no borrowings under the facility at October 31, 1996. In addition, the Nations agreement includes a material adverse change clause which permits the financial institution to call its debt in the event of a material adverse change in the business. Management does not anticipate any such adverse changes in the next twelve-months, however there can be no assurances. Capital and Exeter The senior subordinated notes to Capital and Exeter are provided for in the Senior Subordinated Note and Warrant Purchase Agreement (the Capital agreement). The notes are unsecured and may be redeemed in advance of the scheduled maturity at the option of the Company at par value. Under the terms of the Capital agreement, mandatory prepayment in full would be required if certain events of liquidity or public sales of Company stock occurred, as defined in the agreement. In connection with the Capital agreement, common stock warrants were issued to Capital and Exeter to purchase up to 642 shares of the Company's Class A common stock and up to 16,250 shares of the Company's Class B common stock at $.01 per share (see Note 7). The estimated fair value of the warrants, at the date of issuance of $1,743,000, has been recorded as debt discount and is being amortized over the life of the notes. Amortization expense was approximately $261,000 in 1997, 1996 and 1995. The terms of the Capital agreement include various covenants, which provide, among other things, for the maintenance of certain minimum levels of net worth and cash flow, limitations on dividend payments, the debt leverage of the Company, and limitations on capital expenditures. Industrial Development Revenue Financing The Company's corporate headquarters, its Buffalo, New York plant and its Blue Ridge, Georgia plant were financed under separate long-term lease arrangements with the Industrial Development Agencies of the local counties. The leases have been accounted for as capital leases. Accordingly, the related assets are included in the consolidated balance sheet of the Company. Similarly, an amount equivalent to the principal amount of the Agency's revenue bonds outstanding related to those properties is included as a liability. While the bonds are not a debt of the Company, the long-term lease obligates the Company to payments equal to interest and amortization of such bonds and provides for the ultimate reversion of the properties to the Company at the end of the bond agreement. At October 31, 1997, payments due on all long-term debt arrangements for each of the next five years and thereafter are as follows:
SENIOR CAPITAL SUBORDINATED LONG-TERM LEASE NOTES DEBT OBLIGATIONS ------------ ------------ ----------- 1998................................ $ 4,930,356 $ 2,919,214 1999................................ $ 1,200,000 19,085,051 2,617,286 2000................................ 2,400,000 6,744,588 1,774,763 2001................................ 3,600,000 4,746,610 892,529 2002................................ 4,800,000 642,041 168,435 Thereafter.......................... 2,836,995 142,171 ------------ ------------ ----------- 12,000,000 38,985,641 8,514,398 Less: Unamortized original issue discount........................... (942,856) ------------ ------------ ----------- $ 11,057,144 $ 38,985,641 $ 8,514,398 ============ ============ ===========
F-10 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 6. INCOME TAXES The components of income tax expense for the years ended October 31, were as follows:
1997 1996 1995 ----------- --------- --------- Current tax expense: Federal.................................... $ 245,000 $ 315,000 $ 400,000 State...................................... 185,000 130,000 175,000 ----------- --------- --------- 430,000 445,000 575,000 Deferred tax expense......................... 1,595,000 402,000 315,000 ----------- --------- --------- Income tax expense......................... $ 2,025,000 $ 847,000 $ 890,000 =========== ========= =========
A reconciliation of the federal statutory income tax rate and the Company's effective income tax rate is as follows:
1997 1996 1995 ---- ---- ---- Statutory tax rate......................................... 34.0% 34.0% 34.0% State taxes, net of federal benefit........................ 7.3 10.4 10.5 Non-deductible items....................................... 6.2 16.4 21.9 Other...................................................... 2.2 ---- ---- ---- Effective rate........................................... 49.7% 60.8% 66.4% ==== ==== ====
The tax effects of temporary differences that give rise to deferred tax assets (liabilities) at October 31, were as follows:
1997 1996 ------------ ------------ Current: Rental garments in service.................... $ (9,192,000) $ (8,041,901) Inventory..................................... 119,000 93,031 Accrued expenses.............................. 458,000 267,870 ------------ ------------ Current deferred tax liability.............. (8,615,000) (7,681,000) ------------ ------------ Non-current: Fixed assets.................................. (3,032,000) (2,594,097) Deferred compensation......................... 524,000 508,834 Other liabilities............................. 1,170,000 1,046,699 Alternative minimum tax credit carryforward... 1,838,000 1,681,910 Net operating loss carryforward............... 433,186 Investment tax credit carryforward............ 84,013 ------------ ------------ Non-current deferred tax asset.............. 500,000 1,160,545 ------------ ------------ Net deferred tax liability.................. $ (8,115,000) $ (6,520,455) ============ ============
At October 31, 1997, the Company has alternative minimum tax credit carryforwards, which are available indefinitely, of $1,838,000 available to offset future regular federal income tax. F-11 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7. SHAREHOLDERS' EQUITY Upon the happening of certain events, each Class B common share then issued and outstanding shall automatically be converted into one Class A common share. These events are as follows: (a) a disposition of substantially all the assets of the corporation, (b) transactions in the common stock resulting in Coyne family ownership being less than 51%, or (c) a public offering of the Company's common shares. In connection with the issuance of Senior Subordinated Notes, the noteholders received warrants to purchase shares of the Company's common stock (see Note 5). The warrants contain a put option feature whereby the holder has the right to sell to the Company all of the warrants, at fair market value, as defined, in equal installments in each of the years ended September 30, 2000 and 2001. Correspondingly, the Company has the right during the year ended September 30, 2002 to repurchase all of the warrants and or warrant shares at fair market value, as defined. The Company has not recorded any adjustment to the established warrant amount as of October 31, 1997 or 1996 as management is unable to reasonably estimate its future value, if any. Additionally, the warrants contain antidilution provisions and expire upon the later of the date of full repayment of the notes, or September 30, 2002. 8. SHAREHOLDER NOTE RECEIVABLE The Company has an outstanding note receivable from its principal shareholder in the amount of $1,256,250. This note bears interest at the Applicable Federal Rate as defined by the Internal Revenue Service, 6.4% October 31, 1997. Interest income on the note was not recognized in fiscal 1997. The total amount due as of October 31, 1997 approximates $1,336,000. 9. COMMITMENTS AND CONTINGENCIES The Company and its operations are subject to various federal, state and local regulations relating to environmental matters, including laws which require the investigation and, in some cases, remediation of environmental contamination. The Company's policy is to accrue and charge to operations environmental investigation and remediation expenses when it is probable that a liability has been incurred and an amount is reasonably estimable. Certain claims have been filed or are pending against the Company arising from the conduct of its business. In the opinion of management, all matters are without merit and the Company intends to defend such claims vigorously. Based on information currently available, management believes that the outcome of any such claims will not have a material adverse effect on its business, financial condition or results of operations. 10. OPERATING LEASES The Company has noncancellable operating lease commitments for certain operating facilities, transportation, manufacturing and office equipment, which expire at various dates through 2004. Rent expense under operating leases approximated $2,476,000, $2,649,000 and $3,933,000 during 1997, 1996 and 1995, respectively. Minimum annual rental commitments at October 31, 1997 are as follows: 1998............................................................ $ 1,813,000 1999............................................................ 709,000 2000............................................................ 198,000 2001............................................................ 109,000 2002............................................................ 88,000 Thereafter...................................................... 48,000 ----------- Total minimum lease payments.................................. $ 2,965,000 ===========
F-12 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 11. PENSION PLANS All full-time nonunion and certain union employees are eligible to participate in one of three 401(k) plans after one year of service. The Company matches a portion of the employees' salary reduction contributions and contributes a base contribution of no less than 3% of eligible participant compensation. The Company contributions under the 401(k) plan, which vest over a seven-year employment period, were approximately $680,000, $686,000 and $482,000 in 1997, 1996 and 1995, respectively. Certain employees of the Company are covered by union sponsored, collectively bargained, multi-employer pension plans (Union Plans). The Company charged to expense $1,150,000, $1,182,000 and $1,169,000 in 1997, 1996 and 1995, for such plans. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked. The Company may be liable for its share of unfunded vested benefits, if any, related to the Union Plans. Information from the Union Plans' administrators is not available to permit the Company to determine its share, if any, of unfunded vested benefits. The Company maintains a defined benefit plan for certain employees at one of its plants. The most recent valuation stated an accumulated plan benefit obligation of approximately $490,000 and plan assets with a fair market value of approximately $763,000. The Company has unfunded deferred compensation agreements with three individuals. The cost of the plans is being, or has been previously, charged to income during service periods. 12. RELATED PARTY TRANSACTIONS The Company has guaranteed the obligations of J. Stanley Coyne, a principal shareholder of the Company, under a promissory note payable in 2003. At October 31, 1997, the outstanding balance, including unpaid accrued interest, approximates $1,711,000. At the Company's discretion, the Company has made salary continuation payments totaling $100,000 per year to each of J. Stanley Coyne, a principal shareholder of the Company, and Gerald Coyne, a son of J. Stanley Coyne, including payments of such amounts in each of the last three fiscal years. In addition, the Company has paid certain medical and personal expenses of J. Stanley Coyne aggregating $73,979, $44,088, and $93,451 during the fiscal years ended October 31, 1995, 1996, and 1997, respectively. The Company acquired certain residential property in central New York in 1995 at a cost of $320,000. Thomas M. Coyne, Chairman of the Board and President of the Company, paid the down payment of $75,000 and the Company assumed a mortgage of $245,000 payable at $2,900 per month for ten years. The mortgage bears interest at 7.5%. The Company made mortgage payments of $0, $15,928, and $18,317 during the fiscal years ended October 31, 1995, 1996, and 1997, respectively. Thomas M. Coyne has an option to acquire this property any time for the unpaid balance of the mortgage, but in no event less than $100,000. F-13 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
APRIL 30, OCTOBER 31, 1998 1997 ------------ ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents........................ $ 570,298 $ 1,272,192 Receivables, principally trade................... 13,372,682 11,957,651 Inventories...................................... 6,452,940 5,131,861 Uniforms and other rental items in service, net.. 27,309,696 23,559,751 Prepaid expense and other assets................. 426,175 729,876 ------------ ------------ Total current assets......................... 48,131,791 42,651,331 ------------ ------------ Property, plant and equipment, net................. 42,643,191 41,799,938 Purchased routes and acquisition intangibles, net.. 16,772,377 16,549,578 Deferred financing costs, net...................... 669,625 745,649 Deferred income tax................................ 1,525,000 500,000 Other assets....................................... 374,255 374,248 ------------ ------------ $110,116,239 $102,620,744 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt............. $ 8,799,090 $ 7,849,570 Bank overdraft................................... 1,626,053 1,700,982 Accounts payable................................. 12,233,596 8,318,802 Accrued expenses: Salaries and employee benefits.................. 3,992,235 3,275,202 Other........................................... 6,203,651 6,122,105 Deferred income taxes............................ 9,850,000 8,615,000 ------------ ------------ Total current liabilities.................... 42,704,625 35,881,661 Long-term debt, net of current maturities.......... 38,828,719 39,650,469 Subordinated debentures, net of original issue discount.......................................... 11,187,882 11,057,144 Other liabilities.................................. 4,408,627 4,391,322 ------------ ------------ Total liabilities............................ 97,129,853 90,980,596 ------------ ------------ Redeemable common stock warrants................... 19,000,000 1,743,086 ------------ ------------ Shareholders' equity: Preferred stock--5% non-cumulative, non-voting, callable at par: Class A--$100 par value; authorized 30,000; issued and outstanding 23,107................. 2,310,700 2,310,700 Class B--$500 par value; authorized 5,000; issued 4,991; outstanding 2,991............... 2,495,500 2,495,500 Common stock--$.01 par value: Class A--voting; authorized 100,000 shares, issued and outstanding 2,923.................. 29 29 Class B--non-voting; authorized 99,000; issued and outstanding 74,030................. 740 740 Additional paid-in capital....................... 849,512 849,512 Retained earnings (deficit)...................... (10,246,908) 5,663,768 ------------ ------------ (4,590,427) 11,320,249 Less: Cost of 2,000 shares of Class B preferred stock held in treasury.............................. (166,667) (166,667) Shareholder note receivable.................... (1,256,520) (1,256,520) ------------ ------------ Total shareholders' equity (deficit)......... (6,013,614) 9,897,062 ------------ ------------ Commitments and contingencies $110,116,239 $102,620,744 ============ ============
See notes to consolidated financial statements. F-14 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
SIX MONTHS ENDED APRIL 30, ------------------------- 1998 1997 ------------ ----------- (UNAUDITED) Revenue: Rental operations.................................. $ 62,015,866 $57,038,173 Direct sales....................................... 5,012,343 3,921,123 ------------ ----------- 67,028,209 60,959,296 ------------ ----------- Operating expenses: Cost of rental operations.......................... 47,110,518 43,480,496 Cost of direct sales............................... 3,742,506 2,742,163 Selling, general and administrative................ 11,196,340 9,665,089 ------------ ----------- 62,049,364 55,887,748 ------------ ----------- Income from operations........................... 4,978,845 5,071,548 ------------ ----------- Interest expense including redemption of common stock warrants in 1998 of $17,256,914..................... 20,652,521 3,409,093 ------------ ----------- (Loss) income before income taxes................ (15,673,676) 1,662,455 Income taxes......................................... 237,000 826,240 ------------ ----------- NET (LOSS) INCOME ............................... (15,910,676) 836,215 Retained earnings, beginning of the year............. 5,663,768 3,612,190 ------------ ----------- RETAINED EARNINGS (DEFICIT), END OF PERIOD....... $(10,246,908) $ 4,448,405 ============ ===========
See notes to consolidated financial statements. F-15 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, ------------------------- 1998 1997 ------------ ----------- (UNAUDITED) Cash flows from operating activities: Net (loss) income.................................. $(15,910,676) $ 836,198 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation of plant and equipment.............. 2,107,360 2,050,425 Amortization expense............................. 647,836 545,417 Provision for deferred income taxes.............. 210,000 412,604 Redemption of stock warrants..................... 17,256,914 Changes in operating assets and operating liabilities: Accounts receivable............................. (1,415,031) 117,844 Inventories..................................... (1,321,079) (406,215) Uniforms in service............................. (3,749,945) (169,069) Prepaid expenses and other assets............... 303,694 655,880 Accounts payable and other liabilities.......... 4,730,686 (888,739) ------------ ----------- Net cash provided by operating activities....... 2,859,759 3,154,345 ------------ ----------- Cash flows from investing activities: Purchases of property, plant and equipment......... (2,950,622) (676,588) Acquisition of business, net of cash acquired...... (582,975) (6,463) ------------ ----------- Net cash used in investing activities........... (3,533,597) (683,051) ------------ ----------- Cash flows from financing activities: Proceeds from long-term borrowings................. 75,409,917 58,955,037 Decrease in bank overdrafts........................ (74,929) -- Payments under long-term debt obligations.......... (75,282,146) (60,971,871) Deferred financing costs incurred.................. (80,898) (55,000) ------------ ----------- Net cash used in financing activities........... (28,056) (2,071,834) ------------ ----------- Net increase (decrease) in cash................. (701,894) 399,460 Cash and cash equivalents: Beginning of year.................................. 1,272,192 348,134 ------------ ----------- End of period...................................... $ 570,298 $ 747,594 ============ ===========
F-16 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended April 30, 1998 are not necessarily indicative of the results that may be expected for the year ended October 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto contained herein. NOTE B--REDEMPTION OF STOCK WARRANTS In May 1998 the Company entered into an agreement with its senior subordinated noteholders to redeem the outstanding common stock warrants for $19,000,000 comprised of $6,000,000 for the warrants, $11,000,000 for an early termination fee and $2,000,000 for a management fee. The excess of this settlement over the book value of the stock warrants has been reported as a charge of $17,256,000 in the accompanying financial statements. NOTE C--INCOME TAXES The Company's effective tax rate differs from the statutory rate of 34% due to non deductible costs associated with the redemption of the common stock warrants described in Note B and other non deductible costs. NOTE D--LONG TERM OBLIGATIONS The agreement to redeem the outstanding common stock warrants, and the resulting charge, constituted an event of default under the Company's bank credit facility and its subordinated notes. On May 29, 1998 the banks and the subordinated noteholders amended their agreements or waived this default, as well as certain other covenant violations. NOTE E--SUBSEQUENT EVENT On June 26, 1998, pursuant to a purchase agreement dated June 23, 1998, the Company sold, at par, $75,000,000 of 11 1/4% Senior Subordinated Notes due 2008 ("Notes").The proceeds of the Notes were used primarily to retire certain existing debt obligations, redeem outstanding redeemable common stock warrants, and for general corporate purposes. As a result of the transactions, the Company recognized an extraordinary charge of approximately $780,000, net of a $520,000 tax benefit, for write-off of deferred financing and unamortized issue discounts pertaining to the retired debt. F-17 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR- MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO- SPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDIC- TION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SO- LICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CON- TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. --------------- TABLE OF CONTENTS
PAGE ---- Available Information.................................................... i Summary.................................................................. 1 Risk Factors............................................................. 14 Use of Proceeds.......................................................... 20 Capitalization........................................................... 21 Selected Financial and Operating Data.................................... 22 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 23 Business................................................................. 28 Management............................................................... 37 Certain Relationships and Related Transactions........................... 40 Principal Shareholders................................................... 42 Description of Other Indebtedness........................................ 44 Exchange Offer........................................................... 46 Description of Notes..................................................... 55 Certain Federal Income Tax Considerations ............................... 83 Plan of Distribution..................................................... 84 Legal Matters............................................................ 85 Independent Auditors..................................................... 85 Index to Consolidated Financial Statements............................... F-1
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OFFER TO EXCHANGE ITS 11 1/4% SENIOR B SENIOR SUBORDINATED NOTES DUE 2008 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008 --------------- PROSPECTUS --------------- [ ], 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LOGO PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company and Midway-CTS Buffalo Ltd. are both incorporated under the laws of the State of New York. Section 723 of the New York Business Corporation Law contains provisions entitling directors and officers of New York corporations to indemnification from judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, as the result of an action or proceeding in which they may be included by reason of being or having been a director or officer of a New York corporation, provided said officers or directors acted in good faith. The Company also maintains directors' and officers' liability insurance covering certain liabilities that may be incurred by directors and officers of the Company in the performance of their duties. Clean Towel Service, Inc. and Blue Ridge Textile Manufacturing, Inc. are both incorporated under the laws of the State of Georgia. The Bylaws of Clean Towel Service, Inc., a copy of which are filed as Exhibit 3.6, provide for mandatory indemnification of directors, officers and other persons in certain circumstances. Generally, the Georgia Business Corporation Code provides that a corporation may indemnify an individual who is a party to a proceeding because he or she is or was a director against liability incurred in the proceeding if: (1) such individual conducted himself or herself in good faith; and (2) such individual reasonably believed: (A) in the case of conduct in his or her official capacity, that such conduct was at least not opposed to the best interests of the corporation; (B) in all other cases, that such conduct was at least not opposed to the best interests of the corporation; and (C) in the case of any criminal proceeding, that the individual had no reasonable cause to believe such conduct was unlawful. Similar indemnification is available for officers of the corporation. Ohio Garment Rental Inc. is incorporated under the laws of the State of Ohio. The Bylaws of Ohio Garment Rental, Inc., a copy of which are filed as Exhibit 3.8, provide for the mandatory indemnification of directors, officers and other persons in certain circumstances. Generally, under the Ohio General Corporation Law, a corporation may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, other than an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, member, manager, or agent of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, against expenses, including attorneys' fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding, if he acted in good faith and in manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, if he has no reasonable cause to believe his conduct was unlawful. In addition, a corporation may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgement in its favor, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, member, manager, or agent of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, against expenses, including attorney's fees, actually and reasonable incurred by him in connection with the defense or settlement of such action or suit, if he acted in good faith and in a manner he reasonable believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of certain circumstances. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits 3.1 Amended and Restated Articles of Incorporation of the Company 3.2 Amended and Restated Bylaws of the Company 3.3 Articles of Incorporation of Blue Ridge Textile Manufacturing, Inc. 3.4 Bylaws of Blue Ridge Textile Manufacturing, Inc. 3.5 Articles of Incorporation of Clean Towel Service, Inc. 3.6 Bylaws of Clean Towel Service, Inc. 3.7 Articles of Incorporation of Ohio Garment Rental, Inc. II-1 3.8 Bylaws of Ohio Garment Rental, Inc. 3.9 Certificate of Incorporation of Midway-CTS Buffalo, Ltd. 3.10 Bylaws of Midway-CTS Buffalo, Ltd. 4.1 Indenture, dated as of June 26, 1998, by and among the Company, Blue Ridge Textile Manufacturing, Clean Towel Service, Inc., Ohio Garment Rental, Inc. and Midway-CTS Buffalo, Ltd., as guarantors and IBJ Schroder Bank & Trust Company, as trustee 4.2 Form of 11 1/4% Senior Subordinated Note due 2008 5.1 Opinion of Blank Rome Comisky & McCauley LLP 10.1 Amended and Restated Financing Agreement, dated as of June 26, 1998, between the Company, Blue Ridge Textile Manufacturing, Inc., Clean Towel Service, Inc., Midway-CTS Buffalo, Ltd., Ohio Garment Rental, Inc., (collectively, the "Borrowers") and NationsBank, N.A. (the "Lender") 10.2 Revolving Credit Note, dated as of June 26, 1998, between the Borrowers and the Lender. 10.3 Capital Expenditure Note, dated as of June 26, 1998, between the Borrowers and the Lender. 10.4 Acquisition Loan Note, dated as of June 26, 1998, between the Borrowers and the Lender. 10.5 Lease Purchase Agreement, dated as of December 1, 1994, between the Erie County Industrial Development Agency and Midway-CTS Buffalo, Ltd. 10.6 Form of the $2,600,000 Industrial Development Revenue Bond issued by the Erie County Industrial Development Agency. 10.7 Lessee Guaranty Agreement, dated as of December 1, 1994 between Midway-CTS Buffalo, Ltd. and Key Bank of New York. 10.8 Purchase Agreement, dated as of June 23,1998, by and among the Company, Blue Ridge Textile Manufacturing, Inc., Clean Towel Service, Inc., Midway-CTS Buffalo, Ltd., Ohio Garment Rental, Inc., NationsBank Montgomery Securities LLC and First Union Capital Markets, a division of Wheat First Securities, Inc. II-2 10.9 Registration Rights Agreement , dated as of June 26,1998, by and among the Company, Blue Ridge Textile Manufacturing, Inc., Clean Towel Service, Inc., Ohio Garment Rental, Inc., Midway-CTS Buffalo, Inc., NationsBank Montgomery Securities LLC and First Union Capital Markets, a division of Wheat First Securities, Inc. 10.10 Promissory Note dated September 27, 1994 from J. Stanley Coyne payable to the Company and related Mortgage Deed 10.11 Indemnification Agreement of J. Stanley Coyne and Guaranty by the Company. 12.1 Statement of Computation of Ratio of Earnings to Fixed Charges 21.1 Subsidiaries of the Company 23.1 Consent of PricewaterhouseCoopers LLP 23.2 Consent of Blank Rome Comisky & McCauley LLP (See Exhibit 5.1) 24.1 Power of attorney (included on signature page) *25.1 Statement of Eligibility of Trustee on Form T-1 27.1 Financial Data Schedule 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Tender Instructions (b) Financial Statement Schedules Schedule VIII - Valuation and Qualifying Accounts and Reserves. - ---------------- * To be filed by amendment ITEM 22. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; II-3 (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement: (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally promptly means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrant hereby undertakes to supply by means of a post- effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Syracuse, New York on July 28, 1998. COYNE INTERNATIONAL ENTERPRISES CORP. By: /s/ ----------------------------------------------- Thomas M. Coyne Chairman of the Board, President and Chief Executive Officer Each person whose signature appears below hereby authorizes Thomas M. Coyne or Donald F. X. Keegan to file one or more Amendments, including Post-Effective Amendments, to this Registration Statement, which Amendments may make such changes as Thomas M. Coyne or Donald F. X. Keegan deem appropriate, and each person whose signature appears below, individually and in each capacity stated below hereby appoints Thomas M. Coyne or Donald F. X. Keegan as attorney-in- fact to execute in his name and on his behalf any such Amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE Capacity Date - ------------------------------------- ------------------------------ -------------------------------- /s/ - ---------------------------- Thomas M. Coyne Chairman of the Board, July 28, 1998 President and Chief Executive Officer (Principal Executive Officer) /s/ - ---------------------------- Donald F. X. Keegan Vice President, Chief Financial Officer and July 28, 1998 Treasurer (Principal Financial and Accounting Officer) /s/ - ---------------------------- Thomas C. Crowley Director July 28, 1998 - ---------------------------- James W. Maher Director July , 1998 /s/ - ---------------------------- William D. Matthews Director July 28, 1998 /s/ - ---------------------------- Wallace J. McDonald Director July 28, 1998 /s/ - ---------------------------- David P. O'Hara Director and Assistant July 28, 1998 Secretary /s/ - ---------------------------- Raymond T. Ryan Director July 28, 1998 /s/ - ---------------------------- J. Patrick Barrett Director July 28, 1998
II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Syracuse, New York on July 28, 1998. BLUE RIDGE TEXTILE MANUFACTURING, INC. By: /s/ ---------------------------------------- Thomas M. Coyne President Each person whose signature appears below hereby authorizes Thomas M. Coyne or Donald F. X. Keegan to file one or more Amendments, including Post-Effective Amendments, to this Registration Statement, which Amendments may make such changes as Thomas M. Coyne or Donald F. X. Keegan deem appropriate, and each person whose signature appears below, individually and in each capacity stated below hereby appoints Thomas M. Coyne or Donald F. X. Keegan as attorney-in- fact to execute in his name and on his behalf any such Amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE Capacity Date - ------------------------------------------------------------------------------------------------- /s/ - ------------------------------ Thomas M. Coyne President and Director July 28, 1998 (Principal Executive Officer) /s/ - ------------------------------ Donald F. X. Keegan Vice President (Principal July 28, 1998 Financial and Accounting Officer) /s/ - ------------------------------ David P. O'Hara Director and Assistant July 28, 1998 Secretary /s/ - ------------------------------ Raymond T. Ryan Director July 28, 1998
II-6 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Syracuse, New York on July 28, 1998. CLEAN TOWEL SERVICE, INC. By: /s/ ----------------------------------- Thomas M. Coyne President Each person whose signature appears below hereby authorizes Thomas M. Coyne or Donald F. X. Keegan to file one or more Amendments, including Post-Effective Amendments, to this Registration Statement, which Amendments may make such changes as Thomas M. Coyne or Donald F. X. Keegan deem appropriate, and each person whose signature appears below, individually and in each capacity stated below hereby appoints Thomas M. Coyne or Donald F. X. Keegan as attorney-in- fact to execute in his name and on his behalf any such Amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE Capacity Date - ------------------------------------------------------------------------------------------------- /s/ - ----------------------------------- Thomas M. Coyne President and Director July 28, 1998 (Principal Executive Officer) /s/ - ----------------------------------- Donald F. X. Keegan Vice President (Principal July 28, 1998 Financial and Accounting Officer) /s/ - ----------------------------------- David P. O'Hara Director and Assistant July 28, 1998 Secretary /s/ - ----------------------------------- Raymond T. Ryan Director July 28, 1998
II-7 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Syracuse, New York on July 28, 1998. OHIO GARMENT RENTAL, INC. By: /s/ ----------------------------------- Thomas M. Coyne President Each person whose signature appears below hereby authorizes Thomas M. Coyne or Donald F. X. Keegan to file one or more Amendments, including Post-Effective Amendments, to this Registration Statement, which Amendments may make such changes as Thomas M. Coyne or Donald F. X. Keegan deem appropriate, and each person whose signature appears below, individually and in each capacity stated below hereby appoints Thomas M. Coyne or Donald F. X. Keegan as attorney-in- fact to execute in his name and on his behalf any such Amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE Capacity Date - ------------------------------------------------------------------------------------------------- /s/ - ----------------------------------- Thomas M. Coyne President and Director July 28, 1998 (Principal Executive Officer) /s/ - ----------------------------------- Donald F. X. Keegan Vice President (Principal July 28, 1998 Financial and Accounting Officer) /s/ - ----------------------------------- David P. O'Hara Director and Assistant July 28, 1998 Secretary /s/ - ----------------------------------- Raymond T. Ryan Director July 28, 1998
II-8 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Syracuse, New York on July 28, 1998. MIDWAY-CTS BUFFALO, LTD. By: /s/ ----------------------------------- Thomas M. Coyne President Each person whose signature appears below hereby authorizes Thomas M. Coyne or Donald F. X. Keegan to file one or more Amendments, including Post-Effective Amendments, to this Registration Statement, which Amendments may make such changes as Thomas M. Coyne or Donald F. X. Keegan deem appropriate, and each person whose signature appears below, individually and in each capacity stated below hereby appoints Thomas M. Coyne or Donald F. X. Keegan as attorney-in- fact to execute in his name and on his behalf any such Amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE Capacity Date - ------------------------------------------------------------------------------------------------- /s/ - ---------------------------------- Thomas M. Coyne President and Director July 28, 1998 (Principal Executive Officer) /s/ - ---------------------------------- Donald F. X. Keegan Vice President (Principal July 28, 1998 Financial and Accounting Officer) /s/ - ---------------------------------- David P. O'Hara Director and Assistant July 28, 1998 Secretary /s/ - ---------------------------------- Raymond T. Ryan Director July 28, 1998
II-9 EX-3.1 2 RESTATED CERTIFICATE OF INCORPORATION RESTATED CERTIFICATE OF INCORPORATION OF COYNE INTERNATIONAL ENTERPRISES CORP. PURSUANT TO SECTION 807 OF THE NEW YORK BUSINESS CORPORATION LAW The undersigned, being the President and Secretary of Coyne International Enterprises Corp., hereby certify as follows: 1. The name of the corporation is Coyne International Enterprises Corp. 2. The date its Certificate of Incorporation was filed by the Department of State is June 23, 1961. 3. The Certificate of Incorporation as now in full force and effect is hereby amended to effect the following changes: (a) Article 2 is hereby amended to read as follows: "2. The purpose for which this corporation is formed is to engage in any lawful act or activity for which corporations may be formed under the Business Corporation Law." (b) Articles 7 and 8 relating to original directors and incorporators of the corporation are hereby deleted. (c) Article 9 relating to contracts between the corporation and other firms or corporations is renumbered as Article 7. (d) Article 10 relating to purchase of capital stock is renumbered as Article 8. (e) Article 11 relating to By-laws of the corporation is renumbered as Article 9. (f) Article 12 relating to service of process is renumbered as Article 11 and is amended to read as follows: "11. The address to which the Secretary of State shall mail a copy of any process against the corporation which may be served upon him is c/o O'Hara, Hanlon, Knych & Pobedinsky, LLP, One Park Place, Syracuse,New York 13202." (g) Article 13 relating to the designation of the Secretary of State as agent for sevice of process is renumbered as Article 10. (h) Article 14 relating to conversion of shares is hereby deleted. 4. The text of the Certificate of Incorporation, as amended, is hereby restated as further amended to read as fully set forth herein: 1. The name of the corporation shall be Coyne International Enterprises Corp. 2. The purpose for which this corporation is formed is to engage in any lawful act or activity for which corporations may be formed under the Business Corporation Law. 3. (a) The aggregate number of shares which the corporation is authorized to issue is 234,000 shares of which 30,000 shares shall be Class A preferred shares with a par value of $100.00 per share, 5,000 shall be Class B preferred shares with a par value of $500.00 per share, and 199,000 of which shall be common shares having a par value of $.01 per share. The common shares shall be divided into 100,000 Class A common shares and 99,000 Class B common shares. 2 (b) The designations, relative rights, preferences and limitations of each class of shares shall be as follows: (1) Dividend Rights. The holders of Class A and B preferred --------------- shares shall be entitled to non-cumulative dividends as and when declared by the Board of Directors out of funds legally available therefore, at a rate of five percent (5%) per annum and no more, payable quarterly, semi-annually or annually, on such dates as may be determined by the Board of Directors. No dividends shall be declared or paid on the Class B preferred shares unless the full five percent (5%) dividend for the current year shall have been declared and paid on all shares of Class A preferred. No dividend shall be declared or paid in any fiscal year on the common shares until the five percent (5%) dividend on both classes of the preferred shares for that year has been declared or paid. After full non-cumulative dividends at a rate of five percent (5%) per annum for the then current year shall have been declared and paid to the holders of Class A and B preferred shares, and after making any such provision for working capital and reserves as the Board of Directors in its sole discretion may deem desirable, additional dividends may be declared, paid or set apart during that year to be paid exclusively to the holders of the common shares, share and share alike. Subject to the foregoing provisions, the preferred shares shall not be entitled to participate in any other additional surplus, net profits or earnings of the corporation. (2) Voting Rights. The entire voting rights of the ------------- corporation shall be vested in the Class A common shares and each issued and outstanding Class A common share shall have one vote. (3) Liquidation Rights. In case of liquidation, ------------------ dissolution, or distribution of the assets of the 3 corporation, the holders of the preferred shares shall be paid the par value of their preferred shares before any amount shall be paid to the common shares. After payment on the par value of the preferred shares, the balance of the assets and funds of the corporation shall be distributed solely among the holders of the common shares. A consolidation or merger of the corporation with or into any other corporation shall not constitute a liquidation, dissolution, or winding up within the meaning of this paragraph. (4) Common Shares. Except for voting rights, all of which ------------- shall be in the Class A shares, the Class A and Class B common shares shall have identical rights and preferences. (5) Callable Preferred. At any time, the corporation shall ------------------ have the right to redeem all or any part of its issued and outstanding preferred shares, at a price equal to the par value of the shares redeemed. The Board of Directors shall have full power and discretion to determine and select from the outstanding preferred shares particular shares for redemption and its proceedings and action in this connection shall not be subject to attack. Shares may be redeemed from either or both classes of preferred shares. The corporation may, at its election, issue debentures in exchange for preferred shares payable in 40 equal quarterly installments including principal and interest at 6%. 4. The principal offices of the corporation shall be located in the City of Syracuse, Onondaga County, New York. 5. The duration of the corporation shall be perpetual. 6. The number of directors shall be not less than three nor more than ten. 4 7. No contract or other transaction between the corporation and any other corporation shall be affected or invalidated by the fact that any one or more of the directors of this corporation is, or are interested in, or is a director of, or officer, or are directors of such other corporation, and any director or directors, individually or jointly, may be a party, or parties to, or may be interested in any contract or transaction of this corporation, or in which this corporation is interested; and no contract, act or transaction of this corporation with any person or persons, firm or corporation shall be affected or invalidated by the fact that any directors or director of this corporation is a party or parties to, or interested in such contract, act or transaction, or in any way connected with such person or persons, firm, association or corporation. 8. No holder of any share of capital stock of this corporation, shall, because of his ownership of capital stock, have a pre- emptive or other right to purchase, subscribe for or take any part of any capital stock or any part of the notes, debentures, bonds or other securities convertible into or carrying options or warrants to purchase capital stock of this corporation, authorized by this certificate of incorporation and issued, optioned or sold by it after its incorporation, whether the capital stock issued or sold, be capital stock authorized by this certificate of incorporation or be authorized by an amended certificate, duly filed and in effect at the time of the issuance or sale of such capital stock. Any part of the capital stock and any part of the notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase capital stock of this corporation authorized by this certificate of incorporation or by an amended certificate duly filed, may at any time be issued, optioned for sale and sold or disposed of by this corporation, pursuant to resolution of its Board of Directors to such persons and upon such terms and conditions as may, to the Board seem proper and advisable without first offering the said capital stock or any part thereof to existing stockholders. 5 9. Subject to provisions of the By-laws made by incorporators or stockholders, the Board of Directors may make By-laws and may from time to time alter, amend, or repeal any By-laws, and any By-laws made by the directors may be altered, amended or repealed by the stockholders at any annual meeting, or at any special meeting provided notice of such proposed alteration, amendment or repeal shall be included in the notice of such annual or special meeting. 10. The Secretary of State of the State of New York is hereby designated as agent of this corporation upon whom all process in any action or proceeding against the corporation may be served within the State of New York. 11. The address to which the Secretary of State shall mail a copy of any process against the corporation which may be served upon him is c/o O'Hara, Hanlon, Knych & Pobedinsky, LLP, One Park Place, Syracuse, New York 13202. 5. This Restated Certificate of Incorporation was authorized by unanimous vote of the Board of Directors and by unanimous written consent of all shareholders of record. In witness of the foregoing, we have executed this certificate and affirmed the truth of the statements contained herein under the penalty of perjury on July 22, 1998. COYNE INTERNATIONAL ENTERPRISES CORP. By: /s/ Thomas M. Coyne ---------------------------------- Thomas M. Coyne, President By: /s/ Alexander Pobedinsky ---------------------------------- Alexander Pobedinsky, Secretary 6 EX-3.2 3 BY-LAWS OF COYNE INTERNATIONAL ENTERPRISES CORP BY - LAWS of COYNE INTERNATIONAL ENTERPRISES CORP. ------------------------------------- ARTICLE I Stockholders Meeting -------------------- Section 1. Annual Meeting. The annual meeting of the stockholders shall -------------- be held on the fourth Friday of January each year at 10:30 o'clock A.M. in the forenoon, at the principal office of the corporation, or such places as the Board of Directors shall authorize. If such date shall be a legal holiday, the meeting shall be held on the next secular day following at the same hour. Notice of such meeting shall be given by the Secretary as required by law, by serving personally or by mailing not less than ten days and not more than forty days previous to such meeting, postage prepaid, a copy of such notice, addressed to each stockholder of record. Any and all notices of such meeting may be waived by any stockholder by written waiver or by personal attendance thereat. Section 2. Special Meetings. Special meetings of stockholders for any ---------------- purpose other than those regulated by statute may be called by a resolution of the majority of the Board of Directors upon ten days notice to each stockholder of record. Such notice shall be given by the Secretary and shall contain a statement of the business to be transacted at such meeting. It shall be served personally or sent by mail addressed to each stockholder of record at his last known Post Office Address. The Board of Directors shall also in like manner call a special meeting of the stockholders whenever so requested in writing by stockholders representing not less than 50% of the capital stock of the Company. The President may, in his discretion, call a special meeting of stockholders upon ten days notice by mail, addressed to the stockholders as their respective addresses appear upon the books of the corporation. No business other than that specified in the call for the meetings shall be transacted at any special meeting of the stockholders. Notice of special meeting may be waived by any stockholder by written waiver or by personal attendance thereat. 1 Section 3. Voting. Stockholders entitled to vote at meetings may do so in ------ person or by proxy appointed by an instrument in writing subscribed by the stockholder or by his duly authorized attorney. Each stockholder shall be entitled to one vote for each share of voting stock registered in his name on the books of the Company. The Board of Directors is authorized to fix in advance by resolution a record date for the determination of the stockholders entitled to notice of and to vote at any meetings of stockholders. Section 4. Quorum. The holders of shares of any class, having voting ------ power aggregating such number of the issued and outstanding shares of such class as may be required by the Certificate of Incorporation (or any amendments thereto then in effect) or, in the absence of such requirement, aggregating at least a majority of such shares, present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of any business or specified item of business, except as otherwise provided by statute. However, a lesser number when not constituting a quorum may adjourn a stated meeting to a date certain by giving 5 days written notice to the other stockholders of such adjourned meeting. Section 5. Manner of Voting at Stockholders' Meeting. At all meetings of ----------------------------------------- stockholders, except as otherwise expressly provided by the Certificate of Incorporation (and any amendments thereto then in effect) or by statute, the voting shall be determined by a majority vote of the shares of capital stock present in person or by proxy, provided, however, that any qualified voter may demand a stock vote, and in that case, such stock vote shall immediately be taken. Except as otherwise expressly provided by statute or by these By-laws, all voting shall be viva voce except that stock vote shall be by ballot, each of which shall state the name of the stockholder voting and the number of shares of stock owned and voted by him, and if such ballot be cast by proxy, it shall also state the name of such proxy. ARTICLE II Directors --------- Section 1. Number. The affairs and the business of the company shall be ------ managed by a Board of at least three (3) and not more than ten (10) directors who need not be stockholders of the Corporation. The number of directors shall, within the limits prescribed in this Section, be determined from time to time by resolution of the Board of Directors. Section 2. How elected. At the annual meeting the persons duly elected by ----------- the votes cast at the election held thereat shall become the directors for the ensuing year. 2 Section 3. Term of Office. The term of office of each of the directors -------------- shall be until the next meeting of stockholders and thereafter until a successor be elected. Section 4. Duties of Directors. The Board of Directors shall have the ------------------- control and general management of the affairs and business of the Corporation. Such directors shall in all cases act as a Board regularly convened by a majority, and they may adopt such rules and regulations for the conduct of their meetings, and the management of the Corporation as they may deem proper, not inconsistent with these By-laws and the laws of the State of New York, and in conformity with the Certificate of Incorporation and any amendments thereto then in effect. Section 5. Directors' Meetings. Regular meetings of the Board of ------------------- Directors shall be held immediately following the annual meetings of stockholders. Special meetings of the Board of Directors may be called by the President in his discretion at any time and shall be called upon the written request of two directors. Notice of special meetings of the Board of Directors shall be given by service upon each director in person or by mailing to him at his last known Post Office address, at least five days before the date therein designated for such meetings, including the day of mailing, a notice thereof specifying the time and place of such meeting. In case of special meetings, such notice shall specify the business to be brought before the meeting and no business other than that specified in such notice shall be transacted at any special meeting. Any and all notices of meeting may be waived by any director by written waiver or by personal attendance thereat. At any meeting of the Board a lawful quorum, and the number of votes necessary for the transaction of business or any specified item of business thereat shall consist of such number of the directors as shall be specified in the Certificate of Incorporation (and amendments thereto then in effect) or, in the absence of such specification, a majority of the whole number of directors; but in the event of a quorum not being present, a lesser number may adjourn the meeting to some future time not more than twenty days later. At all meetings of the Board of Directors each director is to have one vote, irrespective of the number of shares of stock of the Company that he may hold. 3 At any meeting at which every member of the Board of Directors shall be present, though held without notice, any business may be transacted which might have been transacted if the meeting had been duly called. See Amendment Page B-1 (Stockholder - 3/26/75) (Stockholder -1/27/78) Section 6. Vacancies. Whenever any vacancy shall occur in the Board of --------- Directors by death, resignation or otherwise, the same shall be filled without undue delay by a majority vote by ballot of the remaining members of the Board at a special meeting which shall be called for that purpose. Such special meeting shall be held within thirty days after the occurrence of such vacancy. The person so chosen shall hold office until his successor shall have been elected at a special or annual meeting of the stockholders. New places on the Board due to increases in the number of directors may be filled prior to any election by stockholders for a term lasting until such election by the vote of the majority of the Board of Directors. Section 7. Removal of Directors. Any one or more of the Directors may be -------------------- removed, for cause, at any time by a vote of the stockholders holding a majority of the stock at any special meeting called for such purpose. ARTICLE III Officers -------- Section 1. Number of Officers. The officers of the Company shall be a ------------------ President, a Vice President, a Treasurer, a Secretary and an Assistant Secretary and any officer may hold more than one office, except that the office of President and Secretary shall not be held by the same person. The Board of Directors may appoint such other officers, agents and employees as in their sole discretion they shall deem advisable, who shall be subject to recall at all times by a majority vote of the Board of Directors. Section 2. Election of Officers. The officers of the Company shall be -------------------- elected annually by the Board of Directors at its meeting held immediately after the annual meeting of stockholders and shall hold office for one year and until their successors have been duly elected and qualified. Section 3. Removal of Officers. Any officer may be removed at any special ------------------- meeting of the Board called for that purpose at which a majority of the Directors are present. 4 Section 4. President. The President shall when present preside at all --------- meetings of the Directors, unless the Board shall have elected a Chairman from their number, and act as temporary Chairman at and call to order all meetings of the stockholders, and regulate the order of business thereat, and he shall have power to call special meetings of the stockholders and directors for any purpose or purposes, appoint and discharge and fix the compensation, subject to the approval of the directors, of all employees and agents of the Company and fix their compensation, make and sign contracts and agreements in the name and behalf of the Company; he shall see that the books, reports, statements and certificates required by the statute under which this Company is organized or any other laws applicable thereto are properly kept, made and filed according to law; and he shall enforce these By-laws and generally do and perform all acts incident to the office of President or which are authorized or required by law. Section 5. Vice President. In the absence of or inability of the -------------- President to act, the Vice President shall perform the duties of the President and shall perform such other functions as the Board of Directors may from time to time designate. Section 6. The Secretary. The Secretary, or Assistant Secretary, shall: ------------- (a) Keep the Minutes of the meetings of the Board of Directors and of the stockholders in appropriate books (b) Give and serve all notice of all meetings of the Company (c) Be custodian of the records and of the seal of the Company and affix the latter when required and may sign all certificates of stock not countersigned by the Treasurer (d) Keep the stock and transfer books in such a manner as to show at any time the amount of capital stock, the manner and the time the same was paid for, the names of the owners respective places of residence or their Post Office addresses, the number of shares owned by each of them and the time at which each person became owner, and keep such stock and transfer book open daily during the usual business hours at the office of the Company subject to the inspection of any person duly authorized, as prescribed by law (e) Lay before the Board of Directors at their stated meetings all communications addressed to him officially by the President or any officer or shareholder of the Company, and attend to all correspondence incident to the 5 office of Secretary. Section 7. The Treasurer. The Treasurer shall: ------------- (a) Have the care and custody of and be responsible for all the funds and securities of the Company and deposit of such funds and securities in the name of the Company in such a bank and safe deposit vaults as the Directors may designate (b) Exhibit at all reasonable times his books and accounts to any director or stockholder of the Company upon application at the office of the Company during business hours (c) Have the right to countersign all certificates of stock signed by the President or Vice President (d) Render a statement of the condition of the finances of the Company at each stated meet- ing of the Board of Directors if called upon to do so, and a full financial report at the annual meeting of the stockholders. He shall keep at the office of the Corporation books of account of all its business and transactions and such books of account as the Board of Directors may require. He shall do and perform all duties pertaining to the office of Treasurer. Section 8. Duties of Officers May be Delegated. In the case of the ----------------------------------- absence of any officer of the Corporation or for any reason that the Board may deem sufficient, the Board may, except as specifically otherwise provided in these By-Laws, delegate the powers or duties of such officers to any other officer or any director for the time being, provided a majority of the entire Board concur therein. Section 9. Vacancies - How Filled. Should any vacancy occur by death, ---------------------- resignation or otherwise, the same shall be filled, without undue delay, by the Board of Directors at its next regular or at a special meting called for that purpose. Section 10. Compensation of Officers. The officers shall receive such ------------------------ salary or compensation as may be determined by the Board of Directors. 6 ARTICLE IV Certificates of Stock --------------------- Section 1. Issue of Certificate of Stock. The President shall ----------------------------- cause to be issued to each stockholder one or more certificates, under the seal of the Corporation, signed by the President (or Vice President) and the Treasurer (or Secretary) certifying the number of shares owned by him in the Corporation. Section 2. Transfer of Shares. The shares of stock of the ------------------ Corporation shall be transferable only upon its books by the registered holders thereof in person or by their duly authorized attorneys or legal representatives, surrender of the old certificates to the Secretary, or to such other person as the Directors may designate, by whom they shall be cancelled and new certificates shall thereupon be issued. The Board of Directors shall have authority to fix in advance by resolution a record date for the determination of the stockholders entitled to notice of and to vote at any meeting of stockholders. Section 3. Lost Certificates. If the holder of any stock shall lose ----------------- the certificate thereof, he shall immediately notify the Company of the facts and the Board of Directors may then cause a new certificate to be issued to him subject to the deposit of a bond or other indemnity in such form and with such sureties, if any, as the Board may require. ARTICLE V Seal ---- The seal of the Corporation shall be as follows: ARTICLE VI Dividends --------- The Board of Directors shall by vote declare dividends from the surplus of the Corporation as provided and permitted by law, whenever in their opinion the condition of the Corporation's affairs will render it expedient for such dividends to be declared. 7 ARTICLE VII Negotiable Instruments ---------------------- All checks, notes or other negotiable instruments shall be signed on behalf of this Corporation by such of the officers, agents and employees as the Board of Directors may from time to time designate. ARTICLE VIII Amendments ---------- These By-laws may be amended, altered or added to by the vote of the Board of Directors of this Corporation at any regular meeting of said Board, or at a special meeting of Directors called for that purpose, provided a quorum of the Directors is present at such regular or special meeting. These By-laws, and any amendments thereto and new By-laws added by the Directors may be amended, altered or replaced by the stockholders at any annual or special meeting of the stockholders. Whenever any provision of these By-laws or any amendment thereto shall conflict with a provision in the Certificate of Incorporation (and any amendment thereto then in effect), the applicable provisions in such Certificate (so amended) shall prevail and control. 8 Amendment to By-laws - by Consent of Sole Shareholder of Voting Shares - March 26, 1975: Section 5, Directors' Meetings, of Article II, Directors, is amended by the addition of the following paragraph at the end of the Section: "Any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members of the Board or of the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the Board or committee shall be filed with the Minutes of the proceedings of the Board or committee." Amendment to By-Laws - by annual meeting of the Shareholder -January 27, 1978: Section 5, Directors' Meetings, of Article II, Directors, is amended by the addition of the following paragraph at the end of the Section: "Any one or more members of the Board or any committee thereof may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting." B-1 EX-3.3 4 ARTICLES OF INCORPORATION ARTICLES OF INCORPORATION OF BLUE RIDGE TEXTILE MANUFACTURING, INC. 1. . The name of the Corporation is Blue Ridge Textile Manufacturing, Inc. 2. The corporation is authorized to issue 100 shares of voting stock, designated as "Voting Common Stock" and 10,000 shares of non-voting stock, designated as "Non-Voting Common Stock." Each share of Voting Common Stock shall have one vote on each matter submitted to a vote of the shareholders of the Corporation. The holders of shares of Voting and Non-Voting Common Stock shall be entitled to receive, in proportion to the number of shares of Voting and Non- Voting Common Stock held, the net assets of the Corporation upon dissolution. 3. The street address and county of the initial registered office of the Corporation in the State of Georgia is 1201 Peachtree Street, N.E. Atlanta, Georgia 30361, Fulton County. The initial registered agent of the Corporation at such address is CT Corporation System. 4. The Incorporator's name and address is Raymond T. Ryan, c/o O'Hara & Hanlon, One Park Place, Syracuse, New York 12202. 5. The mailing address of the initial principal office of the Corporation is c/o Ryan & Ryan, 9 Albany Street, Cazenovia, NY 13035. IN WITNESS WHEREOF, the undersigned has executed these Articles of Incorporation. /s/ ----------------------------------- Incorporator EX-3.4 5 BY-LAWS OF BLUE RIDGE TEXTILE MANUFACTURING, INC. BY-LAWS ------- OF -- BLUE RIDGE TEXTILE MANUFACTURING, INC. -------------------------------------- ARTICLE I- OFFICES ------------------ The office of the Corporation shall be located in the City and State designated in the Articles of Incorporation. The Corporation may also maintain offices at such other places within or without the United States as the Board of Directors may, from time to time, determine. ARTICLE II - MEETING SHAREHOLDERS --------------------------------- Section 1 - Annual Meetings: - ---------------------------- The annual meeting of the shareholders of the Corporation shall be held within five months after the close of the fiscal year of the Corporation, for the purpose of electing directors, and transacting such other business as may properly come before the meeting. Section 2 - Special Meetings: - ----------------------------- Special meetings of the shareholders may be called at any time by the Board of Directors or by the President, and shall be called by the President or the Secretary at the written request of the holders of ten per cent (10%) of the shares then outstanding and entitled to vote thereat, or as otherwise required under the provisions of the Law of the State of Georgia ("Corporation Law"). Section 3 - Place of Meetings. - ----------------------------- All meetings of shareholders shall be held at the principal office of the Corporation, or at such other places as shall be designated in the notices or waivers of notice of such meetings. Section 4 - Notice of Meetings: - ------------------------------- (a) Written notice of each meeting of shareholders, whether annual or special, stating the time when and place where it is to be held, shall be served either personally or by mail, not less than ten or more than fifty days before the meeting, upon each shareholder of record entitled to vote at such meeting, and to any other shareholder to whom the giving of notice may be required by law, Notice of a special meeting shall also state the purpose or purposes for which the meeting is called, and shall indicate that it is being issued by, or at the direction of, the person or persons calling the meeting. If, at any meeting, action is proposed to be taken that would, if taken, entitle shareholders to receive payment for their shares to the Georgia Business Corporation Code, the notice of such By-Laws-1 meeting shall include a statement of that purpose and to that effect. If mailed, such notice shall be directed to each such shareholder at his address, as it appears in the records of the shareholders of the Corporation, unless he shall have previously filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case, it shall be mailed to the address designated in such request. (b) Notice of any meeting need not be given to any person who may become a shareholder of record after the mailing of such notice and prior to the meeting, or to any shareholder who attends such meeting, in person or by proxy, or to any shareholder who, in person or by proxy, submits a signed waiver of notice either before or after such meeting. Notice of any adjourned meeting of shareholders need not be given, unless otherwise required by statute. Section 5 - Quorum: - ------------------ (a) Except as otherwise provided herein, or by statute, or in the Articles of Incorporation (such Articles and any amendments thereof being hereinafter collectively referred to as the "Articles of Incorporation"), at all meetings of shareholders of the Corporation, the presence at the commencement of such meetings in person or by proxy of shareholders holding of record a majority of the total number of shares of the Corporation then issued and outstanding and entitled to vote, shall be necessary and sufficient to constitute a quorum for the transaction of any business. The withdrawal of any shareholder after the commencement of a meeting shall have no effect on the existence of a quorum, after a quorum has been established at such meeting, (b) Despite the absence of a quorum at any annual or special meeting of shareholders, the shareholders, by a majority of the votes cast by the holders of shares entitled to vote thereon, may adjourn the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called if a quorum had been present. Section 6 - Voting: - ------------------- (a) Except as otherwise provided by statute or by the Articles of Incorporation, any corporate action, other than the election of directors to be taken by vote of the shareholders, shall be authorized by a majority of votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon. (b) Except as otherwise provided by statute or, by Articles of Incorporation, at each meeting of shareholders, each shareholder of record of shares of the Corporation entitled to vote thereat, shall be entitled to one vote for each share registered on his name on the books of the Corporation. (c) Each shareholder entitled to vote or express consent or dissent without a meeting, may do so by proxy; provided, however, that the instrument authorizing such proxy to act shall have been By-Laws-2 executed in writing by the shareholder himself, or by his attorney-in-fact thereunto duly authorized in writing. No proxy shall be valid after the expiration of eleven months from the date of its execution, unless the persons executing it shall have specified therein the length of time it is to continue in force. Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation. (d) Any resolution in writing, signed by all of the shareholders entitled to vote thereon, shall be and constitute action by such shareholders to the effect therein expressed, with the same force and effect as if the same had been duly passed by unanimous vote at a duly called meeting of shareholders and such resolution so signed shall be inserted in the Minute Book of the Corporation under its proper date. ARTICLE III - BOARD OF DIRECTORS -------------------------------- Section 1 - Number, Election and Term of Office - ----------------------------------------------- (a) The number of the directors of the Corporation shall be three (3), unless and until otherwise determined by vote of a majority of the entire Board of Directors. The number of Directors shall not be less than three, unless all of the outstanding shares are owned beneficially and of record by less than three shareholders, in which event the number of directors shall not be less than the number of shareholders. (b) Except as may otherwise be provided herein for in the Articles of Incorporation, the members of the Board of Directors of the Corporation, who need not be shareholders, shall be elected by a majority of the votes cast at a meeting of shareholders, by the holders of shares entitled to vote in the election. (c) Each director shall hold office until the annual meeting of the shareholders next succeeding his election, and until his successor is elected and qualified, or until his prior death, resignation or removal. Section 2 - Duties and Powers: - ------------------------------ The Board of Directors shall be responsible for the control and management of the affairs, property and interests of the Corporation, and may exercise all powers of the Corporation, except as are in the Articles of Incorporation or by statute expressly conferred upon or reserved to the shareholders. Section 3 - Annual and Regular Meetings; Notice: - ------------------------------------------------ (a) A regular annual meeting of the Board of Directors shall be held immediately following the annual meeting of the shareholders at the place of such annual meeting of shareholders. (b) The Board of Directors, from time to time, may provide by resolution for the holding of other regular meetings of the Board of Directors, and may fix the time and place thereof. By-Laws-3 c) Notice of any regular meeting of the Board of Directors shall not be required to be given and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be given to each director who shall not have been present at the meeting at which such action was taken within the time limited, and in the manner set forth in paragraph (b) of Section 4 of this Article III, with respect to special meetings, unless such notice shall be waived in the manner set forth in Paragraph (c) of such Section 4. Section 4 - Special Meetings; Notice: - ------------------------------------- (a) Special meetings of the Board of Directors shall be held whenever called by the President or by one of the directors, at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Notice of special meetings shall be mailed directly to each director, addressed to him at his residence or usual place of business, at least two days before the day on which the meeting is to be held, or shall be sent to him at such place by telegram, radio or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meeting is to be held. A notice, or waiver of notice, except as required by Section 8 of this Article III, need not specify the purpose of the meeting. (c) Notice of any special meeting shall not be required to be given to any director who shall attend such meeting without protesting prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notice of any adjourned meeting shall not be required to be given. Section 5 - Chairman: - --------------------- At all meetings of the Board of Directors the Chairman of the Board, if any and if present, shall preside. If there shall be no Chairman, or he shall be absent, then the President shall preside, and in his absence, a Chairman chosen by the Directors shall preside. Section 6 - Quorum and Adjournments: - ------------------------------------ (a) At all meetings of the Board of Directors, the presence of a majority of the entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business, except as otherwise provided by law, by the Articles of Incorporation, or by these By-Laws. (b) A majority of the directors present at the time and place of any regular or special meeting, although less than a quorum, may adjourn the same from time to time without notice, until a quorum shall be present. By-Laws-4 Section 7 - Manner of Acting: - ----------------------------- (a) At all meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by statute, by the Articles of Incorporation, or these By-Laws, the action of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. Any action authorized in writing, by all of the directors entitled to vote thereon and filed with the minutes of the Corporation shall be the act of the Board of Directors with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board. Section 8 - Vacancies: - ---------------------- Any vacancy in the Board of Directors occurring by reason of an increase in the number of directors, or by reason of the death, resignation, disqualification, removal (unless a vacancy created by the removal of a director by the shareholders shall be filed by the shareholders at the meeting at which the removal was effected) or inability to act of any director, or otherwise, shall be filled for the unexpired portion of the term by a majority vote of the remaining directors, though less than a quorum, at any regular meeting or special meeting of the Board of Directors called for that purpose. Section 9 - Resignation: - ------------------------ Any director may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt hereof by the Board of Directors or such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 10 - Removal: - --------------------- Any director may be removed with or without cause at any time by the shareholders, at a special meeting of the shareholders called for that purpose, and may be removed for cause by action of the Board. Section II - Salary: - -------------------- No stated salary shall be paid to directors, as such, for their services, but by resolution of the Board of Directors a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. By-Laws-5 Section 12 - Contracts: - ----------------------- (a) No contract or other transaction between this Corporation and any other Corporation shall be impaired, affected or invalidated nor shall any director be liable in any way by reason of the fact that any one or more of the directors of this Corporation is or are interested in, or is a director or officer, or are directors or officers of such other Corporation, provided that such facts are disclosed or made known to the Board of Directors. (b) Any director, personally and individually, may be a party to or may be interested in any contract or transaction of this Corporation, and no director shall be liable in any way by reason of such interest, provided that the fact of such interest be disclosed or made known to the Board of Directors, and provided that the Board of Directors shall authorize, approve or ratify such contract or transaction by the vote (not counting the vote of any such director) of a majority of a quorum, notwithstanding the presence of any such director at the meeting at which such action is taken. Such director or directors may be counted in determining the presence of a quorum at such meeting. This Section shall not be construed to impair or invalidate or in any way affect any contract or other transaction which would otherwise be valid under the law (common, statutory or otherwise) applicable thereto. Section 13 - Committees: - ------------------------ The Board of Directors, by resolution adopted by a majority of the entire Board, may from time to time designate from among its members an executive committee and such other committees, and alternate members thereof, as they deem desirable, each consisting of three or more members, with such powers and authority (to the extent permitted by law) as may be provided in such resolution. Each such committee shall serve at the pleasure of the Board. ARTICLE IV - OFFICERS ---------------------- Section 1 - Number, Qualifications, Election and Term of Office: - ---------------------------------------------------------------- (a) The officers of the Corporation shall consist of a President, a Secretary, a Treasurer, and such other officers, including a Chairman of the Board of Directors, and one or more Vice Presidents, as the Board of Directors may from time to time deem advisable. Any officer other than the Chairman of the Board of Directors may be, but is not required to be, a director of the Corporation. Any two or more officers may be held by the same person, except the offices of President and Secretary. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of shareholders. (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor has been elected and qualified, or until his death, resignation or removal. By-Laws-6 Section 2 - Resignation: - ------------------------ Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, or to the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 3 - Removal: - -------------------- Any officer may be removed, either with or without cause, and a successor elected by the Board at any time. Section 4 - Vacancies: - ---------------------- A vacancy in any office by reason of death, resignation, inability to act, disqualification, or any other cause, may at any time be filled for the unexpired portion of the term by the Board of Directors. Section 5 - Duties of Officers: - ------------------------------- Officers of the Corporation shall, unless otherwise provided by the Board of Directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may be set forth in these By-Laws, or may from time to time be specifically conferred or imposed by the Board of Directors. The President shall be the chief executive officer of the Corporation. Section 6 - Sureties and Bonds: - ------------------------------- In case the Board of Directors shall so require, any officer, employee or agent of the Corporation shall execute to the Corporation a bond in such sum, and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence and for the accounting for all property, funds or securities of the Corporation which may come into his hands. Section 7 - Shares of Other Corporations: - ----------------------------------------- Whenever the Corporation is the holder of shares of any other corporation, any right or power of the Corporation as such shareholder (including the attendance, acting and voting at shareholders' meetings and execution of waivers, consents, proxies or other instruments) may be exercised on behalf of the Corporation by the President, any Vice President, or such other person as the Board of Directors may authorize. By-Laws-7 ARTICLE V - SHARES OF STOCK ---------------------------- Section 1 - Certificate of Stock: - --------------------------------- (a) The certificates representing shares of the Corporation shall be in such form as shall be adopted by the Board of Directors, and shall be numbered and registered in the order issued. They shall bear the holder's name and the number of shares, and shall be signed by (i) the Chairman of the Board or the President or a Vice President, and (ii) the Secretary or any Assistant Secretary, and may bear the corporate seal. (b) No certificate representing shares shall be issued until the full amount of consideration therefor has been paid, except as otherwise permitted by law. (c) The Board of Directors may authorize the issuance of certificates for fractions of a share which shall entitle the holder to exercise voting rights, receive dividends and participate in liquidating distributions, in proportion to the fractional holdings; or it may authorize the payment in cash of the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or it may authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the signature of an officer or agent of the Corporation, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder, except as therein provided. Section 2 - Lost or Destroyed Certificates: - ------------------------------------------- The holder of any certificate representing shares of the Corporation shall immediately notify the Corporation of any loss or destruction of the certificate representing the same. The Corporation may issue a new certificate in the place of any certificate theretofore issued by it, alleged to have been lost or destroyed. On production of such evidence of loss or destruction as the Board of Directors in its discretion nay require, the Board of Directors may, in it discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the Corporation a bond in such sum as the Board may direct, and with such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claims, loss, liability or damage it may suffer on account of the issuance of the new certificate. A new certificate may be issued without requiring any such evidence or bond when, in the judgment of the Board of Directors, it is proper so to do. Section 3 - Transfers of Shares: - -------------------------------- (a) Transfers of shares of the Corporation shall be made on the share records of the Corporation only by the holder of record thereof, in person or by his duly authorized attorney, upon surrender for cancellation of the certificate or certificates representing such shares, with an assignment or power of transfer endorsed thereon or delivered therewith, duly executed, with such proof of the authenticity of the signature and of authority to transfer and of payment of transfer taxes as the Corporation or its agents may require. By-Laws-8 (b) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 4 - Record Date: - ------------------------ In lieu of closing the share records of the Corporation, the Board of Directors may fix, in advance, a date not exceeding fifty days, nor less than ten days, as the record date for the determination of shareholders entitled to receive notice of, or vote at, any meeting of shareholders, or to consent to any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held; the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the resolution of the directors relating thereto is adopted. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided for herein, such determination shall apply to any adjournment thereof, unless the directors fix a new record date for the adjourned meeting. Section 5 - Restrictions on Transfers: - -------------------------------------- (a) If any shareholder shall desire to sell or transfer any part shares of stock in the Corporation, the shareholder shall first offer to sell the shares to the Corporation at a price per share equal to the then book value of each of the shares as of the last day of calendar month next preceding the date the shares are offered for sale. Book value shall be determined by the independent accountant for the Corporation and such valuation shall be in accordance with generally accepted accounting principles consistent with the method of accounting then employed by the Corporation and shall be binding upon the parties. (b) The offer to sell shall be communicated in writing by the selling shareholder to the Board of Directors of the Corporation and to all other Shareholders and the Corporation shall have a period of thirty (30) days after receipt of such notice in which to exercise its right to purchase the shares at a price determined as above. If the Corporation shall refuse or neglect to notify the selling shareholder in writing of its intention to purchase the shares within the thirty (30) day period, or if the Corporation is prohibited by law from making such a purchase or redemption, the selling shareholder shall then notify in writing the other shareholders of the intention to sell and the number of shares offered for sale and the other shareholders shall have an additional period thirty (30) days within which to accept the offer to sell upon the same terms and conditions as offered to the Corporation, each of the other shareholders having the right to purchase the number of shares owned by the selling shareholder equal to such purchasing shareholders' proportionate ownership of the Corporation immediately prior to the receipt of such offer to sell. By-Laws-9 (c) If neither the Corporation nor the other shareholders elect to purchase the shares, the shareholder desiring to sell or transfer shares shall be free to sell to any other person or corporation free of any restrictions provided herein; provided, however, that such sale or transfer shall not be on terms less favorable to the selling shareholder unless the less favorable terms are re- offered to the Corporation and/or the other shareholders as provided above. If the sale or transfer to any other person or Corporation is not completed within ninety (90) days after the expiration of the periods of time set forth in this By-Law the selling shareholder must, before making any subsequent sale or transfer, re-offer the shares to the Corporation and/or the other shareholders as herein provided. (d) The closing of the sale and transfer of such shares to the Corporation or to the other shareholders of the Corporation shall take place within sixty (60) days after the acceptance of the selling shareholders' offer to sell and the purchase price so determined shall be paid by the purchasers to the seller. Simultaneously with such payments, the stock of the selling shareholder shall be delivered to the purchaser in such form as to effectively transfer such shares, at which time such selling shareholders' rights as a shareholder of the Corporation shall cease to exist as to the shares so transferred. (e) On the death of a shareholder, the Corporation shall purchase and the estate or personal representative of the deceased shareholder shall sell the decedent's stock in the Corporation for a consideration equal to the book value of such stock as established by the accountant for the Corporation as provided above. In the event the Corporation is then prohibited by law from making such purchase or redemption of the decedent's shares of stock in the Corporation, the then surviving shareholders of the Corporation shall purchase and the decedent's estate shall sell all of the shares of stock owned by the decedent at the same price and upon the same terms and conditions as set forth above. In the event of the survival of two or more shareholders of the Corporation; each shall be jointly and severally liable to the decedent's estate for the purchase price, but as between them they shall share such liability in the ratio that the number of the shares of stock respectively owned by them at the time of the decedents' death bears to the aggregate number of such shares and the shares of stock owned by the decedent's estate shall, in like manner be apportioned between them based upon their proportionate ownership of the shares of stock of the Corporation at the date of the decedent's death. The closing of the sale and purchase of the shares by the Corporation or, in the event of its inability to complete the purchase, by the surviving shareholders, shall be made within ninety (90) days after the date of the deceased shareholder's death and the purchase price shall be paid to the estate of the decedent under the terms of this By-Law. In making the valuation of the shares, the accountants for the Corporation shall determine the book value as herein provided as of the end of the calendar month next preceding the date of the decedent's death. (f) No shareholder of the Corporation shall sell or offer to sell to a person not a party to an agreement incorporating the terms of this By-Law nor transfer or assign any right, title or interest in or to any stock, nor shall the heirs, personal representatives, successors, or assigns make any such sale or transfer of such shares after the death of any of the shareholders except in accordance with the terms and conditions of this By-Law. Certificates of stock subject to this By-Law shall be endorsed to clearly indicate that the certificate of stock is subject to a stock purchase restriction By-Laws-10 between its owners, the issuing corporation, and the other shareholders thereof, and is transferable only in accordance with the restriction. (g) In the event a shareholder ceases, regardless of the reason, to be an employee of Coyne Textile Services, that shareholder's stock shall be disposed of in the same manner and under the same terms and conditions as is provided for in Section 5(e) above. (h) This By-Law shall be null and void upon the occurrence of any of the following events: (a) cessation of the Corporation business or enterprise during the lifetime of the shareholders; (b) bankruptcy or receivership or dissolution of the Corporation; (c) death of all of the shareholder simultaneously or within a period of thirty (30) days, one from the other, or (d) a mutual agreement of termination executed by all of the shareholders of the Corporation and shown in the minute book. ARTICLE VI - DIVIDENDS ---------------------- Subject to applicable laws, dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine. ARTICLE VII - FISCAL YEAR ------------------------- The fiscal year of the Corporation shall be fixed by the Board of Directors from time to time, subject to applicable law. ARTICLE VIII - CORPORATE SEAL ----------------------------- The corporate seal, if any, shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE IX - AMENDMENTS ----------------------- Section 1 - By Shareholders: - --------------------------- All by-laws of the Corporation shall be subject to alteration or repeal, and new by-laws may be made, by a majority vote of the shareholders at the time entitled to vote in the election of directors. Section 2 - By Directors: - ------------------------ The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, by-laws of the Corporation; provided, however, that the shareholders entitled to vote with By-Laws-11 respect thereto as in this Article IX above-provided may alter, amend or repeal by-laws made by the Board of Directors, except that the Board of Directors shall have no power to change the quorum for meetings of shareholders or of the Board of Directors, or to change any provisions of the by-laws with respect to the removal of directors or the filling of vacancies in the Board resulting from the removal by the shareholders. If any by-law regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of shareholders for the election of directors, the by-law so adopted, amended or repealed, together with a concise statement of the changes made. The undersigned Incorporator certifies the foregoing by-laws have been adopted as the first by-laws of the Corporation, in accordance with the requirements of the Corporation Law. Dated: October 22, 1992 ---------------- /s/ Raymond T. Ryan ------------------------------------- Incorporator By-Laws-12 EX-3.5 6 ARTICLES OF INCORPORATION OF CLEAN TOWEL SERVICE ARTICLES OF INCORPORATION OF CLEAN TOWEL SERVICE, INC. I. The name of the corporation is "CLEAN TOWEL SERVICE, INC." II. The corporation shall have perpetual duration. III. The corporation is organized for the purpose of owning, operating and managing a commercial towel laundry business; to launder, clean, renovate, repair, dye and otherwise service institutional, industrial and other commercial fabrics of all kinds; to engage in the cleaning and dyeing business in all of its phases; to buy, sell and deal in all materials, equipment, and property appurtenant or incidental to and useful in the towel cleaning, dyeing and repairing business; and to engage in any other lawful activities and to exercise all the powers now or hereafter conferred by the laws of the State of Georgia upon corporations. IV. The corporation shall have authority to issue not more than 200,000 shares of common stock of $1.00 par value. V. The corporation shall not commence business until it shall have received not less than $500.00 in payment for the issuance of shares of stock. VI. The initial registered office of the corporation shall be at 3814 Central Avenue, Doraville, Georgia, 30340. The initial registered agent of the corporation shall be Marvin Lee. VII. The initial Board of Directors shall consist of two members who shall be: Marvin Lee whose address is 438 Emmett Street, Riverdale, Georgia, and Harold D. Priest whose address is 3984 Camelot Court, Tucker, Georgia. VIII. The name and address of the incorporator is Marvin Lee, 438 Emmett Street, Riverdale, Georgia. IN WITNESS WHEREOF, the undersigned executes these Articles of Incorporation. /s/ Phillip L. Martin ------------------------------------------ Counsel for Petitioner Philip L. Martin 750 Columbia Drive Decatur, Georgia 30030 Ph. 377-6461 EX-3.6 7 BY-LAWS OF CLEAN TOWEL SERVICE, INC. BY-LAWS OF CLEAN TOWEL SERVICE, INC. ARTICLE ONE OFFICES 1.1 The address of the registered office of the corporation is 3814 ---- Central Avenue, Doraville, Ga.; and the name of the registered agent at this - ------------------------------ address is Marvin Lee. ---------- 1.2 The corporation may have offices at such place or places (within or without the State of Georgia) as the Board of Directors may from time to time appoint or the business of the corporation may require or make desirable. ARTICLE TWO SHAREHOLDERS MEETINGS 2.1 All meetings of the shareholders shall be held at the office of the ----------------- Corporation or, at such place as may be fixed from time to time by the Board of - -------------- Directors. 2.2 An annual meeting of the shareholders shall be held on the 2nd Tuesday ----------- of October in each year, if not a legal holiday, and if a legal holiday, then on ------- the next following day not a legal holiday, at 10:00 o'clock in the A.M., EDT ----- ---- --- time, at which the shareholders shall elect by a plurality vote a Board of Directors and transact such other business as may properly be brought before the meeting. 2.3 Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or the articles of incorporation, may be called by (the Chairman of the Board or) the President, and shall be called by (the Chairman of the Board or) the President or the secretary when so directed by the Board of Directors, or at the request in writing of any two or more directors, or at the request in writing of shareholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. 2.4 Except as otherwise required by statute or the articles of incorporation, written notice of each meeting of the shareholders, whether annual or special, shall be served, either personally or by mail, upon each shareholder of record entitled to vote at such meeting, not less than ten nor more than 50 days before such meeting. If mailed, such notice shall be directed to a shareholder at his post office address last shown on the records of the corporation. Notice of any special meeting of shareholders shall state the purpose or purposes for which the meeting is called. Notice of any meeting of shareholders shall not be required to be given to any shareholder who, in person or by his attorney thereunto authorized, either before or after such meeting, shall waive such notice. Attendance of a shareholder at a meeting, either in person or by proxy, shall of itself constitute waiver of notice and waiver of any and all objections to the place of the meeting, the time of the meeting, and the manner in which it has been called or convened, except when a shareholder attends a meeting solely for the purpose of stating, at the beginning of the meeting, any such objection or objections to the transaction of business. Notice of any adjourned meeting need not be given otherwise than by announcement at the meeting at which the adjournment is taken. 2.5 The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by law, by the articles of incorporation, or by these by-laws. If, however, such majority 2 shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of voting stock shall be present. At such adjourned meeting at which a quorum shall be present in person or by proxy, any business may be transacted that might have been transacted at the meeting as originally called. 2.6 At every meeting of the shareholders, including (but without limitation of the generality of the foregoing language) meetings of shareholders for the election of directors, any shareholder having the right to vote shall be entitled to vote in person or by proxy, but no proxy shall be voted after eleven months from its date, unless said proxy provides for a longer period. Each shareholder shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, except as otherwise provided by law, by the articles of incorporation or by these by-laws. 2.7 Whenever the vote of shareholders at a meeting thereof is required or permitted to be taken in connection with any corporate action, the meeting and vote of the shareholders may be dispensed with, if all of the shareholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken. ARTICLE THREE DIRECTORS 3.1 Except as may be otherwise provided by any legal agreement among shareholders, 3 the property and business of the corporation shall be managed by its Board of Directors. In addition to the powers and authority by these by-laws expressly conferred upon it, the Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by law, by any legal agreement among shareholders, by the articles of incorporation or by these by-laws directed or required to be exercised or done by the shareholders. 3.2 The Board of Directors shall consist of two members, the precise number to be fixed by resolution of the shareholders from time to time. Each director (whether elected at an annual meeting of shareholders or otherwise) shall hold office until the annual meeting of shareholders held next after his election and until a qualified successor shall be elected, or until his earlier death, resignation, incapacity to serve or removal. Directors need not be shareholders. 3.3 If any vacancy shall occur among the directors by reason of death, resignation, incapacity to serve, increase in the number of directors, or otherwise, the remaining directors shall continue to act, and such vacancies may be filled by a majority of the directors then in office, though less than a quorum, and, if not theretofore filled by action of the directors, may be filled by the shareholders at any meeting held during the existence of such vacancy. 3.4 The Board of Directors may hold its meetings at such place or places (within or without the State of Georgia) as it may from time to time determine. 3.5 Directors may be allowed such compensation for attendance at regular or special meetings of the Board of Directors and of any special or standing committees thereof as may be from time to time determined by resolution of the Board of Directors. ARTICLE FOUR COMMITTEES 4 4.1 (a) The Board of Directors may by resolution adopted by a majority of the entire Board, designate an Executive Committee of three or more directors. Each member of the executive Committee shall hold office until the first meeting of the Board of Directors after the annual meeting of shareholders next following his election and until his successor member of the Executive Committee is elected, or until his death, resignation or removal, or until he shall cease to be a director. (b) During the intervals between the meetings of the Board of Directors, the Executive Committee may exercise all of the powers of the Board of Directors in the management of the business affairs of the corporation, including all powers herein or in the articles of incorporation specifically granted to the Board of Directors, and may authorize the seal of the corporation to be affixed to all papers which may require it; provided, however, that the Executive Committee shall not have the power to amend or repeal any resolution of the Board of Directors that by its terms shall not be subject to amendment or repeal by the Executive Committee, and the Executive Committee shall not have the authority of the Board of Directors in reference to (1) amending the articles of incorporation or by-laws of the corporation; (2) adopting a plan of merger or consolidation; (3) the sale, lease, exchange or other disposition of all or substantially all the property and assets of the corporation; or (4) a voluntary dissolution of the corporation or a revocation of any such voluntary dissolution. (c) The Executive Committee shall meet from time to time on call of (the Chairman of the Board or) the President or of any two or more members of the Executive Committee. Meetings of the Executive Committee may be held at such place of places, within or without the State of Georgia, as the Executive Committee shall determine or as may be specified 5 or fixed in the respective notices or waivers of such meetings. The Executive Committee may fix its own rules of procedure, including provision for notice of its meetings. It shall keep a record of its proceedings and shall report these proceedings to the Board of Directors at the meeting thereof held next after they have been taken, and all such proceedings shall be subject to revision or alteration by the Board of Directors except to the extent that action shall have been taken pursuant to or in reliance upon such proceedings prior to any such revision or alteration. (d) The Executive Committee shall act by majority vote of its members. (e) The Board of Directors, by resolution adopted in accordance with paragraph (a) of this section, may designate one or more directors as alternate members of any such committee, who may act in the place and stead of any absent member of members at any meeting of such committee. 4.2 The Board of Directors, by resolution adopted by a majority of the entire Board, may designate one or more additional committees, each committee to consist of three or more of the directors of the corporation, which shall have such name or names and shall have and may exercise such powers of the Board of Directors in the management of the business and affairs of the corporation, except the powers denied to the Executive Committee, as may be determined from time to time by the Board of Directors. 4.3 The Board of Directors shall have power at any time to remove any member of any committee, with or without cause, and to fill vacancies in and to dissolve any such committee. ARTICLE FIVE MEETINGS OF THE BOARD OF DIRECTORS 6 5.1 Each newly elected Board of Directors shall meet at the place and time which shall have been determined, in accordance with the provisions of these by- laws, for the holding of the regular meeting of the Board of Directors scheduled to be held next following the annual meeting of the shareholders at which the newly elected Board of Directors shall have been elected, or, if no place and time shall have been fixed for the holding of such meeting of the Board of Directors, then immediately following the close of such annual meeting of shareholders and at the place thereof, or such newly elected Board of Directors may hold such meeting at such place and time as shall be fixed by the consent in writing of all the directors. In any such case no notice of such meeting to the newly elected directors shall be necessary in order legally to constitute the meeting. 5.2 Regular meetings of the Board of Directors may be held without notice at such time and place (within or without the State of Georgia) as shall from time to time be determined by the Board of Directors. 5.3 Special meetings of the Board of Directors may be called by (the Chairman of the Board or) the President on not less than two days= notice by mail, telegram, cablegram or personal delivery to each director and shall be called by (the Chairman of the Board,) the President or the Secretary in like manner and on like notice on the written request of any two more directors. Any such special meeting shall be held at such time and place (within or without the State of Georgia) as shall be stated in the notice of meeting. 5.4 No notice of any meeting of the Board of Directors need state the purposes thereof. 5.5 At all meetings of the Board of Directors, the presence of one-third of the 7 authorized number of directors, but not less than two directors, shall be necessary and sufficient to constitute a quorum for the transaction of business. The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law, by the articles of incorporation or by these by- laws. In the absence of a quorum a majority of the directors present at any meeting may adjourn the meeting from time to time until a quorum be had. Notice of any adjourned meeting need only be given by announcement at the meeting at which the adjournment is taken. 5.6 Any action required or permitted to be taken by any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if, prior to such action, a written consent thereto is signed by all members of the Board of such committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the Board or committee. ARTICLE SIX OFFICERS 6.1 The Board of Directors at its first meeting after each annual meeting or shareholders shall elect the following officers: (A Chairman of the Board), a President, one or more Vice Presidents (one of whom may be designated Executive Vice President), a Secretary and a Treasurer. The Board of Directors at any time and from time to time may appoint such other officers as it shall deem necessary, including one or more Assistant Vice Presidents, one or more Assistant Treasurers, and one or more Assistant Secretaries, who shall hold their offices for such terms as shall be determined by the Board of Directors and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors (or the 8 Chairman of the Board). 6.2 Any person may hold any two or more offices, except that no person may hold both the offices of President and Secretary. No officer need be a shareholder. 6.3 The salaries of the officers of the corporation shall be fixed by the Board of Directors, except that the Board of Directors may delegate to any officer or officers the power to fix the compensation of any officer appointed in accordance with the second sentence of Section 6.1 of these by-laws. 6.4 Each officer of the corporation shall hold office until his successor is chosen or until his earlier resignation, death or removal, or the termination of his office. Any officer may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby. Chairman of the Board* --------------------- 6.5 The Chairman of the Board shall be the chief executive officer of the corporation and shall have the general active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall be ex officio a member of all -- ------- standing committees, unless otherwise provided in the resolution appointing the same. The Chairman of the Board shall call meetings of the shareholders, the Board of Directors and the Executive Committee to order and shall act as chairman of such meetings. President --------- ____________________________ * If the Chairman of the Board is not to be the cheif executive officers, the description of the President's power and responsibilities must be changed accordingly. 9 6.6 In the event of the death or disability of the Chairman of the Board or at his request or when specifically authorized by the Board of Directors, the President shall have the powers and perform the duties of the Chairman of the Board. The President shall also have such powers and perform such duties as are specifically imposed upon him by law and as may be assigned to him by the Board of Directors or the Chairman of the Board. The President shall be ex officio a -- ------- member of all standing committees, unless otherwise provided in the resolution appointing the same. In the absence of the Chairman of the Board, the President shall call meetings of the shareholders, the Board of Directors, and the Executive Committee to order and shall act as Chairman of such meetings. Vice Presidents --------------- 6.7 The Vice Presidents shall perform such duties as are generally performed by vice presidents. The Vice Presidents shall perform such other duties and exercise such other powers as the Board of Directors (or the Chairman of the Board) shall request or delegate. The Assistant Vice Presidents shall have such powers, and shall perform such duties, as may be prescribed from time to time by the Board of Directors, (the Chairman of the Board) or the President. Secretary --------- 6.8 The Secretary shall attend all sessions of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in books to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, any notice required to be given of any meetings of the shareholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors (or the Chairman of the Board), under whose supervision he shall be. The 10 Assistant Secretary or Assistant Secretaries shall, in the absence or disability of the Secretary, or at his request, perform his duties and exercise his powers and authority. Treasurer --------- 6.9 The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the corporation, and shall deposit, or cause to be deposited, in the name of the corporation, all monies or other valuable effects, in such banks, trust companies or other depositories as shall, from time to time, be selected by the Board of Directors; he shall render to (the Chairman of the Board), the President and to the Board of Directors, whenever requested, an account of the financial condition of the corporation, and in general, he shall perform all the duties incident to the office of a Treasurer of a corporation, and such other duties as may be assigned to him by the Board of Directors, (the Chairman of the Board) or the President. 6.10 In case of the absence of any officer of the corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, any or all of the powers or duties of such officer to any officer or to any director. ARTICLE SEVEN CAPITAL STOCK 7.1 The interest of each shareholder shall be evidenced by a certificate or certificates representing shares of stock of the corporation which shall be in such form as the Board of Directors may from time to time adopt and shall be numbered and shall be entered in the books of the corporation as they are issued. Each certificate shall exhibit the holder=s name, the number of shares and class of shares and series, if any, represented thereby, a statement that the 11 corporation is organized under the laws of the State of Georgia, and the par value of each share or a statement that the shares are without par value. Each certificate shall be signed by (the Chairman of the Board), the President or a Vice President and the Treasurer or a Assistant Treasurer or the Secretary or an Assistant Secretary and shall be sealed with the seal of the corporation; provided, however, that where such certificate is signed by a transfer agent, or by a transfer clerk acting on behalf of the corporation and a registrar, the signature of any such officer and such seal, may be facsimile. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may nevertheless be delivered as though the person or persons who signed such certificate or certificates or whose facsimile signatures shall have been used thereon had not ceased to be such officer or officers. 7.2 The corporation shall keep a record of the shareholders of the corporation which readily shows, in alphabetical order or by alphabetical index, and by classes of stock, the names of the shareholders entitled to vote, with the address of and the number of shares held by each. Said record shall be presented at all meetings of the shareholders. 7.3 Transfers of stock shall be made on the books of the corporation only by the person named in the certificate, or by attorney lawfully constituted in writing, and upon surrender of the certificate therefor, or in the case of a certificate alleged to have been lost, stolen or destroyed, upon compliance with the provisions of Section 7.7 of these by-laws. 7.4 (a) For the purpose of determining shareholders entitled to notice of or to vote 12 at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. (b) In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date to be not more than fifty days and, in case of a meeting of shareholders, not less than ten days, prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. 7.5 The corporation shall be entitled to treat the holder of any share of stock of the corporation as the person entitled to vote such share, to receive any dividend or other distribution with respect to such share, and for all other purposes and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. 7.6 The Board of Directors may appoint one or more transfer agents and one or more registrars and may require each stock certificate to bear the signature or signatures of a transfer agent or a registrar or both. 7.7 Any person claiming a certificate of stock to be lost, stolen or destroyed shall make an affidavit or affirmation of the fact in such manner as the Board of Directors may require and shall if the directors so require, give the corporation a bond of indemnity in form and amount 13 and with one or more sureties satisfactory to the Board of Directors, whereupon an appropriate new certificate may be issued in lieu of the one alleged to have been lost, stolen or destroyed. ARTICLE EIGHT MISCELLANEOUS Inspection of Books ------------------- 8.1 The Board of Directors shall have power to determine which accounts and books of the corporation, if any, shall be open to the inspection of shareholders, except such as may by law be specifically open to inspection, and shall have power to fix reasonable rules and regulations not in conflict with the applicable law for the inspection of accounts and books which by law or by determination of the Board of Directors shall be open to inspection, and the shareholders= rights in this respect are and shall be restricted and limited accordingly. Fiscal Year ----------- 8.2 The corporation shall be on a October 1-Sept. 30 fiscal year. ------------------ Seal ---- 8.3 The corporate seal shall be in such form as the Board of Directors may from time to time determine. Annual Statements ----------------- 8.4 Not later than four months after the close of each fiscal year, and in any case prior to the next annual meeting of shareholders, the corporation shall prepare: (1) A balance sheet showing in reasonable detail the financial condition of the corporation as of the close of its fiscal year, and (2) A profit and loss statement showing the results of its 14 operation during its fiscal year. Upon written request, the corporation promptly shall mail to any shareholder of record a copy of the most recent such balance sheet and profit and loss statement. Appointments of Agents ---------------------- 8.5 (The Chairman of the Board or) the President or any Vice President shall be authorized and empowered in the name and as the act and deed of the corporation to name and appoint general and special agents, representatives and attorneys to represent the corporation in the United States or in any foreign country or countries and to name and appoint attorneys and proxies to vote any shares of stock in any other corporation at any time owned or held of record by the corporation, and to prescribe, limit and define the powers and duties of such agents, representatives, attorneys, and proxies and to make substitution, revocation or cancellation in whole or in part of any power or authority conferred on any such agent, representative, attorney or proxy. All powers of attorney or other instruments under which such agents, representatives, attorneys, or proxies shall be so named and appointed shall be signed and executed by (the Chairman of the Board or) the President or a Vice President, and the corporate seal shall be affixed thereto. Any substitution, revocation or cancellation shall be signed in like manner, provided always that any agent, representative, attorney or proxy when so authorized by the instrument appointing him may substitute or delegate his powers in whole or in part and revoke and cancel such substitutions or delegations. No special authorization by the Board of Directors shall be necessary in connection with the foregoing, but his by-law shall be deemed to constitute full and complete authority to the officers above designated to do all the acts and things as they deem necessary or incidental thereto or in connection therewith. 15 Indemnification --------------- 8.6 (a) Under the circumstances prescribed in paragraphs (c) and (d) of this section, the corporation shall indemnify and hold harmless any person who was or is a party or is threatened to be made a party of any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys= fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a pleas of nolo contendere or its equivalent, shall not, of itself, create a ---- ---------- presumption that the person did not act in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) Under the circumstances prescribed in paragraphs (c) and (d) of this section, the corporation shall indemnify and hold harmless any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact he is or was a 16 director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys= fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnify for such expenses which the court shall deem proper. (c) To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraphs (a) and (b) of this section, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys= fees) actually and reasonably incurred by him in connection therewith. (d) Except as provided in paragraph (c) of this section and except as may be ordered by a court, any indemnification under paragraphs (a) (b) of this section shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who 17 were not parties to such action, suit or proceeding, or (2) if such a quorum in not obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by the firm of independent legal counsel then employed by the corporation, in a written opinion. (e) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this section. (f) The indemnification provided by this section shall not be deemed exclusive of any other right to which the persons indemnified hereunder shall be entitled and shall inure to the benefit of the heirs, executors or administrators of such persons. (g) The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this section. (h) If any expenses or other amounts are paid by way of indemnification, otherwise than by court order or by an insurance carrier pursuant to insurance maintained by the corporation, the corporation shall, not later than the next annual meeting to the shareholders, 18 unless such meeting is held within three months from the date of such payment, and, in any event, within fifteen months from the date of such payment, send by first class mail to its shareholders of record at the time entitled to vote for the election of directors, a statement specifying the persons paid, the amounts paid, and the nature and status at the time of such payment of the litigation or threatened litigation. ARTICLE NINE NOTICES: WAIVERS OF NOTICE 9.1 Except as otherwise specifically provided in these by-laws, whenever under the provisions of these by-laws notice is required to be given to any shareholder, director or officer, it shall not be construed to mean personal notice, but such notice may be given either by personal notice or by radio, cable or telegraph, or by mail by depositing the same in the post office or letter box in a postpaid sealed wrapper, addressed to such shareholder, officer or director at such address as appears on the books of the corporation, and such notice shall be deemed to be given at the time when the same shall be thus sent or mailed. 9.2 When any notice whatever is required to be given by law, by the articles of incorporation or by these by-laws, a waiver thereof by the person or persons entitled to said notice given before or after the time stated therein, in writing, which shall include a waiver given by telegraph, radio, or cable, shall be deemed equivalent thereto. No notice of any meeting need be given to any person who shall attend such meeting. ARTICLE TEN EMERGENCY POWERS 10.1 The Board of Directors may adopt emergency by-laws subject to repeal or change 19 by action of the shareholders, which shall, notwithstanding any provision of law, the articles of incorporation or these by-laws, be operative during any emergency in the conduct of the business of the corporation resulting from an attack on the United States or on a locality in which the corporation conducts its business or customarily holds meetings of its board of directors or its shareholders, or during any nuclear or atomic disaster, or during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors or a standing committee thereof cannot readily be convened for action. The emergency by-laws may make any provision that may be practical and necessary for the circumstances of the emergency. 10.2 The Board of Directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during such an emergency any or all officers or agents of the corporation shall for any reason be rendered incapable of discharging their duties. 10.3 The Board of Directors, either before or during any such emergency, may, effective in the emergency, change the head office or designate several alternative head offices or regional offices, or authorize the officers so to do. 10.4 To the extent not inconsistent with any emergency by-laws so adopted, these by-laws shall remain in effect during any such emergency and upon its termination the emergency by-laws shall cease to be operative. 10.5 Unless otherwise provided in emergency by-laws, notice of any meeting of the Board of Directors during any such emergency may be given only to such of the directors as it may be feasible to reach at the time, and by such means as may be feasible at the time, including 20 publication, radio or television. 10.6 To the extent required to constitute a quorum at any meeting of the Board of Directors during any such emergency, the officers of the corporation who are present shall, unless otherwise provided in emergency by-laws, be deemed, in order of rank and within the same rank in order of seniority, directors for such meeting. 10.7 No officer, director, agent or employee acting in accordance with any emergency by-laws shall be liable except for willful misconduct. No officer, director, agent or employee shall be liable for any action taken by him in good faith in such a emergency in furtherance of the ordinary business affairs of the corporation even though not authorized by the by-laws then in effect. ARTICLE ELEVEN AMENDMENTS 11.1 The by-laws of the corporation may be altered or amended and new by- laws may be adopted by the shareholders at any annual or special meeting of the shareholders or by the Board of Directors at any regular or special meeting of the Board of Directors; provided, however, that, if such action is to be taken at a meeting of the shareholders, notice of the general nature of the proposed change in the by-laws shall have been given in the notice of meeting. 21 EX-3.7 8 CERTIFICATE OF AMENDMENT ARTICLES OF INCORPORATION OF HOLD, INC. The undersigned, being a citizen of the United States and desiring to form a corporation for profit under the General Corporation Law, Chapter 1701 of the Ohio Revised Code, does hereby certify: FIRST: The name of the corporation shall be HOLD, INC. SECOND: The place in Ohio where the principal office of the Corporation is to be located is the City of Cleveland, County of Cuyahoga. THIRD: The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code. FOURTH: The number of shares which the Corporation is authorized to have outstanding is Five Hundred (500), all of which are common shares without par value. FIFTH: The minimum amount of stated capital with which the corporation shall begin business is Five Hundred Dollars ($500). IN WITNESS WHEREOF, I have hereunto subscribed my name this 14th day of June, ---- 1978. /s/ Edward F. Meyers, Jr. --------------------------------------------- Edward F. Meyers, Jr. Sole Incorporator CERTIFICATE OF AMENDMENT ------------------------ TO THE ------ ARTICLES OF INCORPORATION ------------------------- OF -- HOLD, INC. ---------- The undersigned, STEPHEN A. ALBANESE and EDWARD F. MEYERS, JR., the President and Assistant Secretary, respectively, of Hold, Inc., an Ohio corporation, do hereby certify that the following resolution was adopted and approved by the unanimous written consent of the shareholders of said Corporation on the 20th day of June, 1983. "RESOLVED: That the Articles of Incorporation of this corporation be amended by deleting therefrom present Article FIRST and substituting therefor the following new Article FIRST: FIRST: The name of the corporation shall be OHIO GARMENT RENTAL, INC." IN WITNESS WHEREOF, STEPHEN A. ALBANESE, President, and EDWARD F. MEYERS, JR., Assistant Secretary, of Hold, Inc., acting for and on behalf of said corporation, have hereunto subscribed their names this 20th day of June, 1983. ---- /s/ Stephen A. Albanese -------------------------------------- President /s/ Edward F. Meyers, Jr. -------------------------------------- Assistant Secretary EX-3.8 9 CODE OF REGULATIONS OF HOLD, INC. CODE OF REGULATIONS ------------------- OF -- HOLD, INC. ---------- ARTICLE I --------- OFFICES - ------- Section 1. Principal Office ---------------- The principal office of the Corporation shall be in Cleveland, Ohio, or at such other place in the State of Ohio as may be designated from time to time by the Board of Directors. Section 2. Other Offices ------------- The Corporation may also have offices at such other places without, as well as within, the State of Ohio as the Board Directors shall from time to time determine. ARTICLE II ---------- SHAREHOLDERS - ------------ Section 1. Annual Meeting -------------- The annual meeting of shareholders shall be held at the principal office of the Corporation or at such other place as may be determined by the Board of Directors and designated in the notice of said meeting, at Cleveland, Ohio, on the first Wednesday in October of each year, if not a legal holiday, for the purpose of fixing the number of and electing Directors and considering reports to be laid before said meeting. Upon due notice there may also be considered and acted upon at an annual meeting any matter which could properly be considered and acted upon at a special meeting, in which case and for which purpose the annual meeting shall also be considered as, and shall be, a special meeting. If the annual meeting shall not be held or if Directors shall not be elected thereat, a special meeting may be called and held for that purpose. Section 2. Special Meeting --------------- Special meetings of the shareholders may be called by the Chairman of the Board, the President, or, in the case of the President's absence, death or disability, the Vice President authorized to exercise the authority of the President, or by the Directors by action at a meeting, or a majority of the Directors acting without a meeting, or by the person or persons holding not less than twenty-five percent of all of the shares outstanding and entitled to vote thereat. Upon request in writing delivered either in person or by registered mail to the President or Secretary by any person or persons entitled to call a meeting of shareholders, it shall be the duty of the President or Secretary to give the shareholders entitled thereto, notice of a meeting to be held on a day not less than ten nor more than sixty days after the receipt of such request, as such officer may specify. If such notice shall not be given within fifteen days after the delivery of such request, the person or persons calling the meeting may fix the time of meeting and give notice thereof as hereinafter provided in Section 4 of this ARTICLE II, or cause such notice to be given by any designated representative. Section 3. Place of Meetings ----------------- Any meeting of the shareholders of the Corporation may be held either within or without the State of Ohio. Section 4. Notice of Meetings ------------------ Notice of all shareholders' meetings, whether annual or special, shall be given in writing and may be given by the Chairman of the Board, the President or a Vice President, or by the Secretary or an Assistant Secretary (or in case of their refusal, by the person or persons entitled to call meetings under the provisions of these Regulations), which notice shall state the purpose or purposes for which the meeting is called and the time and place where it is to be held. Not more than sixty nor less than seven days prior to any such meeting, a copy of such notice shall be served upon or mailed to each shareholder of record entitled to notice thereof, directed, postage prepaid, to his last address as it appears upon the records of the Corporation. If any meeting shall be adjourned to another time or place, no further notice as to such reconvened meeting need be given other than by announcement at the meeting at which such adjournment shall be taken. No business shall be transacted at any such reconvened meeting except as might have been lawfully transacted at the meeting at which such adjournment shall have been taken. Section 5. Waiver of Notice ---------------- Notice of the time, place and purpose of any meeting of shareholders may be waived in writing, either before or after the holding of such meeting, by any shareholder, which writing shall be filed with or entered upon the records of the meeting. The attendance of any shareholder at any such meeting without protesting the lack of proper notice, prior to or at the commencement of the meeting, shall be deemed to be a waiver by him of notice of such meeting. Section 6. Shareholders Entitled to Notice and to Vote ------------------------------------------- The Board of Directors may fix a date, which shall not be a past date, not exceeding sixty days preceding the date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of such meeting or to vote thereat, and/or the Board of Directors may close the books of the Corporation against transfer of shares during the whole or any part of such period, including the date of the meeting of the shareholders and the period ending with the date, if any, to which adjourned. -2- Section 7. Inspectiors of Election ----------------------- In advance of any meeting of shareholders, the Board of Directors may appoint Inspectors of Election to act at such meeting and at any adjournment or adjournments thereof. If such Inspectors shall not be so appointed, the Chairman of any such meeting may, and on the request of any shareholder or his proxy shall, make such appointments. No such Inspector need be a shareholder of the Corporation. In case any person appointed as such Inspector shall fail or refuse to act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting; or if not so filled, such vacancy may, and on request of any shareholder or his proxy shall, be filled at the meeting of the Chairman thereof. The Inspectors shall determine the number of shares outstanding, the voting rights of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies; shall receive votes, ballots, consents, waivers or releases, hear and determine all challenges and questions in any way arising in connection with the vote, count and tabulate all votes, consents, waivers and releases, determine and announce the result, and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. On request, the Inspectors shall make a report in writing of any challenge, question or matter determined by them, and shall make and execute a certificate of any fact found by them. If there shall be three or more Inspectors, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. The certificate of the Inspectors shall be prima facie evidence of the facts stated therein and of the vote as certified by them. Section 8. Quorum ------ The shareholders present in person or by proxy at any meeting of shareholders shall constitute a quorum for such meeting, but no action required by law, the Articles or the Regulations to be authorized or taken by the holders of a designated proportion of the shares of any particular class or of each class, may be authorized or taken by a lesser proportion. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time. Section 9. Voting ------ Except when votes are cumulated in the election of Directors as hereinafter provided and except as otherwise provided in the Articles, each outstanding share regardless of class shall entitle the holder thereof to one vote on each matter properly submitted to the shareholders for their vote, consent, waiver, release, or other action. -3- If notice in writing shall be given by any shareholder to the President, Vice President, or the Secretary of the Corporation, not less than forty-eight hours before the time fixed for the holding of a meeting of the shareholders for the purpose of electing Directors, that such shareholder desires that the voting at such election shall be cumulative, and if an announcement of the giving of such notice shall be made upon the convening of the meeting by the Chairman or Secretary or by or on behalf of the shareholder giving such notice, each shareholder shall have the right to cumulate such voting power as he shall possess and to give one candidate as many votes as shall be equal to the number of Directors to be elected multiplied by the number of his votes, or to distribute his votes on the same principle among two or more candidates, as he may see fit. Section 10. Proxies ------- A person who shall be entitled to attend a shareholders' meeting, to vote thereat, or to execute consents, waivers, or releases, may be represented at such meeting or vote thereat, and execute consents, waivers, and releases, and exercise any of his other rights, by proxy or proxies appointed by a writing signed by such person. A telegram or cablegram appearing to have been transmitted by such person, or a photographic, photostatic, or equivalent reproduction of a writing, appointing a proxy shall be sufficient in writing. No appointment of a proxy shall be valid after the expiration of eleven months after it is made unless the writing shall specify the date on which it is to expire or the length of time it is to continue in force. Unless the writing appointing a proxy shall otherwise provide: (1) Each proxy shall have the power of substitution and, when three or more proxies shall be appointed, a majority of them or of their substitutes may appoint one or more substitutes to act for all; (2) If more than one proxy shall be appointed, then (a) with respect to voting or executing consents, waivers, or releases, or objections to consents at a shareholders' meeting, a majority of such proxies as shall attend the meeting, or if only one shall attend then that one, may exercise all the voting and consenting authority thereat; and if one or more shall attend and a majority shall not agree on any particular issue, each proxy so attending shall be entitled to exercise such authority with respect to an equal number of shares; (b) with respect to exercising any other authority, a majority shall act for all; (3) A writing appointing a proxy shall not be revoked by the death or incompetency of the maker unless, before the vote shall be taken or the authority granted shall be otherwise exercised, written notice of such death or incompetency shall be given to -4- the Corporation by the executor or administrator of the estate of such maker or by the fiduciary having control of the shares in respect of which the proxy shall have been appointed; (4) The presence at a meeting of the person appointing a proxy shall not revoke this appointment. Without affecting any vote previously taken, the person appointing a proxy may revoke the appointment not otherwise revoked, by giving notice to the Corporation is writing or in open meeting. Section 11. Acting Without Meeting ---------------------- Any action which may be authorized or taken at a meeting of the shareholders may be authorized or taken without a meeting with the affirmative vote or approval of, and in a writing or writings signed by all the shareholders who would be entitled to notice of a meeting of the shareholders held for such purpose, which writing or writings shall be filed with or entered upon the records of the Corporation. Section 12. Accounts and Reports to Shareholders ------------------------------------ The Corporation shall keep correct and complete books and records of account, together with minutes of the proceedings of its incorporators, shareholders, Directors, and committees of the Directors, and records of its shareholders showing their names and addresses and the number and class of shares issued or transferred of record to or by them from time to time. At the annual meeting of shareholders, or the meeting held in lieu thereof, the Corporation shall lay before the shareholders a financial statement consisting of a balance sheet and a statement of profit and loss and surplus in the form required by law. The financial statement shall have appended thereto a certificate in the form required by law. Upon the written request of any shareholder made within sixty days after notice of any such meeting shall have been given, the Corporation, not later than the fifth day after receiving such request or the fifth day before such meeting, whichever shall be the later date, shall mail to such shareholder a copy of such financial statement. Any shareholder of the Corporation, upon written demand stating the specific purpose thereof, shall have the right to examine in person or by agent or attorney at any reasonable time and for any reasonable and proper purpose, the Articles of the Corporation, its Regulations, its books and records of account, minutes, and records of shareholders aforesaid, and voting trust agreements, if any, on file with the Corporation, and to make copies or extracts thereof. -5- ARTICLE III ----------- BOARD OF DIRECTORS - ------------------ Section 1. Authority and Term of Office ---------------------------- Except where the law, the Articles, or these Regulations require action to be authorized or taken by shareholders, all the authority of the Corporation shall be exercised by the Directors, who shall manage or conduct the business of the Corporation. The Directors shall be elected at the annual meeting of the shareholders or, if not so elected, at a special meeting of the shareholders called for that purpose. Each director shall hold office until the next annual meeting of the shareholders or a special meeting of the shareholders called for that purpose, as the case may be, and until his successor shall be elected and qualified, or until his earlier resignation, removal from office or death. Each person elected a Director of the Corporation shall qualify as such by either (a) accepting in writing his election as a Director, (b) being present and acting as a Director in a duly called meeting of the Board of Directors, or (c) consenting to the taking and adopting of a Resolution. Section 2. Number of Directors ------------------- The number of Directors of the Corporation, none of whom need by shareholders, shall be not less than that required by Ohio Revised Code Section 1701.56(A). The number of Directors shall be fixed by the shareholders at each annual meeting, or at a special meeting of the shareholders called for the purpose of electing Directors, as the case may be, at which a quorum shall be present, by the affirmative vote of the holders of a majority of the shares which shall be represented at the meeting and entitled to vote on such proposal. Section 3. Vacancies --------- The office of a Director shall become vacant if he shall die, or resign by a writing signed by him and delivered to the Corporation, and the Board of Directors may declare vacant the office of a Director: (1) If he shall be declared of unsound mind by an order of court or shall be adjudicated a bankrupt; (2) If he shall not qualify within sixty days after his election as provided by these Regulations. The remaining Directors though less than a majority of the whole authorized number of Directors, may, by the vote of a majority of their number, fill any vacancy in the Board for the unexpired term. Within the meaning of this Section, a vacancy shall exist in case the shareholders increase the authorized number of Directors but fail at the meeting at which such increase is -6- authorized, or an adjournment thereof, to elect the additional Directors provided for, or in case the shareholders shall fail at any time to elect the whole authorized number of Directors. Section 4. Meetings -------- The annual meeting of the Board of Directors shall be held immediately after the annual meeting of the shareholders and such meeting may be held without further notice. Other meetings of the Directors may be called by the Chairman of the Board, the President, any Vice President, or any two Directors. Meetings of the Directors may be held at any place within or without the State of Ohio. Written notice of the time and place of each meeting of the Directors, other than the annual meeting, shall be given to each Director either by personal delivery or by mail, telegram or cablegram at least two days before the meeting, which notice need not specify the purpose of the meeting. Such notice may be waived in writing either before or after the holding of such meeting. Such writing may be by telegram, cablegram or radiogram. The attendance of any Director at any such meeting without protesting the lack of proper notice prior to or at the announcement of the meeting, shall be deemed to be a waiver by him of notice of such meeting. Section 5. Quorum ------ A majority of the whole authorized number of Directors shall be necessary to constitute a quorum for a meeting of the Directors, except that a majority of the Directors in office shall constitute a quorum for filling a vacancy in the Board. The act of a majority of Directors present at a meeting at which a quorum shall be present shall be the act of the Board of Directors. If at any meeting there shall be less than a quorum present, the majority of those present may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall attend. Section 6. Fixing of Record Dates ---------------------- The Board of Directors may fix a date, which shall not be a past date, not exceeding sixty days preceding any dividend or distribution payment date or any date for the receipt or exercise of rights of purchase of or subscription for, or exchange or conversion of, shares or other securities, subject to contract rights with respect thereto, or any date for the participation in the execution of written consents, waivers or releases, as a record date for the determination of the shareholders entitled to receive such dividends or distributions, receive or exercise such rights, or participate in the execution of such consents, waivers or releases, and/or the Board of Directors may close the books of the Corporation against transfer of shares during the whole or any part of such period. -7- Section 7. Committees ---------- The Board of Directors may from time to time create an Executive Committee or any other committee of the Directors, to consist of not less than three Directors, and may authorize the delegation to any such committee of any of the authority of the Directors, however conferred, other than that of filling vacancies among the Directors or in any committee of the Directors. The Directors may appoint one or more Directors as alternate members of any such committee, who may take the place of any absent member or members at any meeting of such committee. Each such committee shall serve at the pleasure of the Directors, shall act only in the intervals between meetings of the Directors, and shall be subject to the control and direction of the Directors. Any such committee may act by a majority of its members at a meeting or by a writing or writings signed by all of its members. An act or authorization of an act by any such committee within the authority delegated to it shall be as effective for all purposes as the act or authorization of the Directors. The Board of Directors shall fix the compensation of the Chairman of the Board and of the President and shall fix or authorize the President to fix the compensation of any or all other officers. The Board of Directors may allow compensation to members of any committee and may vote compensation to any Director for attendance at meetings or for any special services. Section 8. Action Without Meeting ---------------------- Any action which may be authorized or taken at a meeting of the Directors may be authorized or taken without a meeting with the affirmative vote or approval of, and in a writing or writings signed by, all the Directors, which writings shall be filed with or entered upon the records of the Corporation. Section 9. When Duties of Officers May be Delegated ---------------------------------------- The Board of Directors may for any reason that may seem sufficient to the Board, and effective for such length of time, which may be unlimited, as the Board may determine, delegate any or all of the duties and powers of the Corporation to any other officer. -8- ARTICLE V --------- CERTIFICATES - ------------ Section 1. Certificates ------------ The certificates representing shares of the Corporation shall be in such form, consistent with law, as shall be approved by the Board of Directors. Section 2. Transfer and Registration ------------------------- The Board of Directors shall have the authority to make such rules and regulations, not inconsistent with law, the articles or these Regulations, as it may deem expedient concerning the issuance, transfer and registration of certificates for shares and the shares represented thereby, and may appoint transfer agents and registrars thereof. Transfer books may be kept in any state of the United States or in any foreign country for the purposes of transferring shares issued by the Corporation; but if no transfer agent shall be appointed to act in this state, the Corporation shall keep an office in this state at which shares shall be transferable, and at which it shall keep books in which shall be recorded the names and addresses of all shareholders and all transfers of shares. Section 3. Substituted Certificates ------------------------ Any person claiming a certificate for shares alleged to have been lost, stolen or destroyed, shall make an affidavit or affirmation of the fact, give the Corporation and its registrar or registrars and its transfer agent or agents a bond or indemnity satisfactory to the Board, and, if required by the Board of Directors, advertise the same in such manner as the Board of Directors may require, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to have been lost, stolen or destroyed. ARTICLE IV ---------- OFFICERS - -------- Section 1. Officers -------- The Corporation may have a Chairman of the Board of Directors and shall have a President, a Secretary and a Treasurer, all of whom shall be chosen by the Board of Directors. The Corporation may also have an Executive Vice President, one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other officers as the Board may deem necessary, all of whom shall be chosen by the Board of Directors or by an officer or officers designated by it. The Chairman of the Board shall be, but the other officers may but need not be, a member of the Board of Directors. Each -9- officer shall hold office until his successor shall be chosen and qualified, unless otherwise specified by the Board of Directors. Any officer shall be subject to removal, with or without cause, at any time by the vote of a majority of the Board of Directors. Any two or more offices may, in the discretion of the Board of Directors, be held at the same time by the same person. However, no officer shall execute, acknowledge or ratify any instrument in more than one capacity if such instrument shall be required by law or by the Regulations or By-Laws to be executed, acknowledged or verified by any two or more officers. Section 2. Chairman of the Board --------------------- The Chairman of the Board shall have the authority to preside at all meetings of the shareholders and of the Board of Directors, and shall have such other duties and powers as are to be assigned to or vested in him by the Board of Directors or by the Executive Committee. Section 3. The President ------------- The President shall be the chief executive officer of the Corporation, and in the absence of the Chairman of the Board shall have the authority to preside at all meetings of the shareholders and of the Board of Directors. Subject to the direction of the Board of Directors and the Executive Committee, he shall have general charge and authority over the business of the Corporation. He shall from time to time make such reports of the business of the Corporation as the Board of Directors may require, and shall make a report of the business of the Corporation for the preceding fiscal year to the shareholders at each annual meeting. The President shall have such other duties and powers as may be assigned to or vested in him by the Board of Directors or by the Executive Committee. Section 4. The Vice President ------------------ The Executive Vice President, or, if there be none, the Vice Presidents, in the order of their seniority by designation (or, if not designated, in the order of their seniority at election), shall perform the duties of the President in the absence or during his disability to act. The Executive Vice President and the Vice Presidents shall have such other duties and powers as may be assigned to or vested in them by the Board of Directors or by the Executive Committee or by the President. Section 5. The Secretary ------------- The Secretary shall issue notices of all meetings for which notice shall be required to be given, shall keep the minutes of all meetings, shall have charge of the corporate seal and corporate record books, shall cause to be prepared for each meeting of shareholders the list of shareholders entitled to vote thereat, and shall have such other duties and powers as may be assigned to or vested in him by the Board of Directors, the Executive Committee or the President. -10- Section 6. The Treasurer ------------- The Treasurer shall have the custody of all moneys and securities of the Corporation and shall keep adequate and correct accounts of the Corporation's business transactions, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, stated capital and shares, shall prepare and lay before the shareholders' meetings the data referred to in Section 12 of Article II hereof, and shall mail copies of such data as required in said Section to any shareholder requesting same. The funds of the Corporations shall be deposited in the name of the Corporation by the Treasurer in such depositories as the Board of Directors may from time to time designate. The Treasurer shall have such other duties and powers as may be assigned to or vested in him by the Board of Directors, the Executive Committee or the President. Section 7. Other Officers -------------- Other officers of the Corporation shall have such duties and powers as may be assigned to or vested in them by the Board of Directors, the Executive Committee or the President. Section 8. Authority to Sign ----------------- Except as otherwise specifically provided by the Board of Directors or by the Executive Committee, checks, notes, drafts, contracts or other instruments authorized by the Board of Directors or by the Executive Committee shall be executed and delivered on behalf of the Corporation by the President, the Treasurer or a Vice-President, and by the Secretary, Assistant Secretary or an Assistant Treasurer. ARTICLE VI ---------- RESIGNATION OF DIRECTORS AND OFFICERS - ------------------------------------- Any Director or officer may resign at any time by delivering written notice to the Corporation. Any such resignation shall take effect immediately or at such other time as may be specified therein. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. -11- ARTICLE VII ----------- INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES - ---------------------------------------------------- The Corporation shall indemnify and reimburse any person who then is or shall have been a Director, officer or employee of the Corporation, or who then is serving or shall have served at its request as a Director, officer or employee of another corporation, for expenses (including attorneys' fees), judgments, decrees, fines, penalties or settlements incurred or paid in connection with the defense of any pending or threatened action, suit or proceeding, criminal or civil, to which he then is or may be a party by reason of being or having been such Director, officer or employee; provided that: (1) He shall be adjudicated or determined not to have been negligent or guilty of misconduct in the performance of his duty to the Corporation or other corporation of which he then is or shall have been a Director, officer or employee; and (2) It shall be determined that he acted in good faith in what he reasonably believed to be the best interests of the Corporation or other corporation of which he then is or shall have been a Director, officer or employee; and (3) In any matter the subject of a criminal action, suit or proceeding, it shall be determined that he had no reasonable cause to believe that his conduct was unlawful. The determination as to (2) or (3) of the preceding paragraph, and, in the absence of an adjudication by a court of competent jurisdiction the determination as to (1), shall be made as follows: (a) By the Directors of the Corporation acting at a meeting at which a quorum consisting of Directors who shall not be parties to or threatened with any such action, suit or proceeding shall be present, provided that any Director who shall be a party to or threatened with any such action, suit or proceeding shall not be qualified to vote on such determination. (b) If a quorum of qualified Directors cannot be obtained to vote on such determination, it shall be made by independent legal counsel, selected by the Directors, in the form of a written opinion. The indemnification provided by this ARTICLE VII shall not be deemed exclusive of any other rights to which such person may be entitled, and shall inure to the benefit of the heirs, executors and administrators of such person. The Corporation may purchase and maintain insurance against any liability asserted against or incurred by any person who, in his capacity of being or having been a Director, officer or employee as aforesaid, may be indemnified or reimbursed pursuant to the provisions of this ARTICLE VII, whether or not the Corporation would have the power to -12- indemnify or reimburse such person under the provisions of this ARTICLE VII. ARTICLE VIII ------------ MISCELLANEOUS - ------------- Section 1. Voting Shares Held by the Corporation ------------------------------------- Unless otherwise ordered by the Board of Directors, the Treasurer in person or by proxy or proxies appointed by him shall have full power and authority on behalf of the Corporation to vote, act and consent with respect to any shares issued by other corporations which the Corporation may own. The Corporation shall not directly or indirectly vote any shares issued by it. Section 2. Seal ---- The Corporation shall have no seal. Section 3. Amendments ---------- These Regulations may be amended in any respect or superseded by new Regulations, in whole or in part, by the affirmative vote or the written consent of the shareholders entitled to exercise a majority of the voting power on such proposal; provided, however, that if an amendment shall be adopted by written consent without a meeting of the shareholders, it shall be the duty of the Secretary to enter the amendment in the records of the Corporation and to mail a copy of such amendment to each shareholder who shall have been entitled to vote thereon and shall not have participated in the adoption thereof. -13- HOLD, INC. ---------- ACTION OF SHAREHOLDERS TAKEN WITHOUT A MEETING October 29, 1978 ---------------- Pursuant to the authority of Section 1701.54 of the Ohio Revised Code, the undersigned, being all of the shareholders of HOLD, INC., do hereby take and authorize the following action in writing without a meeting: AMENDMENT TO CODE OF REGULATIONS RESOLVED: That Article III, Section 3 of the Code of Regulations of the Corporation is amended by deleting in its entirety the second full paragraph thereof and substituting therefor the following new paragraph: "The remaining Directors though less than a majority of the whole authorized number of Directors, may, by unanimous vote but not otherwise, fill any vacancy in the Board for the unexpired term. Within the meaning of this Section, a vacancy shall exist in case the shareholders increase the authorized number of Directors but fail at the meeting at which such increase is authorized, or an adjournment thereof, to elect the additional Directors provided for, or in case the shareholders shall fail at any time to elect the whole authorized number of Directors." RESOLVED FURTHER: That Article III, Section 5 of the Code of Regulations of the Corporation is hereby amended by deleting in its entirety present Section 5 and substituting therefore the following new Section 5: "Section 5. Quorum ------ A majority of the whole authorized number of Directors shall be necessary to constitute a quorum for a meeting of the Directors, except that a majority of the Directors in office shall constitute a quorum for filling a vacancy in the Board. The act of a majority of Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors except in the following instances where the act of all of the Directors present at a meeting where a quorum is present shall be required to constitute an act of the Board of Directors: (a) The determination of the time when, the terms under which, and the consideration for which the Corporation issues, disposes of, or receives subscriptions for, its shares including treasury shares. (b) The extension, modification or amendment in any way of the Credit Agreement, dated September 13, 1978, among the Corporation, Union Commerce Bank and others, or any other agreement which places restrictions on the ability of the Corporation to redeem any of its shares. (c) The redemption by the Corporation of any of its shares currently issued and outstanding except if such redemption is pro rata or is pursuant to the Share Purchase agreement, dated September 12, 1978, among the Corporation, Stephen A. Albanese, Ned S. Bearden, Ned S. Bearden, Trustee, and John P. Blaser or pursuant to the Share Purchase Agreement dated September 12, 1978 among the Corporation, Frederick G. Heman and Robert M. Berman. (d) The partial or complete liquidation of a subsidiary of this Corporation." /s/ ---------------------------------------- Stephen A. Albanese, Voting Trustee under Voting Trust Agreement dated September 12, 1978 /s/ ---------------------------------------- Ned S. Bearden, Voting Trustee under Voting Trust Agreement dated September 12, 1978 /s/ ---------------------------------------- John P. Blaser, Voting Trustee under Voting Trust Agreement dated September 12, 1978 -2- EX-3.9 10 CERTICICATE OF INCORPORTION OF MIDWAY-CTS BUFFALO Certificate of Incorporation of MIDWAY-CTS BUFFALO, LTD. pursuant to Section 402 of the Business Corporation Law IT IS HEREBY CERTIFIED THAT: The name of the corporation is MIDWAY-CTS BUFFALO, LTD. The purposes for which this corporation is formed are as follows: To engage in any lawful act or activity for which corporations may be formed under the Business Corporation Law. This corporation is not formed to engage in any act or activity for which approval by an state department, official, board, agency or other body is required without such approval first being obtained. The corporation, in furtherance of its corporate purposes above set forth, shall have all of the powers enumerated in Section 202 of the Business Corporation Law or any other statute of the State of New York. The aggregate number of shares the corporation shall have the authority to issue is one hundred (100) voting shares with no par value and one thousand (1000) non-voting shares with no par value. The office of the corporation is to be located in the County of Onondaga, State of New York. The Secretary of State is designated as agent of the corporation upon whom the process in any action or proceeding against it may be served. The postal address to which the Secretary of State shall mail a copy of the process against the corporation served upon him is 140 Cortland Avenue, Syracuse, NY 13221. The corporation elects to name a registered agent. The registered agent for the corporation shall be: CT Corporation System 1633 Broadway New York, NY 10019 The undersigned incorporator is over the age of eighteen years. IN WITNESS WHEREOF, this certificate has been subscribed this 30th day of September, 1994, by the undersigned who affirms that the statements made herein are true under the penalties of perjury. James Geraci 194 Washington Ave. /s/ James Geraci ----------------------------- Albany, NY 12210 EX-3.10 11 BY-LAWS OF MIDWAY-CTS BUFFALO, LTD BY-LAWS ------- OF -- MIDWAY-CTS BUFFALO, LTD. ARTICLE I - OFFICES ------------------- The office of the Corporation shall be located in the City, County and State designated in the Certificate of Incorporation. The Corporation may also maintain offices at such other places within or without the United States as the Board of Directors may, from time to time, determine. ARTICLE II - MEETING OF SHAREHOLDERS ------------------------------------ Section 1 - Annual Meetings: - ---------------------------- The annual meeting of the shareholders of the Corporation shall be held within five months after the close of the fiscal year of the Corporation, for the purpose of electing directors, and transacting such other business as may properly come before the meeting. Section 2 - Special Meetings: - ----------------------------- Special meetings of the shareholders may be called at any time by the Board of Directors or by the President, and shall be called by the President or the Secretary at the written request of the holders of ten percent (10%) of the shares then outstanding and entitled to vote thereat, or as otherwise required under the provisions of the Business Corporation Law. Section 3 - Place of Meetings: - ------------------------------ All meetings of shareholders shall be held at the principal office of the Corporation, or at such other places within or without the State of New York as shall be designated in the notices or waivers of notice of such meetings. Section 4 - Notice of Meetings: - ------------------------------- (a) Written notice of each meeting of shareholders, whether annual or special, stating the By-Laws-1 time when and place where it is to be held, shall be served either personally or by mail, not less than ten or more than fifty days before the meeting, upon each shareholder of record entitled to vote at such meeting, and to any other shareholder to whom the giving of notice may be required by law. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called, and shall indicate that it is being issued by, or at the direction of, the person or persons calling the meeting. If, at any meeting, action is proposed to be taken that would, if taken, entitle shareholders to receive payment for their shares pursuant to the Business Corporation Act, the notice of such meeting shall include a statement of that purpose and to that effect. If mailed, such notice shall be directed to each such shareholder at his address, as it appears on the records of the shareholders of the Corporation, unless he shall have previously filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case, it shall be. mailed to the address designated in such request. (b) Notice of any meeting need not be given to any person who may become a shareholder of record after the mailing of such notice, and prior to the meeting, or to any shareholder who attends such meeting, in person or by proxy, or to any shareholder who, in person or by proxy, submits a signed waiver of notice either before or after such meeting. Notice of any adjourned meeting of shareholders need not be given, unless otherwise required by statute. Section 5 - Quorum: - ------------------ (a) Except as otherwise provided herein, or by statute, or in the Certificate of Incorporation (such Certificate and any amendments thereof being hereinafter collectively referred to as the "Certificate of Incorporation"), at all meetings of shareholders of the Corporation, the presence at the commencement of such meetings in person or by proxy of shareholders holding of record a majority of the total number of shares of the Corporation then issued and outstanding and entitled to vote, shall be necessary and sufficient to constitute a quorum for the transaction of any business. The withdrawal of any shareholder after the commencement of a meeting shall have no effect on the existence of a quorum, after a quorum has been established at such meeting. (b) Despite the absence of a quorum at any annual or special meeting of shareholders, the shareholders, by a majority of the votes cast by the holders of shares entitled to vote thereon, may adjourn the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called if a quorum had been present. Section 6 - Voting: - ------------------ (a) Except as otherwise provided by statute or by the Certificate of Incorporation, any corporate action, other than the election of directors to be taken by vote of the shareholders, shall be authorized by a majority of votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon. (b) Except as otherwise provided by statute or by the Certificate of Incorporation, at each meeting of shareholders, each holder of record of stock of the Corporation entitled to vote thereat, By-Laws-2 shall be entitled to one vote for each share of stock registered in his name on the books of the Corporation. (c) Each shareholder entitled to vote or to express consent or dissent without a meeting, may do so by proxy; provided, however, that the instrument authorizing such proxy to act shall have been executed in writing by the shareholder himself, or by his attorney-in-fact thereunto duly authorized in writing. No proxy shall be valid after the expiration of eleven months from the date of its execution, unless, the persons executing it shall have specified therein the length of time it is to continue in force. Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation. (d) Any resolution in writing, signed by all of the shareholders entitled to vote thereon, shall be and constitute action by such shareholders to the effect therein expressed, with the same force and effect as if the same had been duly passed by unanimous vote at a duly called meeting of shareholders and such resolution so signed shall be inserted in the Minute Book of the Corporation under its proper date. ARTICLE III - BOARD OF DIRECTORS -------------------------------- Section 1 - Number, Election and Term of Office: - ------------------------------------------------ (a) The number of the directors of the Corporation shall be three (3), unless and until otherwise determined by vote of a majority of the entire Board of Directors. The number of Directors shall not be less than three, unless all of the outstanding shares are owned beneficially and of record by less than three shareholders, in which event the number of directors shall not be less than the number of shareholders. (b) Except as may otherwise be provided herein or in the Certificate of Incorporation, the members of the Board of Directors of the Corporation, who need not be shareholders, shall be elected by a majority of the votes cast at a meeting of shareholders, by the holders of shares entitled to vote in the election. (c) Each director shall hold office until the annual meeting of the shareholders next succeeding his election, and until his successor is elected and qualified, or until his prior death, resignation or removal. Section 2 - Duties and Powers: - ------------------------------ The Board of Directors shall be responsible for the control and management of the affairs, property and interests of the Corporation, and may exercise all powers of the Corporation, except as are in the Certificate of Incorporation or by statute expressly conferred upon or reserved to the shareholders. By-Laws-3 Section 3 - Annual and Regular Meetings; Notice: - ----------------------------------------------- (a) A regular annual meeting of the Board of Directors shall be held immediately following the annual meeting of the shareholders at the place of such annual meeting of shareholders. (b) The Board of Directors, from time to time, may provide by resolution for the holding of other regular meetings of the Board of Directors, and may fix the time and place thereof. (c) Notice of any regular meeting of the Board of Directors shall not be required to be given and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be given to each director who shall not have been present at the meeting at which such action was taken within the time limited, and in the manner set forth in paragraph (b) of Section 4 of this Article III, with respect to special meetings, unless such notice shall be waived in the manner set forth in paragraph (c) of such Section 4. Section 4 - Special Meetings: Notice: - ------------------------------------- (a) Special meetings of the Board of Directors shall be held whenever called by the President or by one of the directors, at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Notice of special meetings shall be mailed directly to each director, addressed to him at his residence or usual place of business, at least two (2) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegram, radio or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meeting is to be held. A notice, or waiver of notice, except as required by Section 8 of this Article III, need not specify the purpose of the meeting. (c) Notice of any special meeting shall not be required to be given to any director who shall attend such meeting without protesting prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notice of any adjourned meeting shall not be required to be given. Section 5 - Chairman: - --------------------- (a) At all meetings of the Board of Directors, the Chairman of the Board, if any and if present, shall preside. If there shall be no Chairman, or he shall be absent, then the President shall preside, and in his absence, a Chairman chosen by the Directors shall preside. Section 6 - Quorum and Adjournments: - ------------------------------------ (a) At all meetings of the Board of Directors, the presence of a majority of the entire Board shall be necessary and sufficient to constitute, a quorum for the transaction of business, except as otherwise provided by law, by the Articles of Incorporation, or by these By-Laws. Participation of By-Laws-4 any one or more members of the Board by means of a conference telephone or similar communications; equipment, allowing all persons participating in the meeting to hear each other at the same time, shall constitute presence in person at any such meeting. (b) A majority of the directors present at the time and place of any regular or special meeting, although less than a quorum, may adjourn the same from time to time without notice, until a quorum shall be present. Section 7 - Manner of Acting: - ----------------------------- (a) At all meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by statute, by the Certificate of Incorporation, or these By-Laws, the action of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. Any action authorized, in writing, by all of the directors entitled to vote thereon and filed with the minutes of the Corporation shall be the act of the Board of Directors with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board. Section 8 - Vacancies: - ---------------------- Any vacancy in the Board of Directors occurring by reason of an increase in the number of directors, or by reason of the death, resignation, disqualification, removal (unless a vacancy created by the removal of a director by the shareholders shall be filled by the shareholders at the meeting at which the removal was effected) or inability to act of any director, or otherwise, shall be filled for the unexpired portion of the term by a majority vote of the remaining directors, though less than a quorum, at any regular meeting or special meeting of the Board of Directors called for that purpose. Section 9 - Resignation: - ------------------------ Any director may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 10 - Removal: - --------------------- Any director may be removed with or without cause at any time by the shareholders, at a special meeting of the shareholders called for that purpose, and may be removed for cause by action of the Board. By-Laws-5 Section 11 - Salary: - -------------------- No stated salary shall be paid to directors, as such, for their services, but by resolution of the Board of Directors a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12 - Contracts: - ----------------------- (a) No contract or other transaction between this Corporation and any other Corporation shall be impaired, affected or invalidated nor shall any director be liable in any way by reason of the fact that any one or more of the directors of this Corporation is or are interested in, or is a director or officer, or are directors or officers of such other Corporation, provided that such facts are disclosed or made known to the Board of Directors. (b) Any director, personally and individually, may be a party to or may be interested in any contract or transaction of this Corporation, and no director shall be liable in any way by reason of such interest, provided that the fact of such interest be disclosed or made known to the Board of Directors, and provided that the Board of Directors shall authorize, approve or ratify such contract or transaction by the vote (not counting the vote of any such director) of a majority of a quorum, notwithstanding the presence of any such director at the meeting at which such action is taken. Such director or directors may be counted in determining the presence of a quorum at such meeting. This Section shall not be construed to impair or invalidate or in any way affect any contract or other transaction which would otherwise be valid under the law (common, statutory or otherwise) applicable thereto. Section 13 - Committees: - ------------------------ The Board of Directors, by resolution adopted by a majority of the entire Board, may from time to time designate from among its members an executive committee and such other committees, and alternate members thereof; as they deem desirable, each consisting of three or more members, with such powers and authority (to the extent permitted by law) as may be provided in such resolution. Each such committee shall serve at the pleasure of the Board. At all meetings of a committee, the presence of all members of the committee shall be necessary to constitute a quorum for the transaction of business, except as otherwise provided by said resolution or by these By-laws. Participation of any one or more members of the committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time, shall constitute presence in person at any such meeting. Any action authorized in writing by all of the members of a committee entitled to vote thereon and filed with the minutes of the Committee shall be the act of the committee with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the committee. By-Laws-6 ARTICLE IV - OFFICERS --------------------- Section 1 - Number, Qualifications, Election and Term of Office: - ---------------------------------------------------------------- (a) The officers of the Corporation shall consist of a President, a Secretary, a Treasurer, and such other officers, including a Chairman of the Board of Directors, and one or more Vice Presidents, as the Board of Directors may from time to time deem advisable. Any officer other than the Chairman of the Board of Directors may be, but is not required to be, a director of the Corporation. Any two or more offices may be held by the same person. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of shareholders. (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor shall have been elected and qualified, or until his death, resignation or removal. Section 2 - Resignation: - ------------------------ Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, or to the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or by such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 3 - Removal: - -------------------- Any officer may be removed, either with or without cause, and a successor elected by the Board at any time. Section 4 - Vacancies: - ---------------------- A vacancy in any office by reason of death, resignation, inability to act, disqualification, or any other cause, may at any time be filled for the unexpired portion of the term by the Board of Directors. Section 5 - Duties of Officers: - ------------------------------- Officers of the Corporation shall, unless otherwise provided by the Board of Directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may be set forth in these by-laws, or may from time to time be specifically conferred or imposed by the Board of Directors. The President shall be the chief executive officer of the Corporation. By-Laws-7 Section 6 - Sureties and Bonds: - ------------------------------- In case the Board of Directors shall so require, any officer, employee or agent of the Corporation shall execute to the Corporation a bond in such sum, and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence and for the accounting for all property, funds or securities of the Corporation which may come into his hands. Section 7 - Shares of Other Corporations: - ----------------------------------------- Whenever the Corporation is the holder of shares of any other corporation, any right or power of the Corporation as such shareholder (including the attendance, acting and voting at shareholders' meetings and execution of waivers, consents, proxies or other instruments) may be exercised on behalf of the Corporation by the President, any Vice President, or such other person as the Board of Directors may authorize. ARTICLE V - SHARES OF STOCK ----------------------------- Section 1 - Certificate of Stock: - --------------------------------- (a) The certificates representing shares of the Corporation shall be in such form as shall be adopted by the Board of Directors, and shall be numbered and registered in the order issued. They shall bear the holder's name and the number of shares, and shall be signed by (i) the Chairman of the Board or the President or a Vice President, and (ii) the Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer, and may bear the corporate seal. (b) No certificate representing shares shall be issued until the full amount of consideration therefor has been paid, except as otherwise permitted by law. (c) The Board of Directors may authorize the issuance of certificates for fractions of a share which shall entitle the holder to exercise voting rights, receive dividends and participate in liquidating distributions, in proportion to the fractional holdings; or it may authorize the payment in cash of the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or it may authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the signature of an officer or agent of the Corporation, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder, except as therein provided. Section 2 - Lost or Destroyed Certificates: - ------------------------------------------- The holder of any certificate representing shares of the Corporation shall immediately notify the Corporation of any loss or destruction of the certificate representing the same. The Corporation may issue a new certificate in the place of any certificate theretofore issued by it, alleged to have been lost or destroyed. On production of such evidence of loss or destruction as the Board of By-Laws-8 Directors in its discretion may require, the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the Corporation a bond in such sum as the Board may direct, and with such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claims, loss, liability or damage it may suffer on account of the issuance of the new certificate. A new certificate may be issued without requiring any such evidence or bond when, in the judgment of the Board of Directors, it is proper so to do. Section 3 - Transfers of Shares: - -------------------------------- (a) Transfers of shares of the Corporation shall be made on the share records of the Corporation only by the holder of record thereof, in person or by his duly authorized attorney, upon surrender for cancellation of the certificate or certificates representing such shares, with an assignment or power of transfer endorsed thereon or delivered therewith, duly executed, with such proof of the authenticity of the signature and of authority to transfer and of payment of transfer taxes as the Corporation or its agents may require. (b) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 4 - Record Date: - ------------------------ In lieu of closing the share records of the Corporation, the Board of Directors may fix, in advance, a date not exceeding fifty days, nor less than ten days, as the record date for the determination of shareholders entitled to receive notice of, or to vote at, any meeting of shareholders, or to consent to any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held; the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the resolution of the directors relating thereto is adopted. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided for herein, such determination shall apply to any adjournment thereof, unless the directors fix a new record date for the adjourned meeting. ARTICLE VI - DIVIDENDS ---------------------- Subject to applicable law, dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine. By-Laws-9 ARTICLE VII - FISCAL YEAR ------------------------- The fiscal year of the Corporation shall be fixed by the Board of Directors from time to time, subject to applicable law. ARTICLE VIII - CORPORATE SEAL ----------------------------- The corporate seal, if any, shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE IX - AMENDMENTS ----------------------- Section 1 - By Shareholders: - ---------------------------- All by-laws of the Corporation shall be subject to alteration or repeal, and new by-laws may be made, by a majority vote of the shareholders at the time entitled to vote in the election of directors. Section 2 - By Directors: - ------------------------- The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, by-laws of the Corporation; provided, however, that the shareholders entitled to vote with respect thereto as in this Article IX above- provided may alter, amend or repeal by-laws made by the Board of Directors, except that the Board of Directors shall have no power to change the quorum for meetings of shareholders or of the Board of Directors, or to change any provisions of the by-laws with respect to the removal of directors or the filling of vacancies in the Board resulting from the removal by the shareholders. If any by-law regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of shareholders for the election of directors, the by-law so adopted, amended or repealed, together with a concise statement of the changes made. The undersigned Incorporator certifies the he has adopted the foregoing by-laws as the first by-laws of the Corporation, in accordance with the requirements of the Business Corporation Law. Dated:_____________________ /s/ David P. O'Hara ----------------------------- Incorporator By-Laws-10 EX-4.1 12 INDENTURE EXHIBIT 4.1 EXECUTION COPY ================================================================================ Coyne International Enterprises Corp. $150,000,000 SERIES A AND SERIES B 11 1/4% SENIOR SUBORDINATED NOTES DUE 2008 INDENTURE _____________________________________ Dated as of June 26, 1998 _____________________________________ IBJ SCHRODER BANK & TRUST COMPANY Trustee ______________ ================================================================================ CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section 310 (a)(1)........................ 7.10 (a)(2)............................ 7.10 (a)(3)............................ N.A. (a)(4)............................ N.A. (a)(5)............................ 7.10 (b)............................... 7.10 (c)............................... N.A. 311(a)............................ 7.11 (b)............................... 7.11 (i)(c)............................ N.A. 312 (a)........................... 2.05 (b)............................... 13.03 (c)............................... 13.03 313(a)............................ 7.06 (b)(2)............................ 7.07 (c)............................... 7.06; 13.02 (d)............................... 7.06 314(a)............................ 4.03; 13.02 (c)(1)............................ 13.04 (c)(2)............................ 13.04 (c)(3)............................ N.A. (e)............................... 13.05 (f)............................... N.A. 315 (a)........................... 7.01 (b)............................... 7.05; 13.02 (A)(c)............................ 7.01 (d)............................... 7.01 (e)............................... 6.11 316 (a)(last sentence)............ 2.09 (a)(1)(A)......................... 6.05 (a)(1)(B)......................... 6.04 (a)(2)............................ N.A. (b)............................... 6.07 (c)............................... 2.12 317 (a)(1)........................ 6.08 (a)(2)............................ 6.09 (b)............................... 2.04 318 (a)........................... 13.01 (b)............................... N.A. (c)............................... 12.01
N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. TABLE OF CONTENTS -----------------
PAGE ---- ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE..................... 1 SECTION 1.01. DEFINITIONS............................................... 1 SECTION 1.02. OTHER DEFINITIONS......................................... 16 SECTION 1.03. TRUST INDENTURE ACT DEFINITIONS........................... 16 SECTION 1.04. RULES OF CONSTRUCTION..................................... 17 ARTICLE 2. THE NOTES...................................................... 17 SECTION 2.01. FORM AND DATING........................................... 17 SECTION 2.02. EXECUTION AND AUTHENTICATION.............................. 19 SECTION 2.03. REGISTRAR AND PAYING AGENT................................ 19 SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST....................... 20 SECTION 2.05. HOLDER LISTS.............................................. 20 SECTION 2.06. TRANSFER AND EXCHANGE..................................... 20 SECTION 2.07. REPLACEMENT NOTES......................................... 32 SECTION 2.08. OUTSTANDING NOTES......................................... 32 SECTION 2.09. TREASURY NOTES............................................ 33 SECTION 2.10. TEMPORARY NOTES........................................... 33 SECTION 2.11. CANCELLATION.............................................. 33 SECTION 2.12. DEFAULTED INTEREST........................................ 33 SECTION 2.13. CUSIP NUMBERS............................................. 33 ARTICLE 3. REDEMPTION AND PREPAYMENT...................................... 34 SECTION 3.01. NOTICES TO TRUSTEE........................................ 34 SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED......................... 34 SECTION 3.03. NOTICE OF REDEMPTION...................................... 34
PAGE ---- SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION...................................... 35 SECTION 3.05. DEPOSIT OF REDEMPTION PRICE......................................... 35 SECTION 3.06. NOTES REDEEMED IN PART.............................................. 36 SECTION 3.07. OPTIONAL REDEMPTION................................................. 36 SECTION 3.08. MANDATORY REDEMPTION................................................ 36 SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS................. 36 ARTICLE 4. COVENANTS................................................................ 38 SECTION 4.01. PAYMENT OF NOTES.................................................... 38 SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY..................................... 38 SECTION 4.03. REPORTS............................................................. 39 SECTION 4.04. COMPLIANCE CERTIFICATE.............................................. 39 SECTION 4.05. TAXES............................................................... 40 SECTION 4.06. STAY, EXTENSION AND USURY LAWS...................................... 40 SECTION 4.07. RESTRICTED PAYMENTS................................................. 40 SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES...... 42 SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.......... 43 SECTION 4.10. ASSET SALES......................................................... 45 SECTION 4.11. TRANSACTIONS WITH AFFILIATES........................................ 46 SECTION 4.12. LIENS............................................................... 46 SECTION 4.13. SALE AND LEASEBACK TRANSACTIONS.................................... 46 SECTION 4.14. CORPORATE EXISTENCE................................................. 47 SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.......................... 47 SECTION 4.16. NO SENIOR SUBORDINATED DEBT......................................... 48 SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES.................................... 48 SECTION 4.18. PAYMENTS FOR CONSENT................................................ 48
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PAGE ---- ARTICLE 5. SUCCESSORS...................................................................... 48 SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS............................. 48 SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.................................... 49 ARTICLE 6. DEFAULTS AND REMEDIES........................................................... 49 SECTION 6.01. EVENTS OF DEFAULT.................................................... 49 SECTION 6.02. ACCELERATION......................................................... 50 SECTION 6.03. OTHER REMEDIES....................................................... 51 SECTION 6.04. WAIVER OF PAST DEFAULTS.............................................. 51 SECTION 6.05. CONTROL BY MAJORITY.................................................. 52 SECTION 6.06. LIMITATION ON SUITS.................................................. 52 SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT........................ 52 SECTION 6.08. COLLECTION SUIT BY TRUSTEE........................................... 52 SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM..................................... 53 SECTION 6.10. PRIORITIES........................................................... 53 SECTION 6.11. UNDERTAKING FOR COSTS................................................ 53 ARTICLE 7. TRUSTEE......................................................................... 54 SECTION 7.01. DUTIES OF TRUSTEE.................................................... 54 SECTION 7.02. RIGHTS OF TRUSTEE.................................................... 55 SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE......................................... 55 SECTION 7.04. TRUSTEE'S DISCLAIMER................................................. 55 SECTION 7.05. NOTICE OF DEFAULTS................................................... 56 SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES........................... 56 SECTION 7.07. COMPENSATION AND INDEMNITY........................................... 56 SECTION 7.08. REPLACEMENT OF TRUSTEE............................................... 57 SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC..................................... 58
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PAGE ---- SECTION 7.10. ELIGIBILITY; DISQUALIFICATION................................................................ 58 SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY............................................ 58 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE................................................................ 59 SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE...................................... 59 SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE................................................................ 59 SECTION 8.03. COVENANT DEFEASANCE........................................................................... 59 SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.................................................... 60 SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN Trust; OTHER MISCELLANEOUS PROVISIONS......................................................... 61 SECTION 8.06. REPAYMENT TO COMPANY.......................................................................... 61 SECTION 8.07. REINSTATEMENT................................................................................. 62 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER......................................................................... 62 SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES........................................................... 62 SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.............................................................. 63 SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT........................................................... 64 SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS............................................................. 64 SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.............................................................. 64 SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC............................................................... 65 ARTICLE 10. SUBORDINATION.......................................................................................... 65 SECTION 10.01. AGREEMENT TO SUBORDINATE...................................................................... 65 SECTION 10.02. CERTAIN DEFINITIONS........................................................................... 65 SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.......................................................... 66 SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT............................................................. 66 SECTION 10.05. ACCELERATION OF NOTES......................................................................... 67 SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER........................................................... 67
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PAGE ---- SECTION 10.07. NOTICE BY COMPANY............................................................................. 67 SECTION 10.08. SUBROGATION................................................................................... 68 SECTION 10.09. RELATIVE RIGHTS............................................................................... 68 SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.................................................. 68 SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE...................................................... 68 SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT............................................................ 69 SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION......................................................... 69 ARTICLE 11. SUBSIDIARY GUARANTEES.............................................................................. 69 SECTION 11.01. SUBSIDIARY GUARANTEE.......................................................................... 69 SECTION 11.02. SUBORDINATION OF SUBSIDIARY GUARANTEE......................................................... 70 SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY............................................................. 70 SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE................................................ 71 SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS............................................ 71 SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS............................................................. 72 ARTICLE 12. SATISFACTION AND DISCHARGE......................................................................... 72 SECTION 12.01. SATISFACTION AND DISCHARGE OF INDENTURE....................................................... 72 SECTION 12.02. APPLICATION OF TRUST MONEY.................................................................... 73 ARTICLE 13. MISCELLANEOUS...................................................................................... 73 SECTION 13.01. TRUST INDENTURE ACT CONTROLS.................................................................. 73 SECTION 13.02. NOTICES....................................................................................... 74 SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES................................. 75 SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT............................................ 75 SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION................................................. 75 SECTION 13.06. RULES BY TRUSTEE AND AGENTS................................................................... 76
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PAGE ---- SECTION 13.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS...................... 76 SECTION 13.08. GOVERNING LAW................................................................................. 76 SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS................................................. 76 SECTION 13.10. SUCCESSORS.................................................................................... 76 SECTION 13.11. SEVERABILITY.................................................................................. 76 SECTION 13.12. COUNTERPART ORIGINALS......................................................................... 76 SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC.............................................................. 77
EXHIBITS Exhibit A-1 FORM OF NOTE Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTATION OF SUBSIDIARY GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE vi INDENTURE dated as of June 26, 1998 by and among Coyne International Enterprises Corp., a New York corporation (the "Company"), the Guarantors named on the signature page hereto and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 11 1/4% Series A Senior Subordinated Notes due 2008 (the "Series A Notes") and the 11 1/4% Series B Senior Subordinated Notes due 2008 (the "Series B Notes" and, together with the Series A Notes, the "Notes"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "144A Global Note" means a global note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Additional Notes" means up to $75.0 million in aggregate principal amount of Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and CEDEL that apply to such transfer or exchange. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than a sale or lease of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole shall be governed by the provisions of Section 4.15 hereof and/or the provisions of Section 5.01 hereof and not by the provisions of Section 4.10 hereof), and (ii) the issue or sale by the Company or any of its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the following items shall not be deemed to be Asset Sales: (i) a transfer of assets (whether by sale, lease, conveyance, other disposition, merger, consolidation, division or otherwise) by the Company to a Wholly Owned Subsidiary (other than a Receivables Subsidiary) or a Guarantor by a Subsidiary to the Company or to a Wholly Owned Subsidiary (other than a Receivables Subsidiary) or a Guarantor, (ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary, (iii) a Restricted Payment that is permitted by the Section 4.07 hereof (iv) the sale to a Receivables Subsidiary of accounts receivables and related assets that are customarily transferred in an asset securitization transaction; and (v) the sale of up to $2.0 million of assets since the date hereof. A transfer of assets by the Company or a Wholly-Owned Subsidiary (other than a Receivables Subsidiary) of the Company to a Person other than the Company or another Wholly Owned Subsidiary (other than a Receivables Subsidiary), shall be deemed an Asset Sale only to the extent of the percentage of the Equity Interests in the transferee that are owned by Persons other than the Company or Wholly Owned Subsidiaries (other than a Receivables Subsidiary) of the Company. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Borrowing Base" means, as of any date, an amount equal to the sum of (a) 85.0% of the face amount of all accounts receivable owned by the Company and the Guarantors as of such date that are not more than 90 days past due and (b) 50.0% of the book value of all inventory owned by the Company and the Guarantors as of such date, all calculated on a consolidated basis and in accordance with GAAP. To the extent that information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company may utilize the most recent available information for purposes of calculating the Borrowing Base. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. 2 "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any lender party to the New Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this definition. "CEDEL" means CEDEL Bank, SA. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a Principal, (ii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares), (iii) the consummation of the first transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) becomes the "beneficial owner" (as defined above), directly or indirectly, of more of the Voting Stock of the Company (measured by voting power rather than number of shares) than is at the time "beneficially owned" (as defined above) by the Principals and their Related Parties in the aggregate or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Company" means Coyne International Enterprises Corp., and any and all successors thereto. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale or the disposition of securities held by 3 such Person and its Subsidiaries (to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (v) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Subsidiary thereof that is a Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write- 4 ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date hereof in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of the Indenture 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 at the time of such nomination or election. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Facilities" means, with respect to the Company, one or more debt facilities (including, without limitation, the New Credit Facility) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under this Indenture shall be deemed to have been incurred on such date in reliance on the exception provided by clause (i) of the definition of Permitted Debt. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A-1 hereto except that such Note shall not bear the Global ----------- Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. 5 "Distribution" means the payment of amounts aggregating no more than $19.0 million to Capital Resources Lenders II and Exeter Venture Lenders in connection with the purchase of certain warrants of the Company, certain of which payments may occur as much as two years after the closing of the Offering. "Domestic Subsidiary" means, with respect to the Company, any Subsidiary of the Company that was formed under the laws of the United States of America or that Guarantee or otherwise provides credit support for any Indebtedness of the Company. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Series B Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the New Credit Facility) in existence on the date hereof, until such amounts are repaid. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest of such Person and its Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Subsidiaries or secured by a Lien on assets of such Person or one of its Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. 6 "Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the referent Person or any of its Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges shall not be obligations of the referent Person or any of its Subsidiaries following the Calculation Date. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date hereof. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A-1 or A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv), - ----------- --- 2.06(d)(ii) or 2.06(f) hereof. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantors" means each of (i) Blue Ridge Textile Manufacturing, Inc., Clean Towel Service, Inc., Ohio Garment Rental, Inc. and Midway--CTS Buffalo, Ltd., and (ii) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns. 7 "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" means a Person in whose name a Note is registered. "IAI Global Note" means the global Note in the form of Exhibit ------- A-1 hereto bearing the Global Note Legend and the Private Placement Legend and - --- deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted amount thereof, in the case of any Indebtedness issued with original issue discount, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" means $75.0 million in aggregate principal amount of Notes issued under this Indenture on the date hereof. "Initial Purchaser" shall have the meaning assigned to such term in the Offering Memorandum. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to 8 have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07 hereof. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" means all amounts owing pursuant to Section 5 of the Registration Rights Agreement. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries and (ii) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness (other than under a Credit Facility) secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "New Credit Facility" means that certain Credit Facility, dated as of June 26, 1998, by and among the Company and NationsBank, N.A. and the other lenders party thereto, providing for up to $25.0 million of secured revolving credit borrowings and up to $30.0 million of secured term debt, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. 9 "Non-U.S. Person" means a Person who is not a U.S. Person. "Note Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Notes" has the meaning assigned to it in the preamble to this Indenture. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering" means the offering of the Initial Notes by the Company. "Offering Memorandum" means the Offering Memorandum, dated June 23, 1998, pursuant to which the Initial Notes were offered and sold. "Officer" means, with respect to the Company or any Guarantor, any Co-Chairman of the Board, President, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Senior Vice President, Vice President, Treasurer or Secretary of such Person. "Officers Certificate" means a certificate that meets the requirements of Section 13.5 and has been signed by two Officers. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Participant" means, with respect to the Depositary, Euroclear or CEDEL, a Person who has an account with the Depositary, Euroclear or CEDEL, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and CEDEL). "Permitted Business" means any business conducted by the Company or any of its Subsidiaries as of the date hereof and any business reasonably related or incidental thereto. "Permitted Investments" means (a) any Investment in the Company or in a Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Subsidiary of the Company and a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Subsidiary of the Company that is a Guarantor; (d) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the Section 4.10 hereof; (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) any Investment by the Company or a Subsidiary of the Company in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person or assets in connection with a Qualified Receivables Transaction; provided that any Investment in any such Person is in the form of a Purchase Money Note, an equity interest or interests in accounts receivables generated by the Company or a Subsidiary of the Company and transferred to any Person in connection with a Qualified Receivables Transaction or any such Person owning such accounts receivables; (g) repurchase of the Notes; (h) Investments by the Company and its Subsidiaries 10 outstanding on the date hereof; and (i) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (i) that are at the time outstanding, not to exceed $1.0 million. "Permitted Liens" means (i) Liens existing on the date hereof; (ii) Liens securing Senior Debt that was permitted to be incurred under this Indenture; (iii) Liens securing Permitted Refinancing Indebtedness that was incurred to refinance any Indebtedness that had been secured by a Lien permitted under this Indenture and that was incurred in accordance with the provisions of this Indenture, provided, however, that such Liens (a) are not materially less favorable to the Holders and are not materially more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being refinanced and (b) do not extend to or cover any property or assets of the Company or any of its Subsidiaries not securing the Indebtedness so refinanced; (iv) Liens securing the Notes; (v) Liens securing Indebtedness of a Person existing at the time such Person becomes a Subsidiary, provided that such Liens were in existence prior to the contemplation of such acquisition, merger or consolidation, were not incurred in anticipation thereof, and do not extend to any other assets; (vi) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any time outstanding and that are not incurred in connection with the borrowing of money or obtaining advances or credit (other than trade credit incurred in the ordinary course of business); (vii) Liens imposed by governmental authorities for taxes, assessments or other charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or any of its Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (viii) statutory Liens of landlords, carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other like Liens arising by operation of law in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made in respect thereof; (ix) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or similar obligations, including any Lien securing letters of credit issued in the ordinary course of business in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) incurred in the ordinary course of business; (x) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (xi) easements, rights-of-way, zoning restrictions, minor defects or irregularities with title and other similar charges or encumbrances in respect of real property not materially detracting from the value of the property subject thereto and not interfering in any material respect with the ordinary conduct of business of the Company or any of its Subsidiaries; (xii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such person's obligations in respect of banker's acceptance issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business; (xiii) Liens in favor of the Company or a Guarantor; (xiv) leases or subleases granted to others not interfering in any material respects with the business of the Company or its Subsidiaries; (xv) Liens arising out of consignment or similar arrangements for the sale of goods entered into by the Company or any of its Subsidiaries in the ordinary course of business. 11 "Permitted Payments" means payments to repurchase Equity Interests of the Company in order to satisfy certain estate planning obligations of the estate of J. Stanley Coyne, which payments shall not exceed $1.0 million in each of the second, third, fourth, fifth and sixth calendar years following the death of J. Stanley Coyne and $2.25 million in each of the seventh, eighth, ninth and tenth calendar years following the death of J. Stanley Coyne, plus an additional amount of $2.0 million in the calendar year 2003; provided that no such payment shall be made prior to the death of J. Stanley Coyne; and provided further, that the maximum amount of Permitted Payments in a specified calendar year following the death of J. Stanley Coyne shall be increased by an amount equal to the difference between the maximum amount of Permitted Payments that could have been made by the Company in each of the prior specified calendar years following the death of J. Stanley Coyne and the actual amount of Permitted Payments made by the Company in each of such prior specified calendar years following the death of J. Stanley Coyne. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Subsidiaries (other than intercompany Indebtedness); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, limited liability company, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind. "Preferred Stock," of any person, means Capital Stock of such Person of any class or series (however designated) that ranks prior, as to payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class or series of such Person. "Principals" means J. Stanley Coyne and Thomas M. Coyne. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Purchase Money Note" means a promissory note evidencing a line of credit, which may be irrevocable, from, or evidencing other Indebtedness owed to, the Company or any Subsidiary of the Company in connection with a Qualified Receivables Transaction, which note shall be repaid from cash 12 available to the maker of such note, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors and amounts paid in connection with the purchase of newly generated receivables. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Company or any Subsidiary of the Company pursuant to which the Company or any Subsidiary of the Company may sell, convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a transfer by the Company or any Subsidiary of the Company) and (b) any other Person (in the case of a transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivables (whether now existing or arising in the future) of the Company or any Subsidiary of the Company, and any assets related thereto including, without limitation, all collateral securing such accounts receivables, all contracts and all guarantees or other obligations in respect of such accounts receivables, proceeds of such accounts receivable and other assets that are customarily transferred, or in respect of which security interests are customarily granted, in connection with asset securitization transactions involving accounts receivable. "Receivables Subsidiary" means a Wholly Owned Subsidiary of the Company that engages in no activities other than in connection with the financing of accounts receivable and that is designated by the Board of Directors of the Company (as provided below) as a Receivables Subsidiary (a) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any other Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness)) pursuant to Standard Securitization Undertakings, (ii) is recourse to or obligates the Company or any other Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property or asset of the Company or any other Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (b) with which neither the Company nor any other Subsidiary of the Company has any material contract, agreement, arrangement or undertaking (except in connection with a Purchase Money Note or Qualified Receivables Transaction) other than on terms no less favorable to the Company or such other Subsidiary than those that might be obtained at the time from persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing accounts receivables, and (c) to which neither the Company nor any other Subsidiary of the Company has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers' Certificate certifying, to the best of such officer's knowledge and belief after consulting with counsel, that such designation complied with the foregoing conditions. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date hereof, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements between the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act. 13 "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "Regulation S Permanent Global Note" means a permanent global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private ----------- Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "Regulation S Temporary Global Note" means a temporary global Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and ----------- deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Related Party" with respect to any Principal means (i) any controlling stockholder, 80% (or more) owned Subsidiary, or spouse, ex-spouse, immediate family member or lineal descendant (in the case of an individual) of such Principal or (ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of such Principal and/or such other Persons referred to in the immediately preceding clause (i). "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Period" means the 40-day restricted period as defined in Regulation S. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. 14 "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company that are reasonably customary in an accounts receivable transaction. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Subsidiary Guarantee" means the subordinated Guarantee by each Guarantor of the Company's payment obligations under this Indenture and the Notes, executed pursuant to the provisions of this Indenture. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa- 77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent global Note in the form of Exhibit A-1 attached hereto that bears the Global Note Legend and that has ----------- the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. 15 "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly Owned Subsidiary" of any Person means a Subsidiary (other than a Receivables Subsidiary) of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries (other than a Receivables Subsidiary) of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02. OTHER DEFINITIONS. Defined in Term Section ---- ------- "Affiliate Transaction" 4.11 "Asset Sale Offer" 4.10 "Authentication Order" 2.02 "Change of Control Offer" 4.15 "Change of Control Payment" 4.15 "Change of Control Payment Date" 4.15 "Covenant Defeasance" 8.03 "Designated Senior Debt 10.02 "Designation" 4.07 "Event of Default" 6.01 "ExcessProceeds" 4.10 "incur" 4.09 "Legal Defeasance" 8.02 "Offer Amount" 3.09 "Offer Period" 3.09 "Paying Agent" 2.03 "Payment Blockage Notice" 10.04 "Permitted Indebtedness" 4.09 "Permitted Junior Securities" 10.02 "Purchase Date" 3.09 "Redemption Date" 3.07 "Registrar" 2.03 "Representative" 10.02 "Restricted Payments" 4.07 "Revocation" 4.07 "Senior Debt" 10.02 SECTION 1.03. TRUST INDENTURE ACT DEFINITIONS Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. 16 The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes or the Subsidiary Guarantees means the Company and the Guarantors, respectively and any successor obligor upon the Notes and the Subsidiary Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2. THE NOTES SECTION 2.01. FORM AND DATING. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibits A-1 and A-2 hereto. The Notes may have ------------ --- notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. 17 The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibits A-1 or A-2 attached hereto (including the Global Note Legend thereon - ------------ --- and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon and - ----------- without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or CEDEL Bank, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and CEDEL Bank certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (d) Euroclear and CEDEL Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of CEDEL Bank" and 18 "Customer Handbook" of CEDEL Bank shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or CEDEL Bank. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign the Notes For the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. The Trustee is authorized to enter into a letter of representations with DTC in the form provided to the Trustee by the Company and to act in accordance with such letter. 19 SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will promptly notify the Trustee in writing of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA (S) 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee written notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates determined by the Company to be required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b),(c) or (f) hereof. 20 (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Temporary Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Depositary either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above, provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates determined by the Company to be required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form 21 of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications --------- in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; --------- and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications --------- and certificates and Opinion of Counsel required by item (3) thereof, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal or via the Depositary's book-entry system that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) --------- thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in 22 the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the --------- certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C --------- hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; --------- (C) if such beneficial interest is being transferred to a Non- U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B --------- hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item --------- (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, 23 a certificate to the effect set forth in Exhibit B hereto, including --------- the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item --------- (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including --------- the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through written instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates determined by the Company to be required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker- dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 24 (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, --------- including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications --------- in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from 25 such Holder in the form of Exhibit C hereto, including the --------- certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) --------- thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B --------- hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications --------- in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, --------- certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item --------- (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, --------- including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (c) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; 26 (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, --------- including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the --------- certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest in a Global Note is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in 27 form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B --------- hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; --------- and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B --------- hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, --------- including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications --------- in item (4) thereof; 28 and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal or via the Depositary's book-entry system that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and make available for delivery to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE 29 SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTION SET FORTH IN (A) ABOVE." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR 30 CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of the mailing of notice of redemption under Section 3.02 hereof and ending at the close of business on such day, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (c) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. 31 (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07. Replacement Notes If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser or protected purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. 32 Section 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee actually knows are so owned shall be so disregarded. Section 2.10. Temporary Notes Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirements of the Exchange Act). Certification of the destruction of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. Section 2.13. CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such 33 numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or the omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed, (iv) the redemption price and (v) the CUSIP numbers of the Notes to be redeemed. Section 3.02. Selection of Notes to Be Redeemed If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03. Notice of Redemption Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or 34 Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04. Effect of Notice of Redemption Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05. Deposit of Redemption Price One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. 35 Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07. Optional Redemption. The Notes will not be redeemable at the Company's option prior to June 1, 2003. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon to the applicable redemption date, if redeemed during the twelve-month period beginning June 1 on of the years indicated below: Year Percentage - ---- ---------- 2003................................................................ 105.625% 2004................................................................ 103.750% 2005................................................................ 101.875% 2006 and thereafter................................................. 100.000% Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08. Mandatory Redemption. The Company shall not be required to make mandatory redemption payments with respect to the Notes. Section 3.09. Offer to Purchase by Application of Excess Proceeds. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an Asset Sale Offer, it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain 36 all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before 10:00 a.m. on the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the 37 Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4. COVENANTS Section 4.01. Payment of Notes. The Company shall pay or cause to be paid the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Liquidated Damages, if any, shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest and Liquidated Damages, if any, then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. 38 Section 4.03. Reports. (a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding and commencing with information relating to the fiscal quarter ended July 31, 1998, the Company shall furnish to the Trustee and the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports, in each case within the time periods specified in the SEC's rules and regulations. In addition, following the consummation of the Exchange Offer, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. The Company shall at all times comply with TIA (S) 314(a). (b) For so long as any Notes remain outstanding the Company and the Guarantors shall furnish to the Trustee and the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Section 4.04. Compliance Certificate. (a) The Company and each Guarantor shall (to the extent that such Guarantor is so required under the TIA) deliver to the Trustee within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. For purposes of this paragraph, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) hereof shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being 39 understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06. Stay, Extension and Usury Laws. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07. Restricted Payments. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Subsidiaries) or to the direct or indirect holders of the Company's or any of its Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company (other than any such Equity Interests owned by the Company or any Subsidiary of the Company that is a Guarantor); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the 40 applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (vii) and (viii) of the next succeeding paragraph), is less than the sum, without duplication, of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company since the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company), plus (iii) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment, plus (iv) $2.0 million. The foregoing provisions shall not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any pari passu or subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of pari passu or subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; (v) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Subsidiary of the Company held by any member of the Company's (or any of its Subsidiaries') management pursuant to any management equity subscription agreement or stock option agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $250,000 in any twelve-month period and no Default or Event of Default shall have occurred and be continuing immediately after such transaction; (vi) Permitted Payments; (vii) the Distribution and (viii) in the event the Company is converted into an entity that is not subject to income taxation by a government authority, the payment of dividends to reimburse holders of the Company's equity interests for any income taxes owed and payable to such governmental authority incurred by such holders solely as a result of their status as holders of the Company's Equity Interests; provided that such amounts shall not exceed the tax liability of the Company had it been subject to corporate income taxation of such governmental authority for the corresponding period; and provided further that any such payment shall be used by such holder of the Company's Equity Interests to pay such taxes owed and payable. 41 The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $1.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall 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 Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any Indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or advances to the Company or any of its Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Subsidiaries. However, the foregoing restrictions shall not apply to encumbrances or restrictions existing under or by reason of (a) the New Credit Facility as in effect as of the date of this Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the New Credit Facility as in effect on the date of this Indenture, (b) this Indenture and the Notes, (c) applicable law, (d) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, (e) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices, (f) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (g) any agreement for the sale of a Subsidiary that restricts distributions by that Subsidiary pending its sale, (h) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced, (i) secured Indebtedness otherwise permitted to be incurred pursuant to the provisions of Section 4.12 hereof that limits the right of the debtor to dispose of the assets securing such Indebtedness, (j) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements entered into in the ordinary course of business, and (k) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. 42 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company shall not issue any Disqualified Stock and shall not permit any of its Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1; determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period; The provisions of the first paragraph of this covenant shall not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company of Indebtedness and letters of credit pursuant to Credit Facilities; provided that the aggregate principal amount of all Indebtedness and letters of credit (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder) outstanding under all Credit Facilities after giving effect to such incurrence does not exceed the greater of (x) $55.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied to repay Indebtedness under a Credit Facility and reduce lending commitments with respect thereto pursuant to Section 4.10 hereof and (y) the Borrowing Base as of the date of any such incurrence; (ii) the incurrence by the Company and the Guarantors of the Existing Indebtedness; (iii) the incurrence by the Company and the Guarantors of up to $75.0 million in aggregate principal amount of Initial Notes and the issuance of the Exchange Notes; (iv) the incurrence by the Company or any of its Subsidiaries of additional Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Subsidiary, in an aggregate principal amount at any one time outstanding under this clause (iv), including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (iv), not to exceed $3.0 million; (v) the incurrence by the Company or any of its Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the Indenture to be incurred under the first paragraph hereof or clauses (iii), (iv) or (v) of this paragraph; (vi) the incurrence by the Company or any of its Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding; 43 (vii) the guarantee by the Company or any Guarantor of Indebtedness of the Company or a Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09; (viii) the incurrence by the Company or any of its Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned Subsidiaries (other than Receivables Subsidiaries) or any of the Guarantors; provided, however, that (i) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly-Owned Subsidiary thereof (other than a Receivables Subsidiary) or a Guarantor and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly-Owned Subsidiary thereof (other than a Receivables Subsidiary) or a Guarantor shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Subsidiary, as the case may be, that was not permitted by this clause (viii); (ix) the incurrence by the Company or any of its Subsidiaries of Indebtedness incurred in respect of performance, surety and similar bonds provided by the Company or any of its Subsidiaries in the ordinary course of business; (x) the incurrence by the Company or any of its Subsidiaries of Indebtedness in respect of letters of credit relating to workers' compensation claims and self-insurance or similar requirements in the ordinary course of business; (xi) the incurrence of Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any such obligations of the Company or any such Subsidiary pursuant to such agreements, in each case incurred in connection with the disposition of any business, assets or Subsidiary of the Company, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition, provided that none of the foregoing results in Indebtedness required to be reflected as indebtedness on the balance sheet of the Company, or any such Subsidiary in accordance with GAAP and the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed 100% of the gross proceeds actually received by the Company and its Subsidiaries in connection with such disposition; and (xii) the incurrence by the Company or any of its Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (xii), not to exceed $3.0 million. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xii) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify (or later reclassify, but only among clauses (i) through (xii) of the definition of Permitted Debt) such item of Indebtedness in any manner that complies with this covenant. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock 44 shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued. The Company shall not be deemed to be in breach of this covenant solely as the result of fluctuations in currency exchange rates or as a result of changes in accounting principles that become effective after the date of this Indenture. Section 4.10. Asset Sales The Company shall not, and shall not permit any of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 80% of the consideration therefor received by the Company or such Subsidiary is in the form of cash; provided that the amount of (x) any liabilities (as shown on the Company's or such Subsidiary's most recent balance sheet) of the Company or any Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Guarantee thereof) that are assumed by the transferee of any such assets and either (1) such assumption is evidenced by a customary novation agreement that releases the Company or such Subsidiary from further liability or (2) all such liabilities are paid in full within five days of such Asset Sale by the transferee of such assets and (y) any securities, notes or other obligations received by the Company or any such Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by the Company or such Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 180 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to repay Senior Debt (and to correspondingly reduce lending commitments with respect thereto in the case of Senior Debt that is term Indebtedness or revolving credit Indebtedness and was incurred pursuant to a Credit Facility), (b) to the acquisition of a majority of the assets of, or a majority of the Voting Stock of, another Permitted Business, the making of a capital expenditure or the acquisition of other long-term assets that are used or useful in a Permitted Business or (c) reimburse the Company or its Subsidiaries for expenditures made, and costs incurred to repair, rebuild, replace or restore property subject to loss, damage or taking to the extent that Net Proceeds consist of insurance proceeds received on account of such loss, damage or taking. Pending the final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph shall be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall be required to make an offer to all Holders of Notes and all holders of other Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in Section 3.09 hereof and such other Indebtedness. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such 45 other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Section 4.11. Transactions with Affiliates. The Company shall not, and shall not permit any of its Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. Notwithstanding the foregoing, the following items shall not be deemed to be Affiliate Transactions: (i) any employment agreement or arrangement entered into by the Company or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Subsidiary, (ii) transactions between or among the Company and/or its Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not otherwise Affiliates of the Company, (iv) Restricted Payments that are permitted by the provisions of Section 4.07 hereof, (v) the Distribution, (vi) Permitted Payments, (vii) reasonable and customary indemnification of any officer, director or employee of the Company or any of its Subsidiaries in accordance with any applicable law, and (viii) the conversion of the Company into an entity which is not subject to income taxation by a governmental authority. Section 4.12. Liens. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness or trade payables on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. Section 4.13. Sale and Leaseback Transactions. The Company shall not, and shall not permit any of its Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company may enter into a sale and leaseback transaction if (i) the Company could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof and (b) incurred a Lien to secure such Indebtedness pursuant to Section 4.12 hereof, (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback 46 transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 4.10 hereof. Section 4.14. Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. Section 4.15. Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within thirty (30) days following any Change of Control, the Company shall mail a notice to the Trustee and each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by this Indenture and described in such notice. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. Prior to complying with the provisions of this covenant, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this covenant. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. 47 (c) Notwithstanding anything to the contrary in this Section 4.15, the Company shall not be required to make a Change of Control Offer upon the occurrence of a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15, and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Section 4.16. No Senior Subordinated Debt. (i) The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes, and (ii) no Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Guarantees of Senior Debt and senior in any respect in right of payment to the Subsidiary Guarantees. Section 4.17. Additional Subsidiary Guarantees. If the Company or any of its Subsidiaries shall acquire or create another Domestic Subsidiary after the date of this Indenture, or if any current or future Subsidiary becomes a Domestic Subsidiary of the Company after the date of this Indenture, then such newly acquired or created Subsidiary shall become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel, in accordance with the terms of this Indenture; provided that this provision shall not be applicable to a Subsidiary that has been properly designated as a Receivables Subsidiary. Section 4.18. Payments for Consent. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. ARTICLE 5. SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets. The Company shall not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) 48 immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Wholly Owned Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof. Section 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01. Events of Default. "Event of Defaults" are: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by Article 10 hereof); (ii) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by Article 10 hereof); (iii) failure by the Company or any of its Subsidiaries to comply with Sections 4.07, 4.09, 4.10 or 4.15, hereof; (iv) failure by the Company or any of its Subsidiaries for 60 days after notice to comply with any of its other agreements in this Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on 49 such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (viii) the Company or any of its Subsidiaries: (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a custodian of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors, or (e) generally is not paying its debts as they become due; or (ix) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company or any of its Subsidiaries; (b) appoints a custodian of the Company or any of its Subsidiaries or for all or substantially all of the property of the Company or any of its Subsidiaries; or (c) orders the liquidation of the Company or any of its Subsidiaries; and the order or decree remains unstayed and in effect for 60 consecutive days. Section 6.02. Acceleration. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (viii) or (ix) of Section 6.01 hereof occurs with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the Notes then outstanding by written notice to the Trustee may on behalf of the 50 Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. If an Event of Default occurs on or after June 1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to June 1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to June 1, 2003, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on June 1 of the years set forth below, as set forth below (expressed as a percentage of the aggregate principal amount to the date of payment that would otherwise be due but for the provisions of this sentence): YEAR PERCENTAGE ---- ---------- 1998............................................... 115.000% 1999............................................... 113.125% 2000............................................... 111.250% 2001............................................... 109.375% 2002............................................... 107.500% Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest and Liquidated Damages, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04. Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be 51 deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05. Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Section 6.06. Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07. Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(i) or (ii) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, 52 including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require 53 the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7. TRUSTEE Section 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. 54 (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02. Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. 55 Section 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is actually known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it becomes known to the Trustee. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Notwithstanding anything to the contrary expressed in this Indenture, the Trustee shall not be deemed to have knowledge of any Default or Event of Default hereunder, except in the case of an Event of Default under Section 6.1(a) or (b) hereof (provided that the Trustee is the Paying Agent), unless and until a Responsible Officer shall have actual knowledge thereof or shall have received written notice, at its Principal Corporate Trust Office as specified in Section 11.02 hereof, from the Company or any Holder of Senior Notes that such a Default or an Event of Default has occurred. Section 7.06. Reports by Trustee to Holders of the Notes. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA (S) 313(a) (but if no event described in TIA (S) 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA (S) 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA (S) 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. Section 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the Company and the Trustee shall agree. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee and its officers, directors, shareholders, agents and employees (each an "Indemnified Party") for and hold each Indemnified Party harmless against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee and its officers, directors, shareholders, agents and employees in its capacity as Paying Agent, Registrar, and Note Custodian and Agent for services of notices and demands shall have the full benefit of the foregoing 56 indemnity. An Indemnified Party shall notify the Company promptly of any claim for which it may seek indemnity. Failure by an Indemnified Party to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and an Indemnified Party shall cooperate in the defense. An Indemnified Party may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section with respect to compensation and indemnity, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. The Trustee's right to receive payment of any amounts under this Indenture shall not be subordinated to any of the Indebtedness of the Company. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(viii) or (ix) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the extent applicable. Section 7.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. 57 If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10 hereof, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b). Section 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated therein. 58 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. Section 8.02. Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its Obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all of its obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section 8.04, payments in respect of the principal of and premium, interest and Liquidated Damages, if any, on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03. Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and each Guarantor shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their respective obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under 59 Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(iii) through 6.01(vii) hereof shall not constitute Events of Default. Section 8.04. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit, with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages on the outstanding Notes on the stated maturity thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (b) in the case of Legal Defeasance, the Company must deliver to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or since the date of this Indentures, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance, and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of Covenant Defeasance, the Company must deliver to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance, and such Holders will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company must deliver to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee to the effect that after the 91st day following the deposit, the 60 trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights and remedies generally; (g) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of the Notes over other creditors of the Company, or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (h) the Company must deliver to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States reasonably acceptable to the Trustee, each stating that all conditions precedent provided for or relating to Legal Defeasance or Covenant Defeasance, as applicable, have been complied with. Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06. Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, interest or Liquidated Damages, if any, on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a secured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New 61 York Times (national edition) and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes. Notwithstanding Section 9.02 hereof, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Notes or the Subsidiary Guarantees without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Company's or any Guarantor's obligations to the Holders of the Notes by a successor to the Company or a Guarantor pursuant to Article 5 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (f) to provide for the issuance of Additional Notes in accordance with the provisions set forth in this Indenture as of the date hereof; or (g) to allow any Guarantor to execute a supplemental indenture and/or a Subsidiary Guarantee with respect to the Notes. 62 Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02. With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15 hereof), the Notes or the Subsidiary Guarantees with the consent of the Holders of at least a majority in principal amount Notes (including Additional Notes, if any) then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Without the consent of at least 75% in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), no waiver or amendment to this Indenture may make any change in the provisions of Article 10 hereof that adversely affects the rights of any Holder of Notes. Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): 63 (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes, other than provisions relating to Sections 3.09, 4.10 or 4.15 hereof; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium or Liquidated Damages, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) and a waiver of the payment default that resulted from such acceleration; (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, interest or Liquidated Damages, if any, on the Notes; (g) waive a redemption payment with respect to any Note, other than a payment required by Section 3.09, 4.10 or 4.15 hereof; (h) make any change in the foregoing amendment and waiver provisions; or (i) release any Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture. Section 9.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental indenture that complies with the TIA as then in effect. Section 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05. Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the 64 Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture and that such amendment is the legal, valid and binding obligation of the Company and any Guarantors, enforceable against them in accordance with their terms, subject to customary exceptions, and complies with the provisions hereof (including Section 9.03). ARTICLE 10. SUBORDINATION Section 10.01. Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the principal of and premium, interest and Liquidated Damages, if any, with respect to the Notes are subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full of all Senior Debt of the Company (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. Section 10.02. Certain Definitions. "Designated Senior Debt" means (i) any Indebtedness outstanding under the New Credit Facility (ii) any other Senior Debt permitted under this Indenture the principal amount of which is $10.0 million or more and that has been designated by the Company as "Designated Senior Debt." "Permitted Junior Securities" means Equity Interests in the Company or any Guarantor or debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Debt pursuant to Article 10 of this Indenture. "Representative" means the indenture trustee or other trustee, agent or representative for any Senior Debt. "Senior Debt" means (i) all Indebtedness outstanding under Credit Facilities and all Hedging Obligations with respect thereto, (ii) any other Indebtedness permitted to be incurred by the Company under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or the Subsidiary Guarantees and (iii) all Obligations with respect to the foregoing. Notwithstanding 65 anything to the contrary in the foregoing, Senior Debt shall not include (w) any liability for federal, state, local or other taxes owed or owing by the Company, (x) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of this Indenture. A "distribution" may consist of cash, securities or other property, by set-off or otherwise. Section 10.03. Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities: (1) holders of Senior Debt shall be entitled to receive payment in full of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before Holders of the Notes shall be entitled to receive any payment with respect to the Notes (except that Holders may receive (i) Permitted Junior Securities and (ii) payments and other distributions made from any defeasance trust created pursuant to Article 8 hereof); and (2) until all Obligations with respect to Senior Debt (as provided in subsection (1) above) are paid in full, any distribution to which Holders would be entitled but for this Article 10 shall be made to holders of Senior Debt (except that Holders of Notes may receive (i) Permitted Junior Securities and (ii) payments and other distributions made from any defeasance trust created pursuant to Article 8 hereof), as their interests may appear. Section 10.04. Default on Designated Senior Debt. The Company may not make any payment or distribution to the Trustee or any Holder in respect of Obligations with respect to the Notes and may not acquire from the Trustee or any Holder any Notes for cash or property (other than (a) Permitted Junior Securities and (b) payments and other distributions made from any defeasance trust created pursuant to Article 8 hereof) until all principal and other Obligations with respect to the Senior Debt have been paid in full if: (i) a default in the payment of any principal or other Obligations with respect to Designated Senior Debt occurs and is continuing beyond any applicable grace period in the agreement, indenture or other document governing such Designated Senior Debt; or (ii) a default, other than a payment default, on Designated Senior Debt occurs and is continuing that then permits holders of such Designated Senior Debt to accelerate its maturity and the Trustee receives a written notice of the default (a "Payment Blockage Notice") from a Person who may give it pursuant to Section 10.12 hereof. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section 10.04 unless and until (i) at least 360 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium and Liquidated Damages, if any, and interest on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any 66 Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived for a period of not less than 90 days. The Company may and shall resume payments on and distributions in respect of the Notes and may acquire them upon the earlier of: (1) the date upon which the default is cured or waived, or (2) in the case of a default referred to in Section 10.04(ii) hereof, 179 days pass after notice is received if the maturity of such Designated Senior Debt has not been accelerated, if this Article 10 otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. Section 10.05. Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. Section 10.06. When Distribution Must Be Paid Over. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 10.03 or 10.04 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. If any Holder or the Trustee is required by any court or otherwise to deliver payments it received from the Company or Guarantor to a holder of Senior Debt, any amount so paid to the extent theretofore discharged, shall be reinstated in full force and effect. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 10.07. Notice by Company. The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to 67 violate this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article 10. Section 10.08. Subrogation. After all Senior Debt is paid in full and until the Notes are paid in full, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Notes. Section 10.09. Relative Rights. This Article 10 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture shall: (1) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest and Liquidated Damages, if any, on the Notes in accordance with their terms; (2) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. If the Company fails because of this Article 10 to pay principal of or interest on a Note on the due date, the failure shall nevertheless be a Default or Event of Default. Section 10.10. Subordination May Not Be Impaired by Company. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Section 10.11. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and 68 other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. Section 10.12. Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 10. Only the Company or a Representative may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 10.13. Authorization to Effect Subordination. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. ARTICLE 11. SUBSIDIARY GUARANTEES Section 11.01. Subsidiary Guarantee. Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any 69 action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. Section 11.02. Subordination of Subsidiary Guarantee. The Obligations of each Guarantor under its Subsidiary Guarantee pursuant to this Article 11 shall be junior and subordinated to the Senior Debt of such Guarantor on the same basis as the Notes are junior and subordinated to Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof. Section 11.03. Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor under its Subsidiary Guarantee and this Article 11 shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 70 Section 11.04. Execution and Delivery of Subsidiary Guarantee. To evidence its Subsidiary Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer --------- of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by an Officer thereof. Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors. In the event that the Company creates or acquires any other Domestic Subsidiaries subsequent to the date of this Indenture, or if any current or future Subsidiaries become Domestic Subsidiaries subsequent to the date of this Indenture, if required by Section 4.17 hereof, the Company shall cause such Subsidiaries to execute supplemental indentures to this Indenture in accordance with Section 4.17 hereof, and this Article 11, to the extent applicable. Section 11.05. Guarantors May Consolidate, etc., on Certain Terms. No Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (a) subject to Section 11.06 hereof, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, this Indenture, the Registration Rights Agreement and the Subsidiary Guarantee on the terms set forth herein or therein; and (b) immediately after giving effect to such transaction, no Default or Event of Default exists. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this 71 Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. Notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 11.06. Releases Following Sale of Assets. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11. ARTICLE 12. SATISFACTION AND DISCHARGE Section 12.01. Satisfaction and Discharge of Indenture. This Indenture shall be discharged and shall cease to be of further effect as to all Notes issued hereunder, when either (a) all such Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b) (i) all such Notes not theretofore delivered to such Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or a Guarantor, has irrevocably deposited or caused to be deposited with such Trustee as trust funds in trust an amount of money sufficient to pay and discharge the entire Indebtedness on such Notes not theretofore delivered to the 72 Trustee for cancellation for principal, premium, accrued interest and Liquidated Damages, if any, to the date of maturity or redemption; (ii) no Default or Event of Default with respect to this Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or a Guarantor, is a party or by which the Company or a Guarantor is bound; (iii) the Company or a Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and (iv) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of such Notes at maturity or the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Section 12.02. Application of Trust Money Subject to the provisions of the last paragraph of Section 4.19 hereof, all money deposited with the Trustee pursuant to Section 12.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to Persons entitled thereto, of the principal (and premium, if any), interest and Liquidated Damages, if any, for whose payment such money has been deposited with the Trustee. If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 12.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though such deposit had occurred pursuant to Section 11.01 hereof; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent. ARTICLE 13. MISCELLANEOUS Section 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA (S) 318(c), the imposed duties shall control. 73 Section 13.02. Notices. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company and/or any Guarantor: Coyne International Enterprises Corp. 140 Cortland Avenue P.O. Box 4854 Syracuse, NY 13221 Telecopier No.: (315) 475-9978 Attention: Chief Financial Officer With a copy to: O'Hara, Hanlon, Knych & Pobedinsky, LLP One Park Place Syracuse, NY 13202 Telecopier No.: (315) 422-3943 Attention: Alex Pobedinsky, Esq. If to the Trustee: IBJ Schroder Bank & Trust Company 1 State Street Plaza New York, New York 10004 Telecopier No.: (212) 858-2952 Attention: Corporate Finance Department With a copy to: Proskauer Rose LLP 1585 Broadway New York, New York 10036 Attention: Sheldon Hirshon, Esq. The Company, or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. 74 Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA (S) 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 13.03. Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA (S) 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA (S) 312(c). Section 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S) 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has or they have made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and 75 (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 13.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 13.07. No Personal Liability of Directors, Officers, Employees and Shareholders. No past, present or future director, officer, employee, incorporator or shareholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or such Guarantor under the Notes, the Subsidiary Guarantees, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Section 13.08. Governing Law. THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. Section 13.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 13.10. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. Section 13.11. Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 13.12. Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 76 Section 13.13. Table of Contents, Headings, etc.. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Indenture signature page follows] 77 [Indenture signature page] Dated June 26, 1998 Coyne International Enterprises Corp. By: /s/ Donald F. X. Keegan ------------------------------------ Name: Donald F. X. Keegan Title: V.P. Guarantors: Blue Ridge Textile Manufacturing, Inc. By: /s/ Donald F. X. Keegan ------------------------------------ Name: Donald F. X. Keegan Title: V.P. Clean Towel Service, Inc. By: /s/ Donald F. X. Keegan ------------------------------------ Name: Donald F. X. Keegan Title: V.P. Ohio Garment Rental, Inc. By: /s/ Donald F. X. Keegan ------------------------------------ Name: Donald F. X. Keegan Title: V.P. Midway-CTS Buffalo, Inc. By: /s/ Donald F. X. Keegan ------------------------------------ Name: Donald F. X. Keegan Title: V.P. IBJ Schroder Bank & Trust Company, as Trustee By: /s/ Louis Perez ---------------------------------- Name: Louis Perez Title: Assistant Vice President EXHIBIT A-1 (Face of Note) ================================================================================ CUSIP____________ 11 1/4% [SERIES A] [SERIES B] SENIOR SUBORDINATED NOTES DUE 2008 No. _________ $ ___________ COYNE INTERNATIONAL ENTERPRISES CORP. promises to pay to _____________________________________________________________ or registered assigns, the principal sum of ____________________________________ Dollars on June 1, 2008. Interest Payment Dates: June 1 and December 1. Record Dates: May 15 and November 15. Coyne International Enterprises Corp. By:__________________________________ Name: Title: By:__________________________________ Name: Title: This is one of the [Global] Notes referred to in the within-mentioned Indenture: (SEAL) [IBJ Schroder Bank & Trust Company,] as Trustee By:___________________________________ Dated: June 26, 1998 Name: Title: ================================================================================ A-1-1 (Back of Note) __% [Series A] [Series B] Senior Subordinated Notes due 2008 [INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] [INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. Coyne International Enterprises Corp., a New York corporation (the "Company"), promises to pay interest on the principal amount of this Note at 11 1/4% per annum from June 26, 1998 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages semi-annually on June 1 and December 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 1, 1998. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1.0% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, [IBJ Schroder Bank & Trust Company,] the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may A-1-2 change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of June 26, 1998 ("Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"). The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company limited to $150.0 million in aggregate principal amount plus amounts, if any, issued to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof. 5. Optional Redemption. The Notes will not be redeemable at the Company's option prior to June 1, 2003. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below: Year Percentage - ---- ---------- 2003.............................................................. 105.625% 2004.............................................................. 103.750% 2005.............................................................. 101.875% 2006 and thereafter............................................... 100.000% 6. Mandatory Redemption. Except as set forth in Paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. A-1-3 7. Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of repurchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall be required to make an offer to all Holders of Notes and all holders of other Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture and such other Indebtedness. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. Notice of Redemption. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest shall cease to accrue on Notes or portions thereof called for redemption. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. A-1-4 10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes under the Indenture. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture, the Notes or the Subsidiary Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (and Additional Notes, if any) voting as a single class, and any existing default or compliance with any provision of the Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (and Additional Notes, if any) voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Notes or the Subsidiary Guarantees or may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or the Guarantor's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture or to allow any Guarantor to execute a supplemental indenture to the Indenture. 12. Defaults and Remedies. Events of Default under the Indenture include: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company or any of its Subsidiaries to comply with the provisions of Sections 4.07, 4.09, 4.10 and 4.15 of the Indenture; (iv) failure by the Company or any of its Subsidiaries for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Subsidiaries. A-1-5 (b) If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes shall become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture, except a continuing Default or Event of Default in the payment of interest on, or principal of, the Notes. The Company shall deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company, upon becoming aware of any Default or Event of Default, deliver to the Trustee a statement specifying such Default or Event of Default. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. A director, officer, employee, incorporator or shareholder, of the Company or any Guarantor, as such, shall not have any liability for any obligations of the Company or any Guarantor under the Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Initial Notes shall have all the rights set forth in the Registration Rights Agreement or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Company and the other parties thereto, relating to rights given by the Company to the purchasers of any Additional Notes. 18. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a A-1-6 convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Coyne International Enterprises Corp. 140 Cortland Avenue P.O. Box 4854 Syracuse, NY 13221 Telecopier No.: (315) 475-9978 Attention: Chief Financial Officer A-1-7 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date:___________________ Your Signature:___________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No:____________________________ SIGNATURE GUARANTEE: _________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-1-8 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: [_] Section 4.10 [_] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $________ Date: __________________ Your Signature:___________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No:____________________________ SIGNATURE GUARANTEE: _________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-1-9 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE/1/ The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount Amount of decrease Amount of increase of this Global Note Signature of in Principal in Principal following such authorized officer Amount of this Amount of this decrease of Trustee or Date of Exchange Global Note Global Note (or increase) Note Custodian - ---------------- ------------------ ------------------ ------------------- -----------------
________________________ /1/ Include only if Note is issued in Global Form. A-1-10 EXHIBIT A-2 (Face of Regulation S Temporary Global Note) ================================================================================ CUSIP _________ 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008 No. _____________ $ __________ COYNE INTERNATIONAL ENTERPRISES CORP. promises to pay to ___________________________________________________________ or registered assigns, the principal sum of __________________________________ Dollars on June 1, 2008. Interest Payment Dates: June 1 and December 1. Record Dates: May 15 and November 15. Coyne International Enterprises Corp. By:___________________________________ Name: Title: By:___________________________________ Name: Title: This is one of the Global Notes referred to in the within-mentioned Indenture: (SEAL) [IBJ Schroder Bank & Trust Company,] as Trustee By: ________________________ Dated: June 26, 1998 Name: Title: ================================================================================ A-2-1 (Back of Regulation S Temporary Global Note) 11 1/4% Series A Senior Subordinated Notes due 2008 THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTION SET FORTH IN (A) ABOVE. A-2-2 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. Coyne International Enterprises Corp., a New York corporation (the "Company"), promises to pay interest on the principal amount of this Note at 11 1/4% per annum from June 26, 1998 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages semi-annually on June 1 and December 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 1, 1998. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1.0% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Until this Regulation S Temporary Global Note is exchanged for one or more Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Notes under the Indenture. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. A-2-3 3. Paying Agent and Registrar. Initially, [IBJ Schroder Bank & Trust Company,] the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of June 26, 1998 ("Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"). The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company limited to $150.0 million in aggregate principal amount plus amounts, if any, issued to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof. 5. Optional Redemption. The Notes will not be redeemable at the Company's option prior to June 1, 2003. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below: Year Percentage - ---- ---------- 2003................................................................ 105.625% 2004................................................................ 103.750% 2005................................................................ 101.875% 2006 and thereafter................................................. 100.000% 6. Mandatory Redemption. Except as set forth in Paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. A-2-4 7. Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of repurchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall be required to make an offer to all Holders of Notes and all holders of other Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture and such other Indebtedness. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. Notice of Redemption. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest shall cease to accrue on Notes or portions thereof called for redemption. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. A-2-5 This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Global Notes only (i) on or after the termination of the 40-day restricted period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global Note for one or more Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note. 10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes under the Indenture. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture, the Notes or the Subsidiary Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (and Additional Notes, if any) voting as a single class, and any existing default or compliance with any provision of the Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (and Additional Notes, if any) voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Notes or the Subsidiary Guarantees may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or the Guarantor's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture or to allow any Guarantor to execute a supplemental indenture to the Indenture. 12. Defaults and Remedies. Events of Default under the Indenture include: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company or any of its Subsidiaries to comply with the provisions of Sections 4.07, 4.09, 4.10 and 4.15 of the Indenture; (iv) failure by the Company or any of its Subsidiaries for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or A-2-6 stayed for a period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Subsidiaries. (b) If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes shall become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture, except a continuing Default or Event of Default in the payment of interest on, or principal of, the Notes. The Company shall deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company, upon becoming aware of any Default or Event of Default, deliver to the Trustee a statement specifying such Default or Event of Default. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. A director, officer, employee, incorporator or shareholder, of the Company or any Guarantor, as such, shall not have any liability for any obligations of the Company or any Guarantor under the Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). A-2-7 17. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Initial Notes shall have all the rights set forth in the Registration Rights Agreement or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Companyand the other parties thereto, relating to rights given by the Company to the purchasers of any Additional Notes. 18. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Coyne International Enterprises Corp. 140 Cortland Avenue P.O. Box 4854 Syracuse, NY 13221 Telecopier No.: (315) 475-9978 Attention: Chief Financial Officer A-2-8 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: _______________ Your Signature:___________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No:____________________________ SIGNATURE GUARANTEE: _________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-2-9 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: [_] Section 4.10 [_] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $___________ ________________________________________________________________________________ Date:_____________ Your Signature:___________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No:____________________________ SIGNATURE GUARANTEE: _________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-2-10 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made:
Principal Amount Amount of decrease Amount of increase of this Global Note Signature of in Principal in Principal following such authorized officer Amount of this Amount of this decrease of Trustee or Date of Exchange Global Note Global Note (or increase) Note Custodian - ---------------- ------------------ ------------------ -------------------- ------------------
A-2-11 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Coyne International Enterprises Corp. 140 Cortland Avenue P.O. Box 4854 Syracuse, NY 13221 Attention: Chief Financial Officer [IBJ Schroder Bank & Trust Company One State Street Plaza New York, New York 10004] Attention: _______________ Re: 11 1/4% Senior Subordinated Notes due 2008 ------------------------------------------ Reference is hereby made to the Indenture, dated as of June 26, 1998 (the "Indenture"), among Coyne International Enterprises Corp., as issuer (the "Company"), the Guarantors and [IBJ Schroder Bank & Trust Company,] as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to __________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE ---------------------------------------------------------------------- 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is - ----------------------------------------------------------- being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE ---------------------------------------------------------------------- TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE - -------------------------------------------------------------------------------- NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and - ----------------------------- in accordance with Rule 903 or Rule 904 B-1 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [_] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL ------------------------------------------------------------------- INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION - ------------------------------------------------------------------------------ OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is - ---------------------------------------------------------- being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [_] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [_] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [_] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [_] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if --------- such Transfer is B-2 in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [_] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [_] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [_] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. B-3 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. Dated: __________________,_____ ______________________________ [Insert Name of Transferor] By: __________________________ Name: Title: B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [_] a beneficial interest in the: (i) [_] 144A Global Note (CUSIP ________), or (ii) [_] Regulation S Global Note (CUSIP ________), or (iii) [_] IAI Global Note (CUSIP _______); or (b) [_] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [_] a beneficial interest in the: (i) [_] 144A Global Note (CUSIP _______), or (ii) [_] Regulation S Global Note (CUSIP _______), or (iii) [_] IAI Global Note (CUSIP _______); or (iv) [_] Unrestricted Global Note (CUSIP _______); or (b) [_] a Restricted Definitive Note; or (c) [_] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Coyne International Enterprises Corp. 140 Cortland Avenue P.O. Box 4854 Syracuse, NY 13221 Attention: Chief Financial Officer [IBJ Schroder Bank & Trust Company One State Street Plaza New York, New York 10004 Attention: ______________] Re: 11 1/4% Senior Subordinated Notes due 2008 ------------------------------------------ (CUSIP ______________) Reference is hereby made to the Indenture, dated as of June 26, 1998 (the "Indenture"), among Coyne International Enterprises Corp., as issuer (the "Company"), the Guarantors and IBJ Schroder Bank & Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ____________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A -------------------------------------------------- RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In - ---------------------------------------------------------------------------- connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A -------------------------------------------------- RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the - ------------------------------------------------------ Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) C-1 the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO ------------------------------------------------------- BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the - -------------------------------------------------- Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO ------------------------------------------------------- UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a - ---------------------------- Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A -------------------------------------------------- RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the - ---------------------------------------------------- Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. C-2 (b) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO ------------------------------------------------------- BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange - ----------------------------------------------- of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [_] 144A Global Note, [_] Regulation S Global Note, [_] IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ___________________________________ [Insert Name of Owner] By:________________________________ Name: Title: Dated: __________, ____ C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Coyne International Enterprises Corp. 140 Cortland Avenue P.O. Box 4854 Syracuse, NY 13221 Attention: Chief Financial Officer [IBJ Schroder Bank & Trust Company One State Street Plaza New York, New York 10004 Attention: ______________] Re: 11 1/4% Senior Subordinated Notes due 2008 ------------------------------------------ Reference is hereby made to the Indenture, dated as of June 26, 1998 (the "Indenture"), among Coyne International Enterprises Corp., as issuer (the "Company"), the Guarantors and [IBJ Schroder Bank & Trust Company,] as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [_] a beneficial interest in a Global Note, or (b) [_] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (c) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, D-1 an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. __________________________________________ [Insert Name of Accredited Investor] By:_______________________________ Name: Title: Dated: __________________, ____ D-2 EXHIBIT E FORM OF NOTATION OF SUBSIDIARY GUARANTEE ON NOTE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of June 26, 1998 (the "Indenture") among Coyne International Enterprises Corp., the Guarantors signatories thereto and [IBJ Schroder Bank & Trust Company,] as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes the Trustee, on behalf of such Holder, to make such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. [Guarantor] By:_____________________________ Name: Title: E-1 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of ____________________, among _____________________ (the "Guaranteeing Subsidiary"), a subsidiary of Coyne International Enterprises Corp. (or its successor), a corporation organized under the laws of New York (the "Company"), and [IBJ Schroder Bank & Trust Company,] as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of June 26, 1998, providing for the issuance of an aggregate principal amount at maturity of $150,000,000 of 11 1/4% Senior Subordinated Notes due 2008 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in F-1 full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. F-2 (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) The obligations hereunder shall be subject to the subordination provisions of the Indenture. 3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Section 11.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. F-3 5. Releases. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. (b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 6. No Recourse Against Others. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. F-4 10. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, ____ [Guaranteeing Subsidiary] By: _________________________________ Name: Title: [TRUSTEE] as Trustee By: ______________________________ Name: Title: F-5 EX-4.2 13 NOTES EXHIBIT 4.2 ================================================================================ CUSIP 224062AA7 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008 No. 1 $75,000,000 COYNE INTERNATIONAL ENTERPRISES CORP. promises to pay to Cede & Co. or registered assigns, the principal sum of Seventy Five Million Dollars on June 1, 2008. Interest Payment Dates: June 1 and December 1. Record Dates: May 15 and November 15. COYNE INTERNATIONAL ENTERPRISES CORP. By:________________________________ Name: Title: By:________________________________ Name: Title: This is one of the Global Notes referred to in the within-mentioned Indenture: IBJ SCHRODER BANK & TRUST COMPANY, as Trustee By: _________________________ Dated: June 26, 1998 Name: Title: ================================================================================ 11 1/4% Series A Senior Subordinated Notes due 2008 THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTION SET FORTH IN (A) ABOVE. Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. Coyne International Enterprises Corp., a New York corporation (the "Company"), promises to pay interest on the principal amount of this Note at 11 1/4% per annum from June 26, 1998 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages semi-annually on June 1 and December 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 1, 1998. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1.0% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, IBJ Schroder Bank & Trust Company, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of June 26, 1998 ("Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"). The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company limited to $150.0 million in aggregate principal amount plus amounts, if any, issued to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof. 5. Optional Redemption. The Notes will not be redeemable at the Company's option prior to June 1, 2003. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below:
Year Percentage - ---- ---------- 2003............................................................. 105.625% 2004............................................................. 103.750% 2005............................................................. 101.875% 2006 and thereafter.............................................. 100.000%
6. Mandatory Redemption. Except as set forth in Paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of repurchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall be required to make an offer to all Holders of Notes and all holders of other Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture and such other Indebtedness. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. Notice of Redemption. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest shall cease to accrue on Notes or portions thereof called for redemption. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes under the Indenture. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture, the Notes or the Subsidiary Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (and Additional Notes, if any) voting as a single class, and any existing default or compliance with any provision of the Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (and Additional Notes, if any) voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Notes or the Subsidiary Guarantees or may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or the Guarantor's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture or to allow any Guarantor to execute a supplemental indenture to the Indenture. 12. Defaults and Remedies. (a) Events of Default under the Indenture include: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company or any of its Subsidiaries to comply with the provisions of Sections 4.07, 4.09, 4.10 and 4.15 of the Indenture; (iv) failure by the Company or any of its Subsidiaries for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Subsidiaries. (b) If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes shall become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture, except a continuing Default or Event of Default in the payment of interest on, or principal of, the Notes. The Company shall deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company, upon becoming aware of any Default or Event of Default, deliver to the Trustee a statement specifying such Default or Event of Default. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. A director, officer, employee, incorporator or shareholder, of the Company or any Guarantor, as such, shall not have any liability for any obligations of the Company or any Guarantor under the Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Initial Notes shall have all the rights set forth in the Registration Rights Agreement or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Company and the other parties thereto, relating to rights given by the Company to the purchasers of any Additional Notes. 18. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Coyne International Enterprises Corp. 140 Cortland Avenue P.O. Box 4854 Syracuse, NY 13221 Telecopier No.: (315) 475-9978 Attention: Chief Financial Officer ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ ______ to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: ________________ Your Signature:___________________________________ ______ (Sign exactly as your name appears on the face of this Note) Tax Identification No:____________________________ SIGNATURE GUARANTEE: _________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: [_] Section 4.10 [_] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $________ Date: ________________ Your Signature:___________________________________ ______ (Sign exactly as your name appears on the face of this Note) Tax Identification No:____________________________ SIGNATURE GUARANTEE: _________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount Amount of decrease Amount of increase of this Global Note Signature of in Principal in Principal following such authorized officer Amount of this Amount of this decrease of Trustee or Date of Exchange Global Note Global Note (or increase) Note Custodian - ---------------- ------------------ ------------------ ------------------- ------------------
SUBSIDIARY GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of June 26, 1998 (the "Indenture") among Coyne International Enterprises Corp., the Guarantors signatories thereto and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes the Trustee, on behalf of such Holder, to make such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. Blue Ridge Textile Manufacturing, Inc. By:___________________________________ Name: Title: Clean Towel Service, Inc. By:___________________________________ Name: Title: Ohio Garment Rental, Inc. By:___________________________________ Name: Title: Midway-CTS Buffalo, Inc. By:___________________________________ Name: Title: EX-5.1 14 OPINION OF COUNSEL [LETTERHEAD OF BLANK ROME COMISKY & McCAULEY LLP] EXHIBIT 5.1 July 28, 1998 Coyne International Enterprises Corp. 140 Cortland Avenue Syracuse, NY 13221 Re: Coyne International Enterprises Corp., Blue Ridge Textile Manufacturing, Inc., Clean Towel Service, Inc., Ohio Garment Rental, Inc. and Midway-CTS Buffalo, Ltd. Registration Statement on Form S-4 --------------------------------------------------------- Ladies and Gentlemen: We have acted as securities counsel to Coyne International Enterprises Corp., a New York corporation (the "Issuer"), Blue Ridge Textile Manufacturing, Inc., a Georgia corporation ("Blue Ridge"), Clean Towel Service, Inc., a Georgia corporation ("Clean Towel"), Ohio Garment Rental, Inc., an Ohio corporation ("Ohio Garment") and Midway-CTS Buffalo, Ltd., a New York corporation ("Midway," and together with Blue Ridge, Clean Towel, Ohio Garment and Midway, the "Guarantors," and together with the Issuer, Blue Ridge, Clean Towel, Ohio Garment and Midway, the "Registrants") in connection with the proposed registration by the Registrants of up to $75,000,000 in aggregate principal amount of the Issuer's 11 1/4% Series B Senior Subordinated Notes due 2008 (the "Exchange Notes"), pursuant to a Registration Statement on Form S-4 filed with the Securities and Exchange Commission, under the Securities Act of 1933, as amended (the "Act") (such Registration Statement, as amended or supplemented, is hereinafter referred to as the "Registration Statement"). The obligations of the Issuer under the Exchange Notes will be guaranteed by the Guarantors (the "Guarantees"). The Exchange Notes and the Guarantees are to be issued pursuant to the Indenture (the "Indenture"), dated as of June 26, 1998, among the Issuers, the Guarantors and IBJ Schroeder Bank & Trust Company, as Trustee, in exchange for and in replacement of the Issuer's outstanding 11 1/4% Series A Senior Subordinated Notes due 2008 (the " Initial Notes"), of which $75,000,000 in aggregate principal amount is outstanding. This opinion is being furnished pursuant to the requirements of Item 601(b)(5) of Regulation S-K. Coyne International Enterprises Corp. July 28, 1998 Page 2 In rendering this opinion, we have examined only the following documents: (i) the Certificate of Incorporation, as amended, or the Articles of Incorporation, as amended, as the case may be, of the Registrants; (ii) the By- laws of the Registrants; (iii) minutes and records of the corporate proceedings of the Registrants with respect to the issuance of the Exchange Notes and the Guarantees, respectively; and (iv) the Registration Statement. We have not performed any independent investigation other than the document examination described. Our opinion is, therefore, qualified in all respects by the scope of that document examination. We make no representation as to the sufficiency of our investigation for your purposes. We have assumed and relied, as to questions of fact and mixed questions of law and fact, on the truth, completeness, authenticity and due authorization of all certificates, documents and records examined and the genuineness of all signatures. This opinion is limited to the laws of the Commonwealth of Pennsylvania and no opinion is expressed as to the laws of any other jurisdiction. While the Indenture provides that it will be governed by the substantive laws of the State of New York, we have assumed for the purposes of this opinion that the Indenture will be governed by the laws of the Commonwealth of Pennsylvania. Based upon and subject to the assumptions, qualifications, assumptions and limitations and the further limitations set forth below, we are of the opinion that when (i) the Registration Statement becomes effective; (ii) the Board of Directors and the appropriate officers of the Registrants have taken all necessary action to fix and approve the terms of the Exchange Notes and the Guarantees, respectively; (iii) the Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended; and (iv) the Exchange Notes and the Guarantees have been duly executed and authenticated in accordance with the provisions of the Indenture and duly delivered to the purchasers thereof in exchange for the Initial Notes, the Exchange Notes and the Guarantees will be binding obligations of the Registrants. The opinions expressed herein are qualified in all respects by, and subject to, the following: (a) no opinion is rendered as to the availability of equitable remedies including, but not limited to, specific performance and injunctive relief; (b) the effect of bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent transfer, preference, moratorium and other similar laws or equitable principles affecting creditors' rights or remedies; (c) the effect of equitable subordination or any other doctrine which may subordinate claims under the Indenture or the Initial Notes; (d) general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (e) the effect of applicable law and court decisions which may now or hereafter limit or render unenforceable certain rights and remedies; and (f) the application of a standard of "good faith" or "commercial reasonableness" to any decisions, actions or conduct under the Indenture. Coyne International Enterprises Corp. July 28, 1998 Page 3 This opinion is given as of the date hereof. We assume no obligation to update or supplement this opinion to reflect any facts or circumstances which may hereafter come to our attention or any changes in laws which may hereafter occur. This opinion is strictly limited to the matters stated herein and no other or more extensive opinion is intended, implied or to be inferred beyond the matters expressly stated herein. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus, which is part of the Registration Statement. Sincerely, /s/ BLANK ROME COMISKY & McCAULEY LLP EX-10.1 15 AMENDED FINANCING AGREEMENT EXHIBIT 10.1 FINANCING AND SECURITY AGREEMENT by and among NATIONSBANK, N.A. And COYNE INTERNATIONAL ENTERPRISES CORP. and its Subsidiaries June 26, 1998 AMENDED AND RESTATED i FINANCING AND SECURITY AGREEMENT 1 RECITALS 1 ARTICLE I DEFINITIONS 2 SECTION 1.1 CERTAIN DEFINED TERMS. 22 SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS. 22 ARTICLE II THE CREDIT FACILITIES 22 SECTION 2.1 THE REVOLVING CREDIT FACILITY. 22 2.1.1 Revolving Credit Facility. 22 2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender Protection Loans. 23 2.1.3 Borrowing Base. 23 2.1.4 Borrowing Base Report. 24 2.1.5 Revolving Credit Note. 24 2.1.6 Mandatory Prepayments of Revolving Loan. 24 2.1.7 Optional Prepayments of Revolving Loan. 25 2.1.8 The Collateral Account. 25 2.1.9 Revolving Loan Account. 26 2.1.10 Revolving Credit Unused Line Fee. 26 2.1.11 Required Availability under the Revolving Credit Facility. 26 2.1.12 Right of Lender to Demand Payment and Terminate Revolving Credit Facility. 27 SECTION 2.2 THE LETTER OF CREDIT FACILITY. 27 2.2.1 Letters of Credit. 27 2.2.2 Letter of Credit Fees. 28 2.2.3 Terms of Letters of Credit. 28 2.2.4 Procedure for Letters of Credit. 28 SECTION 2.3 THE ACQUISITION LOAN FACILITY 29 2.3.1 Acquisition Loan Facility. 29 2.3.2 Acquisition Note. 29 2.3.3 Payments of Acquisition Loan. 29 2.3.4 Optional Prepayments of Acquisition Loan. 29 2.3.5 Application of Acquisition Loan Partial Prepayments. 30 2.3.6 Acquisition Line Fee. 30 SECTION 2.4 THE CAPITAL EXPENDITURE LINE FACILITY. 30 2.4.1 Capital Expenditure Line Facility. 30 2.4.2 Procedure for Making Advances Under the Capital Expenditure Line. 30 2.4.3 Capital Expenditure Line Note. 31 2.4.4 Payments of Capital Expenditure Line. 31 2.4.5 Optional Prepayments of Capital Expenditure Line. 32 2.4.6 Application of Capital Expenditure Line Partial Prepayments. 32 SECTION 2.5 INTEREST 32 2.5.1 Applicable Interest Rates. 32 2.5.2 Selection of Interest Rates. 33 2.5.3 Inability to Determine Eurodollar Base Rate. 34 2.5.4 Indemnity. 35 2.5.5 Payment of Interest. 35 SECTION 2.6 GENERAL FINANCING PROVISIONS. 35 2.6.1 Borrowers' Representatives. 35
i 2.6.2 Use of Proceeds of the Loans. 37 2.6.3 Mandatory Prepayments. 37 2.6.4 Closing Fee. 37 2.6.5 Early Termination Fee. 37 2.6.6 Field Examination Fees. 38 2.6.7 Administration Fees. 38 2.6.8 Computation of Interest and Fees. 38 2.6.9 Payments. 38 2.6.10 Liens; Setoff. 38 2.6.11 Requirements of Law. 39 ARTICLE III THE COLLATERAL 39 SECTION 3.1 DEBT AND OBLIGATIONS SECURED. 39 SECTION 3.2 GRANT OF LIENS. 39 SECTION 3.3 COLLATERAL DISCLOSURE LIST. 40 SECTION 3.4 PERSONAL PROPERTY. 40 3.4.1 Securities, Chattel Paper, Promissory Notes, etc. 40 3.4.2 Patents, Copyrights and Other Property Requiring Additional Steps to Perfect. 40 3.4.3 Record Searches. 40 SECTION 3.5 REAL PROPERTY. 41 SECTION 3.6 COSTS. 41 SECTION 3.7 RELEASE. 42 SECTION 3.8 INCONSISTENT PROVISIONS. 42 ARTICLE IV REPRESENTATIONS AND WARRANTIES 42 SECTION 4.1 REPRESENTATIONS AND WARRANTIES. 42 4.1.1 Subsidiaries. 42 4.1.2 Good Standing. 43 4.1.3 Power and Authority. 43 4.1.4 Binding Agreements. 43 4.1.5 No Conflicts. 43 4.1.6 No Defaults, Violations. 43 4.1.7 Compliance with Laws. 44 4.1.8 Margin Stock. 44 4.1.9 Investment Company Act; Margin Securities. 44 4.1.10 Litigation. 44 4.1.11 Financial Condition. 44 4.1.12 Full Disclosure. 45 4.1.13 Indebtedness for Borrowed Money. 45 4.1.14 Offering. 45 4.1.15 Taxes. 46 4.1.16 ERISA. 46 4.1.17 Title to Properties. 46 4.1.18 Patents, Trademarks, Etc. 47 4.1.19 Presence of Hazardous Materials or Hazardous Materials Contamination. 47 4.1.20 Perfection and Priority of Collateral. 47 4.1.21 Places of Business and Location of Collateral. 47 4.1.22 Business Names and Addresses. 47 4.1.23 Equipment. 48 4.1.24 Inventory. 48 4.1.25 Accounts. 48 4.1.26 Compliance with Eligibility Standards. 48 4.1.27 Subordinated Debt. 48
ii 4.1.28 Year 2000. 49 SECTION 4.2 SURVIVAL. 49 ARTICLE V CONDITIONS PRECEDENT 49 SECTION 5.1 CONDITIONS TO THE INITIAL ADVANCE. 49 5.1.1 Good Standing etc. 49 5.1.2 Corporate Proceedings of the Borrowers. 49 5.1.3 Consents, Licenses, Approvals, Etc. 50 5.1.4 Notes. 50 5.1.5 Financing Documents and Collateral. 50 5.1.6 Recordings and Filings. 50 5.1.7 Opinion of Borrowers' Counsel. 50 5.1.8 Other Documents, Etc. 51 5.1.9 Payment of Fees. 51 5.1.10 Additional Matters. 51 5.1.11 Other Financing Documents. 51 5.1.12 Insurance Certificate. 51 5.1.13 Field Examination. 51 5.1.14 'Proforma Balance Sheet and Projections. 51 5.1.15 Senior Subordinated Notes. 51 SECTION 5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT. 52 5.2.1 Compliance. 52 5.2.2 Borrowing Base. 52 5.2.3 Default. 52 5.2.4 Representations and Warranties. 52 5.2.5 Adverse Change. 52 5.2.6 Legal Matters. 52 ARTICLE VI COVENANTS OF THE BORROWERS 53 SECTION 6.1 AFFIRMATIVE COVENANTS. 53 6.1.1 Financial Statements. 53 6.1.2 Reports to SEC and to Stockholders. 54 6.1.3 Recordkeeping, Rights of Inspection, Field Examination, Etc. 55 6.1.4 Corporate Existence. 55 6.1.5 Compliance with Laws. 55 6.1.6 Preservation of Properties. 56 6.1.7 Line of Business. 56 6.1.8 Insurance. 56 6.1.9 Taxes. 56 6.1.10 ERISA. 57 6.1.11 Notification of Events of Default and Adverse 6.1.12 Hazardous Materials; Contamination. 58 6.1.13 Disclosure of Significant Transactions. 59 6.1.14 Environmental Staff. 59 6.1.15 EBITDA. 59 6.1.16 Fixed Charge Coverage Ratio. 60 6.1.17 Leverage Ratio. 60 6.1.18 Capital Expenditures. 61 6.1.19 Collection of Receivables. 61 6.1.20 Assignments of Receivables. 62 6.1.21 Government Accounts. 62 6.1.22 Notice of Returned Goods, etc. 62 6.1.23 Inventory. 62
iii 6.1.24 Insurance With Respect to Equipment and Inventory. 63 6.1.25 Maintenance of the Collateral. 63 6.1.26 Equipment. 63 6.1.27 Defense of Title and Further Assurances. 64 6.1.28 Business Names; Locations. 64 6.1.29 Subsequent Opinion of Counsel as to Recording Requirements. 65 6.1.30 Use of Premises and Equipment. 65 6.1.31 Protection of Collateral. 65 6.1.32 Landlord's Waivers. 65 6.1.33 Funds Transfer Services. 65 6.1.34 Year 2000 Compliance. 66 SECTION 6.2 NEGATIVE COVENANTS. 66 6.2.1 Merger, Acquisition or Sale of Assets. 67 6.2.2 Subsidiaries. 67 6.2.3 Issuance of Stock. 68 6.2.4 Purchase or Redemption of Securities, Dividend Restrictions. 68 6.2.5 Indebtedness. 68 6.2.6 Subordinated Indebtedness. 69 6.2.7 Investments, Loans and Other Transactions. 69 6.2.8 Stock of Subsidiaries. 69 6.2.9 Liens. 69 6.2.10 Transactions with Affiliates. 70 6.2.11 Other Businesses. 70 6.2.12 ERISA Compliance. 70 6.2.13 Prohibition on Hazardous Materials. 70 6.2.14 Method of Accounting; Fiscal Year. 71 6.2.15 Compensation. 71 6.2.16 Transfer of Collateral. 71 ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES 71 SECTION 7.1 EVENTS OF DEFAULT. 71 7.1.1 Failure to Pay. 71 7.1.2 Breach of Representations and Warranties . 71 7.1.3 Failure to Comply with Covenants. 72 7.1.4 Default Under Other Financing Documents or Obligations. 72 7.1.5 Receiver; Bankruptcy. 72 7.1.6 Involuntary Bankruptcy, etc. 72 7.1.7 Judgment. 73 7.1.8 Execution; Attachment. 73 7.1.9 Default Under Other Borrowings. 73 7.1.10 Material Adverse Change. 73 7.1.11 Change in Ownership. 73 7.1.12 Liquidation, Termination, Dissolution, Change in Management, etc. 73 SECTION 7.2 REMEDIES. 74 7.2.1 Acceleration. 74 7.2.2 Further Advances. 74 7.2.3 Uniform Commercial Code. 74 7.2.4 Specific Rights With Regard to Collateral. 75 7.2.5 Application of Proceeds. 76 7.2.6 Performance by Lender. 77 7.2.7 Other Remedies. 77 ARTICLE VIII MISCELLANEOUS 77
iv SECTION 8.1 NOTICES. 77 SECTION 8.2 AMENDMENTS; WAIVERS. 78 SECTION 8.3 CUMULATIVE REMEDIES. 79 SECTION 8.4 SEVERABILITY. 80 SECTION 8.5 ASSIGNMENTS BY LENDER. 80 SECTION 8.6 SUCCESSORS AND ASSIGNS. 81 SECTION 8.7 CONTINUING AGREEMENTS. 81 SECTION 8.8 ENFORCEMENT COSTS. 81 SECTION 8.9 APPLICABLE LAW; JURISDICTION. 81 8.9.1 Governing Law. 81 8.9.2 Jurisdiction. 82 8.9.3 Agent for Service. 82 8.9.4 Service of Process. 82 SECTION 8.10 DUPLICATE ORIGINALS AND COUNTERPARTS. 83 SECTION 8.11 HEADINGS. 83 SECTION 8.12 NO AGENCY. 83 SECTION 8.13 DATE OF PAYMENT. 83 SECTION 8.14 ENTIRE AGREEMENT. 83 SECTION 8.15 WAIVER OF TRIAL BY JURY. 83 SECTION 8.16 LIABILITY OF THE LENDER. 84 SECTION 8.17 CONFIDENTIALITY. 84
v AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT -------------------------------- THIS AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT (this "Agreement") is made this 26th day of June, 1998, by and among COYNE INTERNATIONAL ENTERPRISES CORP., a corporation organized under the laws of the State of New York ("Coyne") which is the successor by merger to COYNE TEXTILE SERVICES, INC., a corporation organized under the laws of the State of Connecticut, CARTER'S DUST-TEX SERVICES, INC., a corporation organized under the laws of the State of Tennessee, LONDON LAUNDRY AND DRY CLEANING, INC., a corporation organized under the laws of the State of Kentucky, and CENTRAL UNIFORM SERVICE, INC., a corporation organized under the laws of the State of New Jersey (the foregoing corporations, other than Coyne collectively, the "Merged Subsidiaries,") BLUE RIDGE TEXTILE MANUFACTURING, INC., a corporation organized under the laws of the State of Georgia, OHIO GARMENT RENTAL, INC., a corporation organized under the laws of the State of Ohio, MIDWAY-CTS BUFFALO, LTD., a corporation organized under the laws of the State of New York, and CLEAN TOWEL SERVICE, INC., a corporation organized under the laws of the State of Georgia ("Clean Towel"), jointly and severally (each of the foregoing corporations, individually, a "Borrower"; and collectively, the "Borrowers"), and NATIONSBANK, N.A., a national banking association (the "Lender"). RECITALS -------- A. Coyne, the Merged Companies and the other Borrowers (except Clean Towel) and the Lender are parties to a Financing and Security Agreement dated October 7, 1994 (the same, as amended, modified, substituted, extended, and renewed from time to time, the "Original Financing Agreement"). The Financing Agreement provides for some of the agreements between the Borrowers (except Clean Towel) and the Lender with respect to the "Loans" (as defined in the Original Financing Agreement), including a revolving credit facility in an amount not to exceed $13,000,000 and two term loan facilities in an original amount not to exceed $25,000,000 in the aggregate. B. In connection with the sale of senior subordinated debt by Coyne, the Borrowers have requested that the Lender agree to recast the credit facilities to consist of a revolving credit facility in the maximum principal amount of $25,000,000, including a letter of credit facility in the amount of $3,000,000, an acquisition facility in the maximum principal amount of $10,000,000, and a capital expenditure facility in the maximum principal amount of $10,000,000 to be used by the Borrowers for the Permitted Uses described in this Agreement. The Borrowers also requested that the Lender secure the recast credit facilities with the "Accounts," Inventory" and the other security described in Article III below, and release all other Collateral contemplated by the Original Financing Agreement. C. The Lender is willing to make the recast credit facilities available to the Borrowers and release such other Collateral upon the terms and subject to the conditions set forth in this Agreement. ARTICLE I DEFINITIONS Section 1.1 Certain Defined Terms. ---------------------- As used in this Agreement, the terms defined in the Preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the following meanings: "Account" individually and "Accounts" collectively mean all presently existing or hereafter acquired or created accounts, accounts receivable, contract rights, notes, drafts, instruments, acceptances, chattel paper, leases and writings evidencing a monetary obligation or a security interest in or a lease of goods, all rights to receive the payment of money or other consideration under present or future contracts (including, without limitation, all rights to receive payments under presently existing or hereafter acquired or created letters of credit), or by virtue of merchandise sold or leased, services rendered, loans and advances made or other considerations given, by or set forth in or arising out of any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy (excluding life insurance policies), instrument, document or general intangible, and all extensions and renewals of any thereof, all rights under or arising out of present or future contracts, agreements or general interest in merchandise which gave rise to any or all of the foregoing, including all goods, all claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise, all collateral security of any kind (including real property mortgages) and letters of credit given by any person with respect to any of the foregoing, all books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to any or all of the foregoing and all equipment and general intangibles necessary or beneficial desirable to retain, access and/or process the information contained in those books and records, and all proceeds (cash and non-cash) of the foregoing. "Acquisition Loan" has the meaning described in Section 2.3.1. "Acquisition Loan Amortization Date" means June 1, 1999. "Acquisition Loan Facility" means the facility described in Section 2.3 (The Acquisition Loan Facility) of this Agreement. "Acquisition Loan Installment Payment Schedule" has the meaning set forth in Section 2.3.3. "Acquisition Loan Maturity Date" means the earlier of (a) November 1, 2003, or (b) the Revolving Credit Termination Date. "Acquisition Loan Optional Prepayment" has the meaning set forth in Section 2.3.4. "Acquisition Note" has the meaning described in Section 2.3.2. "Account Debtor" means any Person who is obligated on a Receivable and "Account Debtors" mean all Persons who are obligated on the Receivables. 2 "Administration Fee" and " Administration Fees" have the meanings described in Section 2.6.7 (Administration Fees). "Affiliate" means, with respect to any designated Person, any other Person, (a) directly or indirectly controlling, directly or indirectly controlled by, or under direct or indirect common control with the Person designated, (b) directly or indirectly owning or holding five percent (5%) or more of any equity interest in such designated Person, or (c) five percent (5%) or more of whose stock or other equity interest is directly or indirectly owned or held by such designated Person. For purposes of this definition, the term "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or other equity interests or by contract or otherwise. "Agreement" means this Amended and Restated Financing and Security Agreement and all amendments, modifications and supplements hereto which may from time to time become effective in accordance with the provisions of Section 8.2. "Applicable Interest Rate" means (a) the Eurodollar Rate or (b) the Base Rate. "Applicable Margin" means the applicable rate per annum added, as set forth in Section 2.5.1 (Applicable Interest Rates), to the Eurodollar Base Rate or the Prime Rate. "Assets" means at any date all assets that, in accordance with GAAP consistently applied, should be classified as assets on a consolidated balance sheet of the Borrowers and their Subsidiaries. "Bankruptcy Code" means the United States Bankruptcy Code, as amended from time to time. "Base Rate" means the sum of (a) the Applicable Margin plus (b) the Prime ---- Rate. "Base Rate Loan" means any Loan for which interest is to be computed with reference to the Base Rate. "Borrowing Base" has the meaning described in Section 2.1.3 (Borrowing Base). "Borrowing Base Deficiency" has the meaning described in Section 2.1.3 (Borrowing Base). "Borrowing Base Report" has the meaning described in Section 2.1.4 (Borrowing Base Report). "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State are authorized or required to close. 3 "Capital Expenditure" means an expenditure for Fixed or Capital Assets, determined in accordance with GAAP consistently applied to the Borrowers. The term also includes the cash payments under a Capital Lease. "Capital Expenditure Line" has the meaning described in Section 2.4.1 (Capital Expenditure Line Facility). "Capital Expenditure Line Advance Period" means the period of time from the Closing Date to May 1, 2003. "Capital Expenditure Line Amortization Date" means June 1, 2000. "Capital Expenditure Line Commitment" and "Capital Expenditure Line Commitments" have the meanings described in Section 2.4.1 (Capital Expenditure Line Facility). "Capital Expenditure Line Committed Amount" has the meaning described in Section 2.4.1 (Capital Expenditure Line Facility). "Capital Expenditure Line Facility" means the facility established by the Lender pursuant to Section 2.4.1 (Capital Expenditure Line Facility). "Capital Expenditure Line Installment Payment Schedule" has the meaning described in Section 2.4.4 (Payments of Capital Expenditure Line). "Capital Expenditure Line Maturity Date" means the earlier of (a) November 1, 2003, or (b) the Revolving Credit Termination Date. "Capital Expenditure Line Note" has the meaning described in Section 2.4.3 (Capital Expenditure Line Note). "Capital Expenditure Line Notice" has the meaning described in Section 2.4.2. "Capital Expenditure Line Optional Prepayment" and "Capital Expenditure Line Optional Prepayments" have the meanings described in Section 2.1.7 (Optional Payments of Capital Expenditure Line). "Capital Lease" means any lease of real or personal property, for which the related Lease Obligations have been or should be, in accordance with GAAP consistently applied, capitalized on the balance sheet. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 4 "Cash Equivalents" means (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit with maturities of one (1) year or less from the date of acquisition of, or money market accounts maintained with, the Lender or any other domestic commercial bank having capital and surplus in excess of One Hundred Million Dollars ($100,000,000.00) or such other domestic financial institutions or domestic brokerage houses to the extent disclosed to, and approved by, the Lender and (c) commercial paper of a domestic issuer rated at least either A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc. with maturities of six (6) months or less from the date of acquisition. "Chattel Paper" means a writing or writings which evidence both a monetary obligation and a security interest in or lease of specific goods; any returned, rejected or repossessed goods covered by any such writing or writings and all proceeds (in any form including, without limitation, accounts, contract rights, documents, chattel paper, instruments and general intangibles) of such returned, rejected or repossessed goods; and all proceeds (cash and non-cash) of the foregoing. "Closing Date" means the Business Day, in any event not later than June 30, 1998, on which the Lender shall be satisfied that the conditions precedent set forth in Section 5.1 (Condition to Initial Advance) have been fulfilled. "Closing Fee" has the meaning described in Section 2.6.4 (Closing Fee). "Collateral" means all property of the Borrowers subject from time to time to the Liens of this Agreement, the Security Documents and the other Financing Documents, together with any and all cash and non-cash proceeds and products thereof. "Collateral Account" has the meaning described in Section 2.1.8 (Collateral Account). "Collateral Disclosure List" means the "Collateral Disclosure List" furnished in connection with the Original Financing Agreement as the same may have been modified prior to the date of this Agreement, the Lender and the Borrowers hereby agreeing that information contained in the Offering Memorandum shall be deemed to have so modified the same. "Commitment" means the Revolving Credit Commitment, the Acquisition Loan or the Capital Expenditure Line Commitment, as the case may be. "Committed Amount" means the Revolving Loan Committed Amount, the Acquisition Loan Committed Amount, or the Capital Expenditure Line Committed Amount, as the case may be, and "Committed Amounts" means collectively the Revolving Loan Committed Amount, the Acquisition Loan Committed Amount, and the Capital Expenditure Line Committed Amount. "Commonly Controlled Entity" means an entity, whether or not incorporated, which is under common control with any of the Borrowers within the meaning of Section 414(b) or (c) of the Internal Revenue Code. "Consolidated Net Income" means, for any period, the net income (or net loss) of the Borrowers for such period, after all expenses, taxes and other proper charges, determined in 5 accordance with GAAP and after eliminating (i) all intercompany items, (ii) all earnings attributable to equity interests in Persons that are not Borrowers unless actually received by the Borrowers, (iii) all income arising from the forgiveness, adjustment or negotiated settlement of any Indebtedness, (iv) any extraordinary items of income or expense and (v) any increase or decrease of income arising from any change in the method of accounting for any item from that employed in the preparation of the financial statements. "Copyrights" means and includes, in each case whether now existing or hereafter arising, all of each Borrower's rights, title and interest in and to (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations copyright applications, and all renewals of any of the foregoing, (b) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past, current or future infringements of any of the foregoing, (c) the right to sue for past, present and future infringements of any of the foregoing, and (d) all rights corresponding to any of the foregoing throughout the world. "Credit Facility" means the Revolving Credit Facility, the Acquisition Loan Facility and the Capital Expenditure Line Facility and "Credit Facilities" means collectively the Revolving Credit Facility, the Acquisition Loan Facility and the Capital Expenditure Line Facility and any and all other credit facilities now or hereafter extended under or secured by this Agreement. "Credit Facility" means the Revolving Credit Facility, the Acquisition Loan Facility and the Loan Facility and "Credit Facilities" means collectively the Revolving Credit Facility, the Acquisition Loan Facility and the Loan Facility and any and all other credit facilities now or hereafter extended under or secured by this Agreement. "Default" means an event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Agreement. "Documents" means all documents of title, whether now existing or hereafter acquired or created, and all proceeds (cash and non-cash of the foregoing). "Early Termination Fee" has the meaning described in Section 2.6.6 (Early Termination Fee). "EBITDA" means for any period, the Consolidated Net Income of the Borrowers for such period after all expenses except depreciation, interest, amortization and taxes. "Eligible Inventory" means Inventory which the Lender, in its good faith discretion determines to meet all of the following requirements: (a) except for rental Inventory located at the Borrowers' rental customers in the ordinary course of business, such Inventory is owned by the Borrower, is stored at a location listed on Schedule 5 to the Collateral Disclosure List, is subject to the security interest, which is perfected by filing as to such Inventory, and is subject to no other Lien whatsoever other than a Permitted Lien, 6 (b) such Inventory consists of finished goods and not work-in- process or supplies, (c) such Inventory is in good condition and meets all standards imposed by any governmental agency, or department or division thereof, having regulatory authority over such goods, their use or sale, (d) such Inventory is currently either usable or salable, at prices approximating at least cost, in the normal course of the Borrower's business and is not slow moving or stale, (e) such Inventory is not obsolete or returned or repossessed or used goods taken in trade, (f) except for rental Inventory located at the Borrower's rental customers in the ordinary course of business, such Inventory is located within the United States at one of the locations set forth in the most recent schedule of Inventory, (g) such Inventory is in the possession and control of the Borrower and not any third party (other than the Borrowers' rental customers in the ordinary course of business) or if the Inventory is held by a third party bailee and a negotiable instrument has not been issued with respect to it (i) a financing statement which names the third party bailee as the debtor/bailee, names the Borrower as the secured party/bailor, names the Lender as assignee of the secured party/bailor and contains a description of such Inventory acceptable to the Lender and otherwise in compliance with the requirements of Section 9- 304(3) of the UCC has been filed in the appropriate filing office and (ii) such other steps as the Lender may reasonably require in order to establish and preserve the priority of the Security Interest against secured creditors of the third party bailee or the Borrower shall have been taken, (h) unless the Borrower is in compliance with Section 6.1.32 of this Agreement, if such Inventory is located in a public warehouse or other facility leased by the Borrower (other than leased terminals in which the Borrower has goods in transit to Account Debtor), the lessor has delivered to the Lender, on behalf of the Lenders, a waiver and consent in form and substance satisfactory to the Lender, and (i) such Inventory is not determined by the Lender, on behalf of the Lenders, in its good faith discretion to be ineligible for any other reason. "Eligible Receivable" means a Receivable that consists of the unpaid portion of the obligation stated on the invoice issued to an Account Debtor with respect to Inventory sold and shipped to or services performed for such Account Debtor in the ordinary course of business, net of any credits or rebates owed by the Borrower to the Account Debtor and net of any commissions payable by the Borrower to third parties and that the Lender, in its good faith discretion determines to meet all of the following requirements: (a) such Receivable is owned by the Borrower and represents a complete bona fide transaction which requires no further act under any 7 circumstances on the part of the Borrower to make such Receivable payable by the Account Debtor, (b) the due date for such Receivable shall not be more than 59 days from the date of the shipment of the goods the sale of which gave rise to such Receivable (or the date of performance of services for Receivables arising from the performance of services), (c) no more than 89 days have elapsed from the date of the original invoice, (d) the goods the sale of which gave rise to such Receivable were shipped or delivered to the Account Debtor on an absolute sale basis and not on a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on the basis of any other similar understanding and no material part of such goods has been returned or rejected, (e) such Receivable is not evidenced by Chattel Paper or an instrument of any kind unless such chattel paper or instrument has been collaterally assigned to the Lender, for the benefit of itself as agent and the Lenders, pursuant to an assignment in form and substance satisfactory to the Lender and is in the possession of the Lender, (f) the Account Debtor with respect to such Receivable is not insolvent or the subject of any bankruptcy or insolvency proceedings of any kind or of any other proceeding or action, threatened or pending, which might, in the Lender's sole judgment, have a materially adverse effect on such Account Debtor, and is not, in the reasonable discretion of the Lender, deemed ineligible for credit or other reasons, (g) such Receivable is not owing by an Account Debtor having 50% or more in face value of its then-existing accounts owing to the Borrower past due more than 60 days from the due date of the original invoice, (h) such Receivable is not owing by an Account Debtor whose then-existing accounts owing to the Borrower exceed in face amount 15% of the Borrower's total Eligible Receivables unless the Borrowers have notified the Lender of the same and the Lender has consented in writing to inclusion of such Receivables, (i) if such Receivable arises from the performance of services, such services have been fully rendered and do not relate to any warranty claim or obligation, (j) such Receivable is not owing by an Account Debtor for whom goods and/or services were furnished, or to whom inventories are sent, outside of the United States, (for this purpose, the Commonwealth of Puerto Rico shall be considered located within the United States of America) unless such 8 Receivable is backed by a letter of credit in form and substance satisfactory to the Lender, issued or confirmed by a bank organized under the laws of the United States of America or a state thereof, (k) such Receivable is a valid, legally enforceable obligation of the Account Debtor with respect thereto and is not subject to any present or contingent (and no facts exist which are the basis for any future) offset, deduction or counterclaim, dispute or other defense on the part of such Account Debtor, (l) such Receivable is subject to the security interest, which is perfected as to such Receivable, and is subject to no other Lien whatsoever other than a Permitted Lien, (m) such Receivable is evidenced by an invoice or other documentation in form acceptable to the Lender, (n) unless the Borrower is in compliance with the provisions of Section 6.1.21, the Receivable is not subject to the Assignment of Claims Act of 1940, as amended from time to time, or any Applicable Law now or hereafter existing similar in effect thereto, or to any other prohibition (under Applicable Law, by contract or otherwise) against its assignment or requiring notice of or consent to such assignment, unless all such required notices have been given, all such required consents have been received and all other procedures have been complied with such that such Receivable shall have been duly and validly assigned to the Lender, for the benefit of the Lenders, (o) the goods giving rise to such Receivable were not, at the time of the sale thereof, subject to any Lien, except the security interest and Permitted Liens, (p) the Borrower is not in breach of any express or implied representation or warranty with respect to the goods the sale of which gave rise to such Receivable nor in material breach of any representation or warranty, covenant or other agreement contained in the Loan Documents with respect to such Receivable, (q) such Receivable does not arise out of any transaction with any Subsidiary, Affiliate, creditor, tenant, or lessor of the Borrower, or to the extent the Lender in good faith determines that the Lender's reserves against the Borrowing Base to cover Receivables from suppliers is inadequate, any transaction with a supplier (the Lender hereby advising the Borrowers that the Lender currently believes that a reserve equal to three percent (3%) of the Borrowers' Receivables shall be adequate), (r) the Borrower is not the beneficiary of any letter of credit, nor has any bond or other undertaking by a guarantor or surety been obtained, supporting such Receivable and the Account Debtor's obligations in respect thereof, 9 (s) such Receivable does not arise out of finance or similar charges by the Borrower or other fees for the time value of money, (t) the Account Debtor with respect to such Receivable is not located in New Jersey or any other state denying creditors access to its courts in the absence of qualification to transact business in such state or the filing of a Notice of Business Activities Report or other similar filing, unless the Borrower has either qualified as a foreign corporation authorized to transact business in such state or has filed a Notice of Business Activities Report or similar filing with the applicable state agency for the then current year, and (u) neither the Account Debtor with respect to such Receivable, nor such Receivable, is determined by the Lender in its good faith discretion to be ineligible for any other reason. "Enforcement Costs" means all reasonable expenses, charges, costs and fees whatsoever (including, without limitation, reasonable attorney's fees and expenses) of any nature whatsoever paid or incurred by or on behalf of the Lender in connection with (a) any or all of the Obligations, this Agreement and/or any of the other Financing Documents, (b) the creation, perfection, collection, maintenance, preservation, defense, protection, realization upon, disposition, sale or enforcement of all or any part of the Collateral, this Agreement or any of the other Financing Documents, including, without limitation, those costs and expenses more specifically enumerated in Section 3.6 (Costs) and/or Section 8.8 (Enforcement Costs), and (c) the monitoring, administration, processing and/or servicing of any or all of the Obligations, the Financing Documents, and/or the Collateral. "Equipment" means all equipment, machinery, computers, chattels, tools, parts, machine tools, furniture, furnishings, fixtures and supplies of every nature, presently existing or hereafter acquired or created and wherever located, whether or not the same shall be deemed to be affixed to real property, together with all accessions, additions, fittings, accessories, special tools, and improvements thereto and substitutions therefor and all parts and equipment which may be attached to or which are necessary or beneficial for the operation, use and/or disposition of such personal property, all licenses, warranties, franchises and general intangibles related thereto or necessary or beneficial for the operation, use and/or disposition of the same, together with all Accounts, Chattel Paper, Instruments and other consideration received by the Borrower on account of the sale, lease or other disposition of all or any part of the foregoing, and together with all rights under or arising out of present or future Documents and contracts relating to the foregoing and all proceeds (cash and non-cash) of the foregoing. "Equity Interests" means Capital Stock (as defined in this definition) and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 10 "Eurodollar Base Rate" means for any Interest Period with respect to any Eurodollar Loan, the per annum interest rate rounded upward, if necessary, to the nearest 1/100 of 1%, appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at or about 11:00 a.m. (London time) on the date that is two (2) Eurodollar Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is -------- ------- specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). "Eurodollar Business Day" means any Business Day on which dealings in United States Dollar deposits are carried out on the London interbank market and on which commercial banks are open for domestic and international business (including dealings in Dollar deposits) in London, England. "Eurodollar Loan" means any Loan for which interest is to be computed with reference to the Eurodollar Rate. "Eurodollar Rate" means for any Interest Period with respect to any Eurodollar Loan, (a) the Applicable Margin, plus (b) the per annum rate of ---- interest calculated pursuant to the following formula: Eurodollar Base Rate -------------------------- 1.00 - Reserve Percentage "Excess Cash Flow" means for any annual period of determination thereof, an amount equal to the Borrowers' EBITDA minus the Borrowers' Fixed Charges. ----- "Event of Default" has the meaning described in Article 7. "Facilities" means the collective reference to the loan and other credit facilities now or hereafter provided to the Borrowers by the Lender whether under this Agreement or otherwise. "Fees" means the collective reference to each fee payable to the Lender under the terms of this Agreement or under the terms of any of the other Financing Documents, including, without limitation, the following: the Revolving Credit Unused Line Fees, Closing Fee, Early Termination Fee, Origination Fee, Administration Fee, and Field Examination Fees. "Field Examination Fee" and "Field Examination Fees" have the meanings described in Section 2.6.6 (Field Examination Fees). "Financing Documents" means at any time collectively this Agreement, the Notes, the Security Documents, and any other instrument, agreement or document previously, simultaneously or hereafter executed and delivered by the Borrowers and/or any other Person, 11 singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with this Agreement, any Note, any of the Security Documents, any of the Facilities, and/or any of the Obligations. "Fixed Charge Coverage Ratio" means for the period of any determination thereof the ratio of (a) EBITDA to (b) Fixed Charges. "Fixed Charges" means for any period of determination thereof, the scheduled or required payments (including, without limitation, principal and interest) made in cash on all Indebtedness for Borrowed Money of the Borrower and its Subsidiaries, plus Permitted Payments plus Capital Expenditures made in cash (and Permitted Acquisitions to the extent not included in Capital Expenditures) of the Borrower and its Subsidiaries, plus cash payments of Taxes. "Fixed or Capital Assets" of a Person at any date means all assets which would, in accordance with GAAP consistently applied, be classified on the balance sheet of such Person as property, plant or equipment at such date. "Funded Debt" means Indebtedness for Borrowed Money minus any obligation ----- under a employee stock ownership plan or other similar employee benefit plan. "GAAP" means generally accepted accounting principles in the United States of America in effect from time to time. "General Intangibles" means all general intangibles of every nature, whether presently existing or hereafter acquired or created, and without implying any limitation of the foregoing, further means all books and records, claims (including without limitation all claims for income tax and other refunds), choses in action, claims, causes of action in tort or equity, contract rights, judgments, customer lists, Patents, Trademarks, licensing agreements, rights in intellectual property, goodwill (including goodwill of the Borrowers' business symbolized by and associated with any and all trademarks, trademark licenses, copyrights and/or service marks), royalty payments, licenses, contractual rights, rights as lessee under any lease of real or personal property, literary rights, Copyrights, service names, service marks, logos, trade secrets, amounts received as an award in or settlement of a suit in damages, deposit accounts, interests in joint ventures or general or limited partnerships, rights in applications for any of the foregoing, books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to any or all of the foregoing and all equipment and general intangibles necessary or beneficial desirable to retain, access and/or process the information contained in those books and records, and all proceeds (cash and non-cash) of the foregoing. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any department, agency or instrumentality thereof. "Hazardous Materials" means (a) any "hazardous waste" as defined by the Resource Conservation and Recovery Act of 1976, as amended from time to time, and regulations promulgated thereunder; (b) any "hazardous substance" as defined by the Comprehensive 12 Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, and regulations promulgated thereunder; (c) any substance the presence of which on any property now or hereafter owned or acquired by the Borrowers is prohibited by any Law similar to those set forth in this definition; and (d) any other substance which by Law requires special handling in its collection, storage, treatment or disposal. "Hazardous Materials Contamination" means the contamination (whether presently existing or occurring after the date of this Agreement) by Hazardous Materials of any property owned, operated or controlled by the Borrowers or for which the Borrowers have responsibility, including, without limitation, improvements, facilities, soil, ground water, air or other elements on, or of, any property now or hereafter owned or acquired by the Borrowers, and any other contamination by Hazardous Materials for which the Borrowers are, or are claimed to be, responsible. "Indebtedness" of a Person means at any date the total liabilities of such Person at such time determined in accordance with GAAP consistently applied. "Indebtedness for Borrowed Money" of a Person means at any time the sum at such time of (a) indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (b) any obligations of such Person in respect of letters of credit, banker's or other acceptances or similar obligations issued or created for the account of such Person, (c) Lease Obligations of such Person with respect to Capital Leases, (d) all liabilities secured by any Lien on any property owned by such Person, to the extent attached to such Person's interest in such property, even though such Person has not assumed or become personally liable for the payment thereof, (e) obligations of third parties which are being guarantied or indemnified against by such Person or which are secured by the property of such Person; and (f) any obligation of such Person under a employee stock ownership plan or other similar employee benefit plan; but excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not overdue (as determined in accordance with the Borrowers' past practices) or which are being disputed in good faith by such Person and for which adequate reserves are being provided on the books of such Person in accordance with GAAP. "Indenture" means that certain Indenture dated as of June 26, 1998 (as amended, supplemented or otherwise modified from time to time), between Coyne, the Trustee and, as guarantors, the Borrowers. "Interest Period" means as to any Eurodollar Loan, the period commencing on and including the date such Eurodollar Loan is made (or on the effective date of the Borrowers' election to convert any Base Rate Loan to a Eurodollar Loan in accordance with the provisions of this Agreement) and ending on and including the day which is one month, two months or three months thereafter, as selected by the Borrowers in accordance with the provisions of this Agreement, and thereafter, each period commencing on the last day of the then preceding Interest Period for such Eurodollar Loan and ending on and including the day which is one month, two months or three months thereafter, as selected by the Borrowers in accordance with the provisions of this Agreement; provided, however that: 13 (a) the first day of any Interest Period shall be a Eurodollar Business Day; (b) if any Interest Period would end on a day that shall not be a Eurodollar Business Day, such Interest Period shall be extended to the next succeeding Eurodollar Business Day unless such next succeeding Eurodollar Business Day would fall in the next calendar month, in which case, such Interest Period shall end on the next preceding Eurodollar Business Day; and (c) no Interest Period shall extend beyond the Revolving Credit Expiration Date, or in the case of Interest Periods with respect to the Acquisition Loan, the Acquisition Loan Maturity Date, or in the case of Interest Periods with respect to the Capital Expenditure Line, the Capital Expenditure Line Maturity Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the Income Tax Regulations issued and proposed to be issued thereunder. "Instrument" means a negotiable instrument (as defined under Article 3 of the Uniform Commercial Code), a "certificated security" (as defined under Article 8 of the Uniform Commercial Code), or any other writing which evidences a right to payment of money and is not itself a security agreement or lease and is of a type which is in the ordinary course of business transferred by delivery with any necessary endorsement. "Inventory" means all inventory of the Borrowers and all right, title and interest of the Borrowers in and to all of its now owned and hereafter acquired goods, merchandise and other personal property furnished under any contract of service or intended for sale or lease, including, without limitation, all raw materials, work-in-progress, finished goods and materials and supplies of any kind, nature or description which are used or consumed in the Borrowers' business or are or might be used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, merchandise and other licenses, warranties, franchises, general intangibles, personal property and all documents of title or documents relating to the same and all proceeds (cash and non-cash) of the foregoing. "Item of Payment" means each check, draft, cash, money, instrument, item, and other remittance in payment or on account of payment of the Receivables or otherwise with respect to any Collateral, including, without limitation, cash proceeds of any returned, rejected or repossessed goods, the sale or lease of which gave rise to a Receivable, and other proceeds of Collateral; and "Items of Payment" means the collective reference to all of the foregoing. "Laws" means all ordinances, statutes, rules, regulations, orders, injunctions, writs, or decrees of any Governmental Authority or political subdivision or agency thereof, or any court or similar entity established by any thereof. "Lease Obligations" of a Person means at any date the rental commitments of such Person for such period under leases for real and/or personal property (net of rent from subleases thereof, but including taxes, insurance, maintenance and similar expenses which the lessee is obligated to pay under the terms of said leases, except to the extent that such taxes, insurance, 14 maintenance and similar expenses are payable by sublessees), including rental commitments under Capital Leases. "Letter of Credit" and "Letters of Credit" shall have the meanings described in Section 2.5.1 hereof. "Letter of Credit Agreement" means the collective reference to each letter of credit application and agreement substantially in the form of the Lender's then standard form of application for letter of credit or such other form as may be approved by the Lender, executed and delivered by any one or more of the Borrowers in connection with the issuance of a Letter of Credit, as the same may from time to time be amended, restated, supplemented or modified and "Letter of Credit Agreements" means all of the foregoing in effect at any time and from time to time. "Letter of Credit Documents" means any and all drafts under or purporting to be under a Letter of Credit, any Letter of Credit Agreement, and any other instrument, document or agreement executed and/or delivered by any one or more of the Borrowers or any other Person under, pursuant to or in connection with a Letter of Credit or any Letter of Credit Agreement. "Letter of Credit Facility" means the facility established by the Lender pursuant to Section 2.2 (Letter of Credit Facility) of this Agreement. "Letter of Credit Fee" and "Letter of Credit Fees" have the meanings described in Section 2.2.2 hereof. "Letter of Credit Obligations" means all Obligations of any one or more of the Borrowers with respect to the Letters of Credit and the Letter of Credit Agreements. "Liabilities" means at any date all liabilities that in accordance with GAAP consistently applied should be classified as liabilities on a consolidated balance sheet of the Borrowers and their Subsidiaries. "Lien" means any mortgage, deed of trust, deed to secure debt, grant, pledge, security interest, assignment, encumbrance, judgment, lien, hypothecation, claim or charge of any kind, whether perfected or unperfected, avoidable or unavoidable, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction, excluding the precautionary filing of any financing statement by any lessor in a true lease transaction, by any bailor in a true bailment transaction or by any consignor in a true consignment transaction under the Uniform Commercial Code of any jurisdiction or the agreement to give any financing statement by any lessee in a true lease transaction, by any bailee in a true bailment transaction or by any consignee in a true consignment transaction. "Loan" means each of the Revolving Loan, the Acquisition Loan or the Capital Expenditure Loan, as the case may be, and "Loans" means the collective reference to the Revolving Loan, the Acquisition Loan and the Capital Expenditure Loan. "Loan Notice" has the meaning described in Section 2.1.2 (Procedure for Making Advances). 15 "Lockbox" has the meaning described in Section 2.1.8 (The Collateral Account). "Mandatory Prepayment" and "Mandatory Prepayments" have the meaning set forth in Section 2.6.3. "Mortgage" means the collective reference to each Security Document covering real property and required by Section 3.5 (Real Property). "Multiemployer Plan" means a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Note" means the Revolving Credit Note, the Acquisition Note or the Capital Expenditure Line Note, as the case may be, and "Notes" means collectively the Revolving Credit Note, the Acquisition Note and the Capital Expenditure Line Note, and any other promissory note which may from time to time evidence the Obligations. "Obligations" means all present and future indebtedness, duties, obligations, and liabilities, whether now existing or contemplated or hereafter arising, of the Borrowers to the Lender under, arising pursuant to, in connection with and/or on account of the provisions of this Agreement, each Note, each Security Document, and any of the other Financing Documents, the Loans, and any of the Credit Facilities including, without limitation, the principal of, and interest on, each Note, late charges, the Fees, Enforcement Costs, and prepayment penalties (if any), letter of credit fees or fees charged with respect to any guaranty of any letter of credit; also means all other present and future indebtedness, liabilities and obligations, whether now existing or contemplated or hereafter arising, of the Borrowers to the Lender of any nature whatsoever regardless of whether such debts, obligations and liabilities be direct, indirect, primary, secondary, joint, several, joint and several, fixed or contingent; and also means any and all renewals, extensions substitutions, amendments, restatements and rearrangements of any such debts, obligations and liabilities. "Offering Memorandum" means Coyne's Offering Memorandum dated June 23, 1998, pursuant to which the Senior Subordinated Notes are offered. "Offering Transaction" means the sale of the Senior Subordinated Notes as described in the Offering Memorandum. "Outstanding Letter of Credit Obligations" has the meaning described in Section 2.2.3 hereof. "Patents" means and includes, in each case whether now existing or hereafter arising, all of each Borrower's rights, title and interest in and to (a) any and all patents and patent applications, (b) any and all inventions and improvements described and claimed in such patents and patent applications, (c) reissues, divisions, continuations, renewals, extensions and continuations-in- part of any patents and patent applications, (d) income, royalties, damages, claims and payments now or hereafter due and/or payable under and with respect to any patents or patent applications, including, without limitation, damages and payments for past and future infringements, (e) rights to sue for past, present and future infringements of patents, and (f) all rights corresponding to any of the foregoing throughout the world. 16 "PBGC" means the Pension Benefit Guaranty Corporation. "Permitted Acquisitions" means the acquisition or purchase of, or investment in, any Person, any operating division or unit of any Person, or the stock or assets of any Person, engaged substantially in the industrial laundry business; provided, however that (i) the aggregate purchase price of, investment in, and/or expenditures (and the timing thereof) relating to, any given acquisition, purchase, or investment cannot itself exceed Three Million Five Hundred Thousand Dollars ($3,500,000) in any fiscal year; which purchase price shall be based on reasonable purchase price multiples, (ii) such acquisition, purchase or investment cannot otherwise constitute or give rise to a Default or an Event of Default; (iii) the Borrowers have furnished financial projections in form and content reasonably acceptable to the Lender which give effect to such acquisition, purchase or investment and which indicate that such acquisition, purchase and/or investment could not or would not cause a Default or Event of Default and has and will generate sufficient cash flow to cover any related advance under the Acquisition Loan, use of the Revolving Loan and other obligations as they become due; (iv) if such acquisition, purchase or investment (A) is a stock or other securities acquisition, purchase or investment, the Person so acquired, purchased or invested in becomes a Borrower hereunder or is merged into Coyne and, except as permitted by the Lender, all of its assets are subjected to the Lien of this Agreement and other Security Documents, all in form and substance satisfactory to the Lender and its counsel, subject only to Permitted Liens and in conformance with the provisions of this Agreement generally, or (B) is an asset acquisition, purchase or investment, the assets are subjected to the Lien of this Agreement and other Security Documents, all in form and substance satisfactory to the Lender and its counsel, subject only to Permitted Liens and in conformance with the provisions of this Agreement generally; (v) if a Phase I environmental assessment of any real property to be acquired or purchased by any of the Borrowers or owned by any Person to be acquired or purchased by any of the Borrowers or owned by any Person in which any of the Borrowers intend to make an investment, has been performed by a reputable and recognized environmental consulting firm acceptable to the Lender and has revealed no material Hazardous Materials Contamination or material violations of any Environmental Laws, as reasonably determined by the Lender; and (vi) the acquisition, purchase, or investment must otherwise be satisfactory to the Lender in all other respects. "Permitted Liens" means: (a) Liens for Taxes which are not delinquent or which the Lender has determined in the exercise of its good faith discretion (i) are being diligently contested in good faith and by appropriate proceedings, (ii) the Borrower affected has the financial ability to pay, with all penalties and interest, at all times without materially and adversely affecting the Borrower, and (iii) are not, and will not be with appropriate filing, the giving of notice and/or the passage of time, entitled to priority over any Lien of the Lender; (b) deposits or pledges to secure obligations under workers' compensation, social security or similar laws, or under unemployment insurance in the ordinary course of business; (c) Liens in favor of the Lender; (d) judgment Liens to the extent the entry of such judgment does not constitute a Default or an Event of Default under the terms of this Agreement or result in the sale of, or levy of execution on, any of the Collateral; (e) a purchase money security interest in, or Capital Leases of, any Equipment hereafter acquired attaching at the time of such acquisition, provided, however, that (i) the indebtedness secured by any such security interest so created, assumed or existing shall not exceed 100% of the cost of the Equipment covered thereby to the entity selling and/or financing the purchase of the same, and (ii) each such security interest shall attach only to the Equipment so acquired, and (iii) the acquisition to which any security interest relates shall 17 not result in a Default or Event of Default under any other provision of this Agreement; and (f) such other Liens, if any, as are set forth on Schedule 4.1.20 attached hereto and made a part hereof. "Permitted Payments" means payments to repurchase Equity Interests of Coyne in order to satisfy certain estate planning obligations of the estate of J. Stanley Coyne, which payments shall not exceed $1.0 million in each of the second, third, fourth, fifth and sixth calendar years following the death of J. Stanley Coyne and $2.25 million in each of the seventh, eighth, ninth and tenth calendar years following the death of J. Stanley Coyne, plus an additional amount of $2.0 million in the calendar year 2003; provided that no such payment shall be made prior to the death of J. Stanley Coyne; and provided further, that the maximum amount of Permitted Payments in a specified calendar year following the death of J. Stanley Coyne shall be increased by an amount equal to the difference between the maximum amount of Permitted Payments that could have been made by Coyne in each of the prior specified calendar years following the death of J. Stanley Coyne and the actual amount of Permitted Payments made by Coyne in each of such prior specified calendar years following the death of J. Stanley Coyne. "Permitted Senior Subordinated Note Purchases" means the collective reference to each purchase by Coyne of Senior Subordinated Notes provided, however that (i) the aggregate purchase price of all such purchases (net of cash proceeds received on resales of the same) cannot exceed Five Million Dollars ($5,000,000) in the aggregate unless the Lender has given its prior written consent to such excess, (ii) such purchase cannot otherwise constitute or give rise to a Default or an Event of Default and shall not be made at any time when a Default or Event of Default exists; and (iii) the Borrowers have furnished financial projections in form and content reasonably acceptable to the Lender which give effect to such purchase and which indicate that such purchase could not or would not cause a Default or Event of Default. "Permitted Uses" means (a) with respect to the Revolving Loan, the payment of expenses incurred in the ordinary course of the business of each of the Borrowers, and (b) with respect to the Capital Expenditure Loan, purchases described in Section 2.4.2, and (c) with respect to the Acquisition Loan, Permitted Acquisitions. "Person" means and includes an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, a government or political subdivision or agency thereof or any other organization or entity. "Plan" means any pension plan which is covered by Title IV of ERISA and in respect of which any of the Borrowers or a Commonly Controlled Entity is an "employer" as defined in Section 3 of ERISA. "Post-Default Rate" means (a) with respect to principal of, and interest on, the Capital Expenditure Line the applicable rate in effect from time to time under the Capital Expenditure Line Note, plus two percent (2%) per annum, (b) with respect to principal of, and interest on the Acquisition Loan, the applicable rate in effect from time to time under the Acquisition Note, plus two percent (2%) per annum and (c) with respect to all other Obligations, the applicable rate in effect from time to time under the Revolving Note, plus two percent (2%) per annum. 18 "Prepayment" means a Revolving Loan Mandatory Prepayment, a Revolving Loan Optional Prepayment, a Mandatory Prepayment, an Acquisition Loan Optional Prepayment or a Capital Expenditure Loan Optional Prepayment, as the case may be, and "Prepayments" mean collectively Revolving Loan Mandatory Prepayments, Revolving Loan Optional Prepayments, Mandatory Prepayments, Acquisition Loan Optional Prepayments or and Capital Expenditure Loan Optional Prepayments. "Prime Rate" means the floating and fluctuating per annum prime rate of interest of the Lender, as established and declared by the Lender at any time or from time to time. The Prime Rate does not necessarily represent the lowest rate of interest charged by the Lender to borrowers. "Receivable" means one of the Borrowers' now owned and hereafter owned, acquired or created Accounts, Chattel Paper, General Intangibles and Instruments and "Receivables" means all of the Borrowers' now or hereafter owned, acquired or created Accounts, Chattel Paper, General Intangibles and Instruments, and all cash and non-cash proceeds and products thereof. "Reportable Event" means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. "Reserve Percentage" means, at any time, the then current maximum rate for which reserves (including any basic, special, supplemental, marginal and emergency reserves) are required to be maintained by member banks of the Federal Reserve System under Regulation D of the Board of Governors of the Federal Reserve System against "Eurocurrency liabilities", as that term is defined in Regulation D. Without limiting the effect of the foregoing, the Reserve Percentage shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the Eurodollar Rate is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Loans. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage. "Responsible Officer" means the chief executive officers of the Borrowers or the presidents of the Borrowers or, with respect to financial matters, the chief financial officers of the Borrowers. "Revolving Credit Commitment" means the agreement of the Lender relating to the making of the Revolving Loan and advances thereunder subject to and in accordance with the provisions of this Agreement. "Revolving Credit Commitment Period" means the period of time from the Closing Date to the Business Day preceding the Revolving Credit Termination Date. "Revolving Credit Committed Amount" has the meaning described in Section 2.1.1 (Revolving Credit Facility). "Revolving Credit Expiration Date" means November 1, 2003, extending automatically for successive periods of one (1) year each (but in no event later than November 1, 2008) unless the Lender in the exercise of its sole and absolute discretion, or Coyne in the exercise of its sole 19 and absolute discretion, has notified the other, no later than August 31 of any year after September 1, 2002, of its intention to terminate the Revolving Credit Facility as of the next September 1. "Revolving Credit Facility" means the facility established by the Lender pursuant to Section 2.1 (Revolving Credit Facility) of this Agreement. "Revolving Credit Note" has the meaning described in Section 2.1.5 (Revolving Credit Note). "Revolving Credit Termination Date" means the earlier of (a) the Revolving Credit Expiration Date, or (b) the date on which the Revolving Credit Commitment is terminated pursuant to Section 7.2. "Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line Fees" have the meanings described in Section 2.1.10 (Revolving Credit Unused Line Fee). "Revolving Credit Loans" means the loans made to the Borrower pursuant under the Revolving Credit Facility. "Revolving Loan Account" has the meaning described in Section 2.1.9 (Revolving Loan Account). "Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory Prepayments" have the meanings described in Section 2.1.6 (Mandatory Prepayments of Revolving Loan). "Revolving Loan Optional Prepayment" and "Revolving Loan Optional Prepayments" have the meanings described in Section 2.1.7 (Optional Prepayments of Revolving Loan). "Securities" means the collective reference to each and every certificated or uncertificated security which constitutes a "security" under the provisions of Title 8 of the Uniform Commercial Code, and all proceeds (cash and non-cash) of the foregoing. "Security Documents" means collectively any assignment, pledge agreement, security agreement, mortgage, deed of trust, deed to secure debt, financing statement and any similar instrument, document or agreement under or pursuant to which a Lien is now or hereafter granted to, or for the benefit of, the Lender on any real or personal property to secure all or any portion of the Obligations, all as the same may from time to time be amended, restated, supplemented or otherwise modified, including, without limitation, this Agreement. "Security Procedures" means the rules, policies and procedures adopted and implemented by the Lender and its Affiliates at any time and from time to time with respect to security procedures and measures relating to electronic funds transfers, all as the same may be amended, restated, supplemented, terminated, or otherwise modified at any time and from time to time by the Agent in its sole and absolute discretion. 20 "Senior Subordinated Notes" means any and all 11-1/4% Senior Subordinated Notes due 2008 to be issued from time to time under the Indenture, in the principal amount of $75,000,000. "Senior Subordinated Notes Documents" means, collectively, the Indenture and the Senior Subordinated Notes. "State" means the State of Maryland. "Subordinated Indebtedness" means (a) the Senior Subordinated Notes and (b) all other Indebtedness incurred at any time by the Borrowers, the repayment of which is subordinated to the Obligations by a written agreement in form and substance satisfactory to the Lender in its sole and absolute discretion. "Subordination Agreement" means that certain Subordination agreement by and among Capital Resource Partners, the Borrowers and the Lender, as the same may be from time to time amended, restated, supplemented or modified. "Subsidiary" means any corporation the majority of the voting shares of which at the time are owned directly by any of the Borrowers and/or by one or more Subsidiaries of any of the Borrowers. "Taxes" means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character (including all penalties or interest thereon), which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority on the Borrowers or any of their properties or assets or any part thereof or in respect of any of their franchises, businesses, income or profits. "Trademarks" means and includes in each case whether now existing or hereafter arising, all of each Borrower's rights, title and interest in and to (a) any and all trademarks (including service marks), trade names and trade styles, and applications for registration thereof and the goodwill of the business symbolized by any of the foregoing, (b) any and all licenses of trademarks, service marks, trade names and/or trade styles, whether as licensor or licensee, (c) any renewals of any and all trademarks, service marks, trade names, trade styles and/or licenses of any of the foregoing, (d) income, royalties, damages and payments now or hereafter due and/or payable with respect thereto, including, without limitation, damages, claims, and payments for past, present and future infringements thereof, (e) rights to sue for past, present and future infringements of any of the foregoing, including the right to settle suits involving claims and demands for royalties owing, and (f) all rights corresponding to any of the foregoing throughout the world. "Trustee" means IBJ Schroder Bank and Trust Company, and its successor and assigns as Trustee under the Indenture. "Uniform Commercial Code" means, unless otherwise provided in this Agreement, the Uniform Commercial Code as adopted by and in effect from time to time in the State. "Wholly Owned Subsidiary" means any domestic United States corporation all the shares of stock of all classes of which (other than directors' qualifying shares) at the time are owned 21 directly or indirectly by any of the Borrowers and/or by one or more Wholly Owned Subsidiaries of any of the Borrowers. "Wire Transfer Procedures" means the rules, policies and procedures adopted and implemented by the Lender and its Affiliates at any time and from time to time with respect to electronic funds transfers, including, without limitation, the Security Procedures, all as the same may be amended, restated, supplemented, terminated or otherwise modified at any time and from time to time by the Agent in its sole and absolute discretion. "Year 2000 Problem" has the meaning set forth in Section 4.1.28. Section 1.2 Accounting Terms and Other Definitional Provisions. -------------------------------------------------- Unless otherwise defined herein, as used in this Agreement and in any certificate, report or other document made or delivered pursuant hereto, accounting terms not otherwise defined herein, and accounting terms only partly defined herein, to the extent not defined, shall have the respective meanings given to them under GAAP. Unless otherwise defined herein, all terms used herein which are defined by the Uniform Commercial Code shall have the same meanings as assigned to them by the Uniform Commercial Code unless and to the extent varied by this Agreement. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, subsection, schedule and exhibit references are references to articles, sections or subsections of, or schedules or exhibits to, as the case may be, this Agreement unless otherwise specified. As used herein, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neuter gender shall include all genders, as the context may require. Without implying any limitation on the foregoing, any reference to the "Borrowers" in provision of this Agreement or any of the other Financing Documents shall be deemed to refer to each and any one or more of the Borrowers, jointly and severally. Reference to any one or more of the Financing Documents shall mean the same as the foregoing may from time to time be amended, restated, substituted, extended, renewed, supplemented or otherwise modified. ARTICLE II THE CREDIT FACILITIES Section 2.1 The Revolving Credit Facility. ----------------------------- 2.1.1 Revolving Credit Facility. ------------------------- Subject to and upon the provisions of this Agreement, the Lender establishes a revolving credit facility in favor of the Borrowers. The aggregate of all advances under the Revolving Credit Facility are sometimes referred to in this Agreement collectively as the "Revolving Loan". The principal amount of Twenty-five Million Dollars ($25,000,000) is the "Revolving Credit Committed Amount". 22 During the Revolving Credit Commitment Period, the Lender agrees to make advances under the Revolving Loan requested by the Borrowers from time to time provided that after giving effect to the Borrowers' request, the outstanding principal balance of the Revolving Loan would not exceed the lesser of (a) the Revolving Credit Committed Amount minus the Outstanding Letter of Credit Obligations, or (b) the most current Borrowing Base. 2.1.2 Procedure for Making Advances Under the Revolving Loan; ------------------------------------------------------- Lender Protection Loans. ----------------------- The Borrowers may borrow under the Revolving Credit Commitment on any Business Day. Advances under the Revolving Loan shall be deposited to the demand deposit account of Coyne with the Lender or shall be otherwise applied as directed by the Borrowers, which direction the Lender may require to be in writing. No later than 10:00 a.m. (Baltimore time) on the date of the requested borrowing, the Borrowers shall give the Lender oral or written notice (a "Loan Notice") of the amount and (if requested by the Lender) the purpose of the requested borrowing. Any oral Loan Notice shall be confirmed in writing by the Borrowers within three (3) Business Days after the making of the requested Revolving Loan. In addition, the Borrowers hereby irrevocably authorize the Lender at any time and from time to time, without further request from or notice to the Borrowers, to make advances under the Revolving Loan which the Lender, in its good faith discretion, deems necessary or appropriate to protect the Lender's interests under this Agreement, including, without limitation, advances under the Revolving Loan made to cover debit balances in the Revolving Loan Account, principal of, and/or interest on, the Loan, the Obligations, and/or Enforcement Costs, prior to, on, or after the termination of other advances under this Agreement, regardless of whether the outstanding principal amount of the Revolving Loan which the Lender may make hereunder exceeds the Revolving Credit Committed Amount. 2.1.3 Borrowing Base. -------------- As used in this Agreement, the term "Borrowing Base" means at any time, an amount equal to the aggregate of (a) eighty-five percent (85%) of the amount of Eligible Receivables, plus (b) the lesser of (i) the sum of fifty percent (50%) of the amount of Eligible Inventory consisting of new merchandise plus twenty-five percent (25%) of the amount of Eligible Inventory consisting of - ---- in-service inventory, or (ii) Twelve Million Five Hundred Thousand Dollars ($12,500,000). The Borrowing Base shall be computed based on the Borrowing Base Report most recently delivered to and accepted by the Lender in its good faith discretion. In the event the Borrowers fail to furnish a Borrowing Base Report required by Section 2.1.4 below, or in the event the Lender in good faith determines that a Borrowing Base Report is no longer accurate, the Lender may, in its sole and absolute discretion exercised from time to time and without limiting its other rights and remedies under this Agreement, suspend the making of or limit advances under the Revolving Loan. The Borrowing Base shall be subject to reduction by amounts credited to the Collateral Account since the date of the most recent Borrowing Base Report and by the amount of any Receivable or any Inventory which was included in the Borrowing Base but which the Lender determines fails to meet the respective criteria applicable from time to time for Eligible Receivables or Eligible Inventory. 23 If at any time the total of the aggregate principal amount of the Revolving Loan, the Outstanding Letter of Credit Obligations exceed the Borrowing Base, a borrowing base deficiency ("Borrowing Base Deficiency") shall exist. Each time a Borrowing Base Deficiency exists, the Borrowers at the sole and absolute discretion of the Lender exercised from time to time shall pay the Borrowing Base Deficiency ON DEMAND to the Lender from time to time. 2.1.4 Borrowing Base Report. --------------------- The Borrowers will furnish to the Lender no less frequently than monthly and no later than the 10th day of each month and at such other times as may be requested by the Lender a report of the Borrowing Base (each a "Borrowing Base Report"; collectively, the "Borrowing Base Reports") in the form required from time to time by the Lender, appropriately completed and duly signed. The Borrowing Base Report shall contain the amount and payments on the Receivables, the value of Inventory, and the calculations of the Borrowing Base, all in such detail, and accompanied by such supporting and other information, as the Lender may from time to time request. Upon the Lender's request and upon the creation of any Receivables, or at such intervals as the Lender may require, the Borrowers will provide the Lender with: (a) copies of Account Debtor invoices; (b) evidence of shipment or delivery; and (c) such further schedules, documents and/or information regarding the Receivables and the Inventory as the Lender may reasonably require. The items to be provided under this subsection shall be in form satisfactory to the Lender, and certified as true and correct by a Responsible Officer, and delivered to the Lender from time to time solely for the Lender's convenience in maintaining records of the Collateral. The Borrowers' failure to deliver any of such items to the Lender shall not affect, terminate, modify, or otherwise limit the Lender's security interests in the Collateral. 2.1.5 Revolving Credit Note. ---------------------- The obligation of the Borrowers to pay the Revolving Loan with interest shall be evidenced by a promissory note (as from time to time extended, amended, restated, supplemented or otherwise modified, the "Revolving Credit Note") substantially in the form of EXHIBIT "A-1" attached hereto and made a part hereof, with appropriate insertions. The Revolving Credit Note shall be dated as of the Closing Date, shall be payable to the order of the Lender at the times provided in the Revolving Credit Note, and shall be in the principal amount of the Revolving Credit Committed Amount. The Borrowers acknowledge and agree that, if outstanding principal balance of the Revolving Loan outstanding from time to time exceeds the face amount of the Revolving Credit Note, the excess shall bear interest at the rates provided from time to time for advances under Revolving Loan evidenced by the Revolving Credit Note and shall be payable, with accrued interest, ON DEMAND. The Revolving Credit Note shall not operate as a novation of any of the Obligations or nullify, discharge, or release any such Obligations or the continuing contractual relationship of the parties hereto in accordance with the provisions of this Agreement. 2.1.6 Mandatory Prepayments of Revolving Loan. --------------------------------------- The Borrowers shall make the mandatory prepayments (each a "Revolving Loan Mandatory Prepayment" and collectively, the "Revolving Loan Mandatory Prepayments") of the Revolving Loan at any time and from time to time in such amounts requested by the 24 Lender pursuant to Section 2.1.3 (Borrowing Base) and/or Section 2.1.11(c) (Required Availability under the Revolving Credit Facility) of this Agreement in order to cover any Borrowing Base Deficiency. 2.1.7 Optional Prepayments of Revolving Loan. -------------------------------------- Subject to the limitations and fees of Section 2.6.5 below, the Borrowers may, at their option, at any time and from time to time prepay (each a "Revolving Loan Optional Prepayment" and collectively the "Revolving Loan Optional Prepayments") the Revolving Loan, in whole or in part without premium or penalty. 2.1.8 The Collateral Account. ---------------------- The Borrowers will deposit, or cause to be deposited, all Items of Payment to a bank account designated by the Lender and, if the Lender so elects (provided that such election may only be made at any time following either (i) an Event of Default or (ii) a time when the aggregate outstanding principal amount of the Revolving Loan plus the Outstanding Letter of Credit ---- Obligations exceeds the Borrowing Base minus Two Million Five Hundred Thousand ----- Dollars ($2,500,000)) from which the Lender alone has power of access and withdrawal (the "Collateral Account"). Each deposit shall be made not later than the next Business Day after the date of receipt of the Items of Payment. The Items of Payment shall be deposited in precisely the form received, except for the endorsements of the Borrowers where necessary to permit the collection of any such Items of Payment, which endorsement the Borrowers hereby agree to make. In the event the Borrowers fail to do so, the Borrowers hereby authorize the Lender to make the endorsement in the name of the Borrowers. Prior to such a deposit, the Borrowers will not commingle any Items of Payment with any of the Borrowers' other funds or property, but will hold them separate and apart in trust and for the account of the Lender. In addition, if so directed by the Lender after an Event of Default, the Borrowers shall direct the mailing of all Items of Payment from the Borrowers' Account Debtors to a post-office box designated by the Lender, or to such other additional or replacement post-office boxes pursuant to the request of the Lender from time to time (collectively, the "Lockbox"). The Lender shall have unrestricted and exclusive access to the Lockbox. Upon obtaining Items of Payment, the Lender is authorized to inspect all Items of Payment, endorse all Items of Payment in the name of the Borrowers, and deposit such Items of Payment in the Collateral Account. The Lender reserves the right, exercised in its sole and absolute discretion from time to time, to provide to the Collateral Account credit prior to final collection of an Item of Payment and to disallow credit for any uncollected Item of Payment which is unsatisfactory to the Lender. In the event Items of Payment are returned to the Lender for any reason whatsoever, the Lender may, in the exercise of its discretion from time to time, forward such Items of Payment a second time. Any returned Items of Payment shall be charged back to the Collateral Account, the Revolving Loan Account, or other account, as appropriate. The Lender will apply the whole or any part of the collected funds credited to the Collateral Account against the Revolving Loan (or with respect to Items for 25 Payments which are not proceeds of accounts or inventory or after a Default, against any of the Obligations) or credit such collected funds to the depository account of the Borrowers with the Lender, the application to take place as of the Business Day after the date of crediting and the order and method of such application to be in the sole discretion of the Lender. 2.1.9 Revolving Loan Account. ---------------------- The Lender will establish and maintain a loan account on its books (the "Revolving Loan Account") to which the Lender will (a) debit (i) the ----- principal amount of each Revolving Loan made by the Lender hereunder as of the date made, (ii) the amount of any interest accrued on the Revolving Loan as and when due, and (iii) any other amounts due and payable by the Borrowers to the Lender from time to time under the provisions of this Agreement in connection with the Revolving Loan, including, without limitation, Enforcement Costs, Fees, late charges, and service, collection and audit fees, as and when due and payable, and (b) credit all payments made by the Borrowers to the Lender on ------ account of the Revolving Loan as of the date made including, without limitation, funds credited to the Revolving Loan Account from the Collateral Account. The Lender may debit the Revolving Loan Account for the amount of any Item of Payment which is returned to the Lender unpaid. All credit entries to the Revolving Loan Account are conditional and shall be readjusted as of the date made if final and indefeasible payment is not received by the Lender in cash or solvent credits. The Borrowers hereby promise to pay to the order of the Lender, on demand, an amount equal to the excess, if any, of all debit entries over all credit entries recorded in the Revolving Loan Account under the provisions of this Agreement. Any and all periodic or other statements or reconciliations, and the information contained in those statements or reconciliations, of the Revolving Loan Account shall be presumed conclusively to be correct and shall constitute an account stated between the Lender and the Borrowers unless the Lender receives specific written objection thereto from the Borrowers within thirty (30) Business Days after such statement or reconciliation shall have been sent by the Lender. 2.1.10 Revolving Credit Unused Line Fee. -------------------------------- The Borrowers shall pay to the Lender a monthly revolving credit facility fee (collectively, the "Revolving Credit Unused Line Fees" and individually, a "Revolving Credit Unused Line Fee") in an amount equal to (i) three-eighths percent (3/8%) per annum times the positive difference up to and ----- including $15,000,000, if any, between the average daily unused and undisbursed portion of the Revolving Credit Committed Amount in effect from time to time during each calendar month and (ii) one-quarter percent (1/4%) per annum times ----- such positive difference in excess of $15,000,000. The accrued and unpaid portion of the Revolving Credit Unused Line Fee shall be paid by the Borrowers to the Lender on the first day of the next calendar month, commencing on the first such date following the date hereof, and on the Revolving Credit Termination Date. 2.1.11 Required Availability under the Revolving Credit ------------------------------------------------ Facility. - -------- (a) On the Closing Date, the Revolving Loan plus the ---- Outstanding Letter of Credit Obligations shall not exceed the Borrowing Base minus the Permitted Uses required to be made on the Closing Date minus the costs - ----- ----- relating to the closing of this 26 Agreement (including, without limitation, applicable Fees, recording costs, recording taxes, and the fees and expenses of the Borrowers' and the Lender's professionals) minus Five Million Dollars ($5,000,000). ----- (b) After the Closing Date, the Borrowers shall not at any time permit the aggregate outstanding principal amount of the Revolving Loan plus the Outstanding Letter of Credit Obligations to exceed the Borrowing ---- Base minus One Million Dollars ($1,000,000). ----- (c) If so required by the Lender, the Borrowers shall make a Revolving Loan Mandatory Prepayment pursuant to the provisions of Section 2.1.6 to the extent necessary to achieve compliance with this Section. 2.1.12 Right of Lender to Demand Payment and Terminate ----------------------------------------------- Revolving Credit Facility. - ------------------------- Notwithstanding any of the provisions of this Agreement, the Revolving Credit Note or any of the other Financing Documents, during the continuance of an Event of Default, the Lender may at any time, in its sole and absolute discretion, demand payment of the Revolving Loan in whole or in part and/or terminate, suspend or limit the Revolving Credit Commitment. Upon termination of the Revolving Credit Facility, the outstanding principal balance under the Revolving Loan, and any accrued and unpaid interest thereon, shall be immediately due and payable, and the Lender shall not make any further advances under the Revolving Loan, unless it elects to do so in the exercise of its sole and absolute discretion. Section 2.2 The Letter of Credit Facility. ----------------------------- 2.2.1 Letters of Credit. ----------------- Subject to and upon the provisions of this Agreement, and as a part of the Revolving Credit Commitment, the Borrowers may, upon the prior approval of the Lender, obtain standby and documentary letters of credit (as the same may from time to time be amended, supplemented or otherwise modified, each a "Letter of Credit" and collectively the "Letters of Credit") from the Lender from time to time from the Closing Date until the Business Day preceding the Revolving Credit Termination Date. The Borrowers will not be entitled to obtain a Letter of Credit hereunder unless (a) after giving effect to the request, the outstanding principal balance of the Revolving Loan and of the Letter of Credit Obligations would not exceed the lesser of (i) the Revolving Credit Committed Amount, or (ii) the most current Borrowing Base and (b) the sum of the aggregate face amount of the then outstanding Letters of Credit (including the face amount of the requested Letter of Credit, but excluding, only up to $500,000, the stated amount of the Letter of Credit for the benefit of the Borrowers' workmen's compensation insurance carrier) does not exceed Three Million Dollars ($3,000,000). 2.2.2 Letter of Credit Fees. --------------------- Prior to or simultaneously with the opening of each Letter of Credit, the Borrowers shall pay to the Lender, a letter of credit fee (each a "Letter of Credit Fee" and 27 collectively the "Letter of Credit Fees") in an amount equal to two percent (2%) per annum of the amount of the Letter of Credit. Such Letter of Credit Fees shall be paid upon the opening of the Letter of Credit and upon each anniversary thereof, if any. In addition, the Borrowers shall pay to the Lender any and all additional issuance, negotiation, processing, transfer or other fees to the extent and as and when required by the provisions of any Letter of Credit Agreement; such additional fees are included in and a part of the "Fees" payable by the Borrowers under the provisions of this Agreement. 2.2.3 Terms of Letters of Credit. -------------------------- Each Letter of Credit shall (a) be opened pursuant to a Letter of Credit Agreement, and (b) expire on a date not later than the Business Day preceding the Revolving Credit Expiration Date; provided, however, if any Letter of Credit does have an expiration date later than the Business Day preceding the Revolving Credit Termination Date, as of the Business Day preceding the Revolving Credit Termination Date an advance of the Revolving Loan Credit Facility shall be made by the Lender in the face amount of such Letter of Credit (or Letters of Credit) and the proceeds thereof shall be deposited in an account titled in the name of the Lender as trustee for the Borrowers. The proceeds of the trustee account referred to in the immediately preceding sentence shall be held as collateral for the Letter of Credit (or Letters of Credit) and in the event of a draw under the Letter of Credit (or Letters of Credit), used to pay any such draw. The aggregate face amount of all Letters of Credit at any one time outstanding and issued by the Lender pursuant to the provisions of this Agreement, plus the amount of any unpaid Letter of Credit Fees accrued or scheduled to accrue thereon, and less the aggregate amount of all drafts issued under or purporting to have been issued under such Letters of Credit that have been paid by the Lender, is herein called the "Outstanding Letter of Credit Obligations". 2.2.4 Procedure for Letters of Credit. ------------------------------- The Borrowers shall give the Lender written notice at least three (3) Business Days prior to the date on which a Letter of Credit is requested to be opened of their request for a Letter of Credit. Such notice shall be accompanied by a duly executed and delivered Letter of Credit Agreement. Upon receipt of the Letter of Credit Agreement and the Letter of Credit Fee, the Lender shall process such Letter of Credit Agreement in accordance with its customary procedures and open such Letter of Credit on the Business Day specified in such notice. Upon the payment and performance of all Obligations of the Borrowers and all obligations and liabilities of each other Person, other than the Lender, under this Agreement and all other Financing Documents, the termination and/or expiration of the Commitments and Outstanding Letter of Credit Obligations, upon the Borrowers' request and at the Borrowers' sole cost and expense, the Lender shall release and/or terminate any Financing Document but only if and provided that there is no commitment or obligation (whether or not conditional) of the Lender to re-advance amounts which would be secured thereby. 28 Section 2.3 The Acquisition Loan Facility ----------------------------- 2.3.1 Acquisition Loan Facility. ------------------------- Subject to and upon the provisions of this Agreement, the Lender establishes an acquisition loan facility in the maximum principal amount of Ten Million Dollars ($10,000,000) ("Acquisition Loan Committed Amount") in favor of the Borrowers. The aggregate of all advances under the Acquisition Loan Facility are sometimes referred to in this Agreement collectively as the "Acquisition Loan". The obligation of the Lender to make advances under the Acquisition Loan is herein called its "Acquisition Loan Commitment". 2.3.2 Acquisition Note. ---------------- The obligation of the Borrowers to pay the Acquisition Loan with interest shall be evidenced by a promissory note (as from time to time extended, amended, restated, supplemented or otherwise modified, the "Acquisition Note") substantially in the form of EXHIBIT "A-2" attached hereto and made a part hereof with appropriate insertions. The Borrowers acknowledge and agree that, if the outstanding principal balance of the Acquisition Loan outstanding from time to time exceeds the aggregate face amount of the Acquisition Loan Note, the excess shall bear interest at the rates provided from time to time for the Acquisition Loan evidenced by the Acquisition Loan Note and shall be payable, with accrued interest, ON DEMAND. The Acquisition Loan Note shall not operate as a novation of any of the Obligations or nullify, discharge, or release any such Obligations or the continuing contractual relationship of the parties hereto in accordance with the provisions of this Agreement. The Acquisition Loan shall mature, and the entire unpaid principal balance and accrued and unpaid interest thereon shall be due and payable on the Acquisition Loan Maturity Date. 2.3.3 Payments of Acquisition Loan. ---------------------------- The Acquisition Loan shall be repayable in installment payments of principal quarterly on the first day of each June, September, December and March commencing June 1, 1999 in an amount equal to 1/12th of the amount of the Acquisition Loan outstanding on May 31, 1999 plus an amount equal to 1/12th of the aggregate of all advances under the Acquisition Loan on or after June 1, 1999. At the time of each advance under the Acquisition Loan on or after June 1, 1999, the Borrowers shall furnish a "Acquisition Loan Installment Payment Schedule" substantially in the form of EXHIBIT "A-3" attached hereto and ------------- made a part hereof, with appropriate insertions, which shall set forth aggregate installment payments due thereafter on all Acquisition Loan advances. The Acquisition Loan Installment Payment Schedules shall not operate as a novation of any of the Obligations or nullify, discharge, or release any such Obligations or the continuing contractual relationship of the parties hereto in accordance with the provisions of this Agreement. 2.3.4 Optional Prepayments of Acquisition Loan. ---------------------------------------- The Borrowers may, at their option, at any time and from time to time prepay (each a "Acquisition Loan Optional Prepayment" and collectively the "Acquisition Loan Optional Prepayments") the Acquisition Loan, in whole or in part without premium or penalty. The amount to be so prepaid, together with interest accrued thereon to date of prepayment if the 29 amount is intended as a prepayment of the Acquisition Loan in whole, shall be paid by the Borrowers to the Lender on the date specified for such prepayment. Amounts prepaid may not be reborrowed. 2.3.5 Application of Acquisition Loan Partial Prepayments. --------------------------------------------------- Before the Acquisition Loan Amortization Date, each partial Acquisition Loan Optional Prepayments shall be applied first to all accrued and unpaid interest on the principal of the Acquisition Loan Note, and then to the outstanding principal balance. On or after the Acquisition Loan Amortization Date, partial Acquisition Loan Optional Prepayments shall be in an amount not less than the aggregate amount of the next principal installment under the Acquisition Loan Note and shall be applied first to all accrued and unpaid interest on the principal of the Acquisition Loan Note, and then to the balloon payment due at maturity and to the principal installment payments in the inverse order of maturity. 2.3.6 Acquisition Line Fee. -------------------- The Borrowers shall pay to the Lender as a condition precedent to each advance under the Acquisition Loan a fee (the "Acquisition Loan Fee") in the amount of three-quarters of one percent (3/4%), which shall be deemed to be fully earned and non-refundable upon payment. Section 2.4 The Capital Expenditure Line Facility. ------------------------------------- 2.4.1 Capital Expenditure Line Facility. --------------------------------- Subject to and upon the provisions of this Agreement, the Lender establishes a capital expenditure line facility in the maximum principal amount of Twenty Million Dollars ($20,000,000) ("Capital Expenditure Line Committed Amount") in favor of the Borrowers. The aggregate of all advances under the Capital Expenditure Line Facility are sometimes referred to in this Agreement collectively as the "Capital Expenditure Line". The obligation of the Lender to make advances under the Capital Expenditure Line is herein called its "Capital Expenditure Line Commitment". During the Capital Expenditure Line Advance Period, the Borrowers may request advances under the Capital Expenditure Line Facility in accordance with the provisions of this Agreement; provided that after giving effect to the Borrowers' request (a) the outstanding principal balance of the Capital Expenditure Line would not exceed the Capital Expenditure Line Commitment; and (b) the aggregate of all advances under the Capital Expenditure Line would not exceed the Capital Expenditure Line Committed Amount. Amounts repaid on the Capital Expenditure Line may not be reborrowed. 2.4.2 Procedure for Making Advances Under the Capital ----------------------------------------------- Expenditure Line. ---------------- The Borrowers may borrow under the Capital Expenditure Line Facility on any Business Day. The Borrowers shall give the Lender written notice (a "Capital 30 Expenditure Line Notice") at least five (5) Business Days prior to the date on which the Borrowers desire an advance under the Capital Expenditure Line. Each Capital Expenditure Line Notice shall be accompanied by (a) a contract of sale, purchase order or invoice, in form and substance reasonably satisfactory to the Lender, which accurately and completely describes the Equipment purchased after the Closing Date which is the subject of the requested advance and the purchase price therefor, expressly identifying and excluding the costs of delivery, installation, taxes, and other "soft" costs, and (b) evidence reasonably satisfactory to the Lender indicating that such Equipment have been delivered to and accepted by the applicable Borrower. Each Capital Expenditure Line Notice shall also be accompanied by such other information, certificates, confirmations, and other items as the Lender may reasonably require to determine the value and the delivery of the subject Equipment and compliance with the other terms of this Agreement. The amount to be advanced with respect to a Capital Expenditure Line Notice shall not exceed the lesser of (a) the amount requested by the Borrowers or (b) the purchase price (excluding the costs of delivery, installation, taxes, and other "soft" costs) of the Equipment times ----- (i) 100% for advances aggregating up to and including $4,000,000 in any year, and (ii) 80% for advances in excess of $4,000,000 in any year. Each advance under the Capital Expenditure Line shall be not less than $250,000. 2.4.3 Capital Expenditure Line Note. ------------------------------ The obligation of the Borrowers to pay the Capital Expenditure Line with interest shall be evidenced by a promissory note (as from time to time extended, amended, restated, supplemented or otherwise modified, the "Capital Expenditure Line Note") substantially in the form of EXHIBIT "A-4" attached ------------- hereto and made a part hereof, with appropriate insertions. The Borrowers acknowledge and agree that, if the outstanding principal balance of the Capital Expenditure Line outstanding from time to time exceeds the aggregate face amount of the Capital Expenditure Line Note, the excess shall bear interest at the rates provided from time to time for the Capital Expenditure Line evidenced by the Capital Expenditure Line Note and shall be payable, with accrued interest, ON DEMAND. The Capital Expenditure Line Note shall not operate as a novation of any of the Obligations or nullify, discharge, or release any such Obligations or the continuing contractual relationship of the parties hereto in accordance with the provisions of this Agreement. The Capital Expenditure Line shall mature, and the entire unpaid principal balance and accrued and unpaid interest thereon shall be due and payable on the Capital Expenditure Line Maturity Date. 2.4.4 Payments of Capital Expenditure Line. ------------------------------------- The Capital Expenditure Line shall be repayable in installment payments of principal quarterly (on the first day of each June, September, December and March commencing June 1, 2000) in an amount equal to 1/20th of the amount of the Capital Expenditure Line outstanding on May 31, 2000, plus amount equal to 1/20th of the aggregate of all advances under the Capital Expenditure Line on or after June 1, 2000. At the time of each advance under the Capital Expenditure Line on or after June 1, 2000, the Borrowers shall furnish a "Capital Expenditure Line Installment Payment Schedule" substantially in the form of EXHIBIT "A-5" attached hereto and made a part hereof, with appropriate ------------- insertions, which shall set forth aggregate installment payments due thereafter on all Capital Expenditure Line advances. The Capital Expenditure Line Installment Payment Schedules shall not operate as a 31 novation of any of the Obligations or nullify, discharge, or release any such Obligations or the continuing contractual relationship of the parties hereto in accordance with the provisions of this Agreement or the Capital Expenditure Line Note. 2.4.5 Optional Prepayments of Capital Expenditure Line. ------------------------------------------------- The Borrowers may, at their option, at any time and from time to time prepay (each a "Capital Expenditure Line Optional Prepayment" and collectively the "Capital Expenditure Line Optional Prepayments") the Capital Expenditure Line, in whole or in part without premium or penalty. The amount to be so prepaid, together with interest accrued thereon to date of prepayment if the amount is intended as a prepayment of the Capital Expenditure Line in whole, shall be paid by the Borrowers to the Lender on the date specified for such prepayment. 2.4.6 Application of Capital Expenditure Line Partial Prepayments. ------------------------------------------------------------ Before the Capital Expenditure Line Amortization Date, partial Capital Expenditure Line Loan Optional Prepayments shall be applied first to all accrued and unpaid interest on the principal of the Capital Expenditure Line Note, and then to the outstanding principal balance. On or after the Capital Expenditure Line Amortization Date, partial Capital Expenditure Line Loan Optional Prepayments shall be in an amount not less than the aggregate amount of the next principal installment under the Capital Expenditure Line Note and shall be applied first to all accrued and unpaid interest on the principal of the Capital Expenditure Line Note, and then to the balloon payment due at maturity and to the principal installment payments in the inverse order of maturity. Section 2.5 Interest -------- 2.5.1 Applicable Interest Rates. -------------------------- (a) Each Loan shall bear interest until maturity (whether by acceleration, declaration, extension or otherwise) at either the Base Rate or the Eurodollar Rate, as selected and specified by the Borrowers in an Interest Rate Election Notice furnished to the Lender in accordance with the provisions of Section 2.5.2(e), or as otherwise determined in accordance with the provisions of this Section 2.5, and as may be adjusted from time to time in accordance with the provisions of Section 2.5.3 (Inability to Determine Eurodollar Base Rate). (b) Notwithstanding the foregoing, following the occurrence and during the continuance of an Event of Default, at the option of the Lender, all Loans and all other Obligations shall bear interest at the Post-Default Rate. (c) The Applicable Margin for (i) Eurodollar Loans and (ii) Base Rate Loans shall be as set forth on Schedule 2.5.1. -------------- 32 2.5.2 Selection of Interest Rates. ---------------------------- (a) The Borrowers may select the initial Applicable Interest Rate or Applicable Interest Rates to be charged on the Loans. (b) From time to time after the date of this Agreement as provided in this Section, by a proper and timely Interest Rate Election Notice furnished to the Lender in accordance with the provisions of Section 2.5.2(e), the Borrowers may select an initial Applicable Interest Rate or Applicable Interest Rates for any Loans or may convert the Applicable Interest Rate and, when applicable, the Interest Period, for any existing Loan to any other Applicable Interest Rate or, when applicable, any other Interest Period. (c) The Borrowers' selection of an Applicable Interest Rate and/or an Interest Period, the Borrowers' election to convert an Applicable Interest Rate and/or an Interest Period to another Applicable Interest Rate or Interest Period, and any other adjustments in an interest rate are subject to the following limitations: (i) the Borrowers shall not at any time select or change to an Interest Period that extends beyond the Revolving Credit Expiration Date in the case of the Revolving Loan or in the case of Interest Periods with respect to the Acquisition Loan, the Acquisition Loan Maturity Date, or in the case of Interest Periods with respect to the Capital Expenditure Line, the Capital Expenditure Line Maturity Date; (ii) except as otherwise provided in Section 2.5.4 (Indemnity), no change from the Eurodollar Rate to the Base Rate shall become effective on a day other than a Business Day and on a day which is the last day of the then current Interest Period, no change of an Interest Period shall become effective on a day other than the last day of the then current Interest Period, and no change from the Base Rate to the Eurodollar Rate shall become effective on a day other than a day which is a Eurodollar Business Day; (iii) any Applicable Interest Rate change for any Loan to be effective on a date on which any principal payment on account of such Loan is scheduled to be paid shall be made only after such payment shall have been made; (iv) no more than three (3) different Eurodollar Rates may be outstanding at any time and from time to time with respect to the Revolving Loan; (v) only one (1) Eurodollar Rate may be outstanding at any time and from time to time with respect to the Acquisition Loan; (vi) only one (1) Eurodollar Rate may be outstanding at any time and from time to time with respect to the Capital Expenditure Line; (vii) the first day of each Interest Period shall be a Eurodollar Business Day; 33 (viii) as of the effective date of a selection, there shall not exist an Event of Default; and (ix) the minimum principal amount of a Eurodollar Loan shall be Five Hundred Thousand Dollars ($500,000). (d) If a request for an advance under the Loans is not accompanied by an Interest Rate Election Notice or does not otherwise include a selection of an Applicable Interest Rate and, if applicable, an Interest Period, or if, after having made a selection of an Applicable Interest Rate and, if applicable, an Interest Period, the Borrowers fail or are not otherwise entitled under the provisions of this Agreement to continue such Applicable Interest Rate or Interest Period, the Borrowers shall be deemed to have selected the Base Rate as the Applicable Interest Rate until such time as the Borrowers have selected a different Applicable Interest Rate and specified an Interest Period in accordance with, and subject to, the provisions of this Section. (e) The Lenders will not be obligated to make Loans, to convert the Applicable Interest Rate on Loans to another Applicable Interest Rate, or to change Interest Periods, unless the Lender shall have received an irrevocable written or telephonic notice (an "Interest Rate Election Notice") from the Borrowers specifying the following information: (i) the amount to be borrowed or converted; (ii) a selection of the Base Rate or the Eurodollar Rate; (iii) the length of the Interest Period if the Applicable Interest Rate selected is the Eurodollar Rate; and (iv) the requested date on which such election is to be effective. Any telephonic notice must be confirmed in writing within three (3) Business Days. Each Interest Rate Election Notice must be received by the Lender not later than 10:00 a.m. (Baltimore City time) on the Business Day of any requested borrowing or conversion in the case of a selection of the Base Rate and not later than 10:00 a.m. (Baltimore City time) on the third Business Day before the effective date of any requested borrowing or conversion in the case of a selection of the Eurodollar Rate. 2.5.3 Inability to Determine Eurodollar Base Rate. -------------------------------------------- In the event that (a) the Lender shall have determined that, by reason of circumstances affecting the London interbank eurodollar market, adequate and reasonable means do not exist for ascertaining the Eurodollar Base Rate for any requested Interest Period with respect to a Loan the Borrowers have requested to be made as or to be converted to a Eurodollar Loan or (b) the Lender shall determine that the Eurodollar Base Rate for any requested Interest Period with respect to a Loan the Borrowers have requested to be made as or to be converted to a Eurodollar Loan does not adequately and fairly reflect the cost to the Lenders of funding or converting such Loan, the Lender shall give telephonic or written notice of such determination to the Borrowers 34 at least one (1) day prior to the proposed date for funding or converting such Loan. If such notice is given, any request for a Eurodollar Loan shall be made as or converted to a Base Rate Loan. Until such notice has been withdrawn by the Lender, the Borrowers will not request that any Loan be made as or converted to a Eurodollar Loan. 2.5.4 Indemnity. ---------- The Borrowers agree to indemnify and reimburse the Lender and the Lenders and to hold the Lender and the Lenders harmless from any loss, cost (including administrative costs) or expense which any one or more of the Lender or the Lenders may sustain or incur as a consequence of (a) a default by the Borrowers in payment when due of the principal amount of or interest on any Eurodollar Loan, (b) the failure of the Borrowers to make, or convert the Applicable Interest Rate of, a Loan after the Borrowers has given a Loan Notice or an Interest Rate Election Notice, (c) the failure of the Borrowers to make any prepayment of a Eurodollar Loan after the Borrowers have given notice of such intention to make such a prepayment, and/or (d) the making by the Borrowers of a prepayment of a Eurodollar Loan on a day which is not the last day of the Interest Period for such Eurodollar Loan, including, without limitation, any such loss or expense arising from the reemployment of funds obtained by the Lenders to maintain any Eurodollar Loan or from fees payable to terminate the deposits from which such funds were obtained. 2.5.5 Payment of Interest. -------------------- Unpaid and accrued interest shall be paid monthly, in arrears, on the first day of each calendar month, commencing on the first such date after the date of this Agreement, and on the first day of each calendar month thereafter, and at maturity (whether by acceleration, declaration, extension or otherwise). In addition:(i) any and all unpaid and accrued interest on any Base Rate Loan converted to a Eurodollar Loan or prepaid shall be paid immediately upon such conversion and/or prepayment, as appropriate; and (ii) unpaid and accrued interest on any Eurodollar Loan shall be paid on the last Business Day of each Interest Period for such Eurodollar Loan and at maturity (whether by acceleration, declaration, extension or otherwise); provided, however that any and all unpaid and accrued interest on any Eurodollar Loan prepaid prior to expiration of the then current Interest Period for such Eurodollar Loan shall be paid immediately upon prepayment. Section 2.6 General Financing Provisions. ----------------------------- 2.6.1 Borrowers' Representatives. --------------------------- (a) The Borrowers hereby represent and warrant to the Lender that each of the Borrowers will derive benefits, directly and indirectly, from each Loan, both in their separate capacity and as a member of the integrated group to which each of the Borrowers belong, because the successful operation of the integrated group is dependent upon the continued successful performance of the functions of the integrated group as a whole. The Borrowers in the discretion of their respective managements are to agree among themselves as to the allocation of the benefits the proceeds of Loans, and the purposes for which such benefits and proceeds will be used so long as any such allocation or purpose is not in violation of this Agreement. 35 (b) For administrative convenience, Coyne is hereby irrevocably appointed by each of the Borrowers as agent for each of the Borrowers for the purpose of requesting Loans, receiving the proceeds of Loans, and disbursing the proceeds of Loans as between the Borrowers. By reason thereof, Coyne is hereby irrevocably appointed by each of the Borrowers as the attorney-in-fact of each of the Borrowers with power and authority through its duly authorized officer or officers to (i) endorse any check (if any) for the proceeds of any Loan for and on behalf of each of the Borrowers and in the name of each of the Borrowers and (ii) instruct the Lender to credit the proceeds of any Loan directly to an account of any of the Borrowers which shall evidence the making of such Loan and shall constitute the acknowledgement by each of the Borrowers of the receipt of the proceeds of such Loan. All actions taken by Coyne in connection with the Loans and the Financing Documents shall be conclusively presumed to be the joint and several actions of the Borrowers even though Coyne may act from time to time in its name alone. (c) Each of the Borrowers hereby irrevocably authorizes the Lender to make Loans to any or all of the Borrowers pursuant to the provisions of this Agreement upon the written, oral or telephone request of any one of the Persons who is from time to time a Responsible Officer of a Borrower under the provisions of the most recent "Certificate" of corporate resolutions of the Borrowers on file with the Lender and also upon the written, oral or telephone request of any one of the Persons who is from time to time a Responsible Officer of Coyne under the provisions of the most recent "Certificate" of corporate resolutions and/or incumbency for Coyne on file with the Lender. (d) The Lender assumes no responsibility or liability for any errors, mistakes, and/or discrepancies, except those involving the Lender's gross negligence or willful misconduct in the oral, telephonic, written or other transmissions of any instructions, orders, requests and confirmations between the Lender and the Borrowers in connection with the Credit Facilities, any Loan or any other transaction in connection with the provisions of this Agreement. (e) Without implying any limitation on the joint and several nature of the Obligations, the Lender agrees that, notwithstanding any other provision of this Agreement, the Borrowers may create reasonable inter- company indebtedness between or among the Borrowers with respect to the allocation of the benefits and proceeds of the advances under this Agreement. The Borrowers agree among themselves, and the Lender consents to that agreement, that each Borrower shall have rights of contribution from all of the other Borrowers to the extent the Borrower incurs Obligations in excess of the proceeds of the Loans received by, or allocated to purposes for the direct benefit of, the Borrower. All such indebtedness and rights shall be, and is hereby agreed by the Borrowers to be, subordinate in priority and payment to the indefeasible repayment in full of the Obligations, and, unless the Lender agrees in writing otherwise, shall not be exercised or repaid in whole or in part until all of the Obligations have been satisfied. The Borrowers agree that all of such indebtedness and rights are part of the Collateral of a Borrower who is the creditor and secures the Obligations. Each Borrower hereby waives all rights of counterclaim, recoupment and offset between or among themselves arising on account of that indebtedness and otherwise. Each Borrower shall not evidence that indebtedness or rights by note or other instrument, and shall not secure that indebtedness with 36 any mortgages, security interests or otherwise, even though any such instrument and security shall be part of the Collateral. 2.6.2 Use of Proceeds of the Loans. ----------------------------- The proceeds of each advance under the Loans shall be used by the Borrowers for Permitted Uses, and for no other purposes except as may otherwise be agreed by the Lender in writing. The Borrowers shall use the proceeds of the Loans promptly. 2.6.3 Mandatory Prepayments. ---------------------- Provided there are amounts outstanding under the Acquisition Loan and/or the Capital Expenditure Line, the Borrowers shall make annual mandatory prepayments (each a "Mandatory Prepayment" and collectively the "Mandatory Prepayments") in an amount equal to the lesser of $2,000,000 or 35% of Excess Cash Flow and shall be payable on the date the Borrowers furnish to the Lender the annual financial statements referred to in Section 6.1.1(a) of this Agreement. If, however, the Borrowers fail to furnish such financial statements in any given calendar year as and when required, the Borrowers shall be required to pay the Mandatory Prepayment payable during such calendar year on the date which is ninety (90) days after the close of the Borrowers' then preceding fiscal year. The Borrowers shall pay to the Lender on the date of each Mandatory Prepayment accrued interest to such date on the amount prepaid. Each partial Mandatory Prepayment shall be applied to the balloon payment due at maturity on the Capital Expenditure Line, then to principal against the principal installments on the Capital Expenditure Line in the inverse order of their maturity, then to the balloon payment due at maturity on the Acquisition Loan, and then to principal against the principal installments on the Acquisition Loan in the inverse order of their maturity. 2.6.4 Closing Fee. ------------ The Borrowers shall pay to the Lender at the time this Agreement is executed a loan closing fee (the "Closing Fee") in the amount of Seventy-five Thousand Dollars ($75,000), which fee has been fully earned and is non- refundable. 2.6.5 Early Termination Fee. ---------------------- In the event of the termination by, or on behalf of, the Borrowers, of the Commitments (unless that termination is (i) at a time when the Borrowers' interest rate has been directly increased under Section 2.6.11, or (ii) is at that time accompanied by the repayment of all Obligations from the proceeds of the sale of substantially all of the Assets of the Borrowers or from an initial public offering of the common stock of one or more of the Borrowers or (iii) is the result of the application of the Borrowers' Excess Cash Flow, and not from the proceeds of loans or other debt, or (iv) a replacement credit facility extended by a Person other than the Lender and/or its Affiliates and which provides interest rates, economic terms and/or other pricing more favorable than that provided under this Agreement, which pricing Lender has declined to match) the Borrowers shall pay a fee (the "Early Termination Fee") in the amount of Two Hundred Sixty-two Thousand Five Hundred Dollars ($262,500). 37 2.6.6 Field Examination Fees. ----------------------- The Borrowers shall pay to the Lender an annual field examination fee in the amount of $12,000 (collectively, the "Field Examination Fees" and individually a "Field Examination Fee"), which Field Examination Fees shall be payable in Three Thousand Dollar ($3,000.00) installments on the first day of each October, January, April and September hereafter and continuing until the last such date prior to which all Obligations arising out of, or under, the Credit Facilities then outstanding have been paid in full. 2.6.7 Administration Fees. -------------------- The Borrowers shall pay to the Lender an administration fee in the amount of $5,000 (collectively, the "Administration Fees" and individually a "Administration Fee"), which Administration Fees shall be payable in One Thousand Two Hundred Fifty Dollar ($1,250.00) installments on the first day of each October, January, April and September hereafter and continuing until the last such date prior to which all Obligations arising out of, or under, the Credit Facilities then outstanding have been paid in full. 2.6.8 Computation of Interest and Fees. --------------------------------- All applicable Fees and interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. Any change in the interest rate on any of the Obligations resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such change in the Base Rate is announced. 2.6.9 Payments. --------- All payments of the Obligations, including, without limitation, principal, interest, Prepayments, and Fees, shall be paid by the Borrowers without setoff, recoupment or counterclaim to the Lender at the Lender's office specified in the promissory note evidencing the Obligations in immediately available funds not later than 12:00 noon, Baltimore, Maryland time on the due date of such payment. Alternatively, at its sole discretion, the Lender may charge any deposit account of the Borrowers at the Lender or any affiliate thereof with all or any part of any amount due hereunder to the extent that the Borrowers have not otherwise tendered payment to the Lender. All payments shall be applied first to any unpaid Fees, second to any and all accrued and unpaid late charges and Enforcement Costs, third to any and all accrued and unpaid interest on the Obligations, and then to principal, all in such order and manner as shall be determined by the Lender in its sole and absolute discretion. 2.6.10 Liens; Setoff. -------------- The Borrowers hereby grant to the Lender a continuing Lien for all of the Obligations of the Borrowers upon any and all monies, securities, and other property of the Borrowers and the proceeds thereof, now or hereafter held or received by or in transit to, the Lender from or for the Borrowers, and also upon any and all deposit accounts (general or special) and credits of the Borrowers, if any, with the Lender or any affiliate of the Lender, at any time existing, excluding any deposit accounts held by the Borrowers in the capacity as trustee for Persons who are not Affiliates of the Borrowers. Without implying any limitation on 38 any other rights the Lender may have under the Financing Documents or applicable Laws, during the continuance of an Event of Default, the Lender is hereby authorized by the Borrowers at any time and from time to time, without notice to the Borrowers, to set off, appropriate and apply any or all items hereinabove referred to against all Obligations then outstanding, all in such order and manner as shall be determined by the Lender in its sole and absolute discretion. 2.6.11 Requirements of Law. -------------------- In the event that the Lender shall have determined in good faith that (a) the adoption of any Laws regarding capital adequacy, or (b) any change therein or in the interpretation or application thereof or (c) compliance by the Lender or any corporation controlling the Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority, does or shall have the effect of reducing the rate of return on the Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which the Lender or such corporation would have achieved but for such adoption, change or compliance (taking into consideration the Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by the Lender to be material, then from time to time, after submission by the Lender to the Borrowers of a written request therefor and a statement of the basis for such determination, the Borrowers shall pay to the Lender such additional amount or amounts in order to compensate for such reduction. ARTICLE III THE COLLATERAL Section 3.1 Debt and Obligations Secured. ----------------------------- All property and Liens assigned, pledged or otherwise granted under or in connection with this Agreement (including, without limitation, those under Section 3.2 (Grant of Liens) below) or any of the Financing Documents shall secure (a) the payment of all of the Obligations, and (b) the performance, compliance with and observance by the Borrowers of the provisions of this Agreement and all of the other Financing Documents or otherwise under the Obligations. Section 3.2 Grant of Liens. --------------- Each of the Borrowers hereby assigns, pledges and grants to the Lender, and agrees that the Lender shall have a perfected and continuing security interest in, and Lien on, (a) all of the Borrower's Accounts, and Inventory whether now owned or existing or hereafter acquired or arising, (b) all returned, rejected or repossessed goods, the sale or lease of which shall have given or shall give rise to an Account, (c) all Chattel Paper, Documents, Instruments, Equipment, Securities, and General Intangibles relating to a Permitted Acquisition and/or an advance under the Capital Expenditure Line, (d) all insurance policies relating to the foregoing, (e) all books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to the foregoing and all equipment and general intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records, and (f) all cash and non-cash proceeds and products of the foregoing. Each of the Borrowers further agrees that the Lender shall have in respect to the foregoing all of the rights and remedies of a secured party 39 under the Uniform Commercial Code as well as those provided in this Agreement, under each of the other Financing Documents and under applicable Laws. Section 3.3 Collateral Disclosure List. --------------------------- Promptly after demand by the Lender, the Borrowers shall furnish to the Lender an update of the information contained in the Collateral Disclosure List at any time and from time to time as may be requested by the Lender. Section 3.4 Personal Property. ------------------ With respect to the Collateral: 3.4.1 Securities, Chattel Paper, Promissory Notes, etc. ------------------------------------------------- (a) Within ten (10) days of each acquisition of any letters of credit, Securities, Chattel Paper, or Instruments, included among the Collateral, the Borrowers shall deliver the originals to the Lender and shall execute and deliver to the Lender separate pledges, assignments and security agreements in form and content acceptable to the Lender, which pledges, assignments and security agreements shall assign, pledge and grant a Lien to the Lender on all such letters of credit, Securities, Chattel Paper, and Instruments. All letters of credit, Securities, Chattel Paper, and Instruments shall be delivered to the Lender endorsed and/or assigned as required by any pledge, assignment and security agreement and/or as the Lender may require and, if applicable, shall be accompanied by blank irrevocable and unconditional stock or bond powers and/or notices as the Lender may require. The Lender may in its sole and absolute discretion from time to time require that the Borrowers deliver immediately all Documents to the Lender. 3.4.2 Patents, Copyrights and Other Property Requiring ------------------------------------------------ Additional Steps to Perfect. ---------------------------- On the Closing Date and without implying any limitation on the scope of Section 3.2 above, the Borrowers shall execute and deliver all Financing Documents and take all actions requested by the Lender in order to perfect a first priority assignment of patents, copyrights, tradenames, tradestyles, customer lists or any other type or kind of intellectual property included among the Collateral. 3.4.3 Record Searches. ---------------- As of the Closing Date and thereafter at the time any Financing Document is executed and delivered by the Borrowers pursuant to this Section, the Lender shall have received, in form and substance satisfactory to the Lender, such Lien or record searches with respect to the Borrowers and/or any other Person, as appropriate, and the property covered by such Financing Document showing that the Lien of such Financing Document will be a perfected first priority Lien on the property covered by such Financing Document subject only to Permitted Liens and other existing Liens expressly disclosed in the Offering Memorandum or to such other matters as the Lender may approve. 40 Section 3.5 Real Property. -------------- With respect to real property acquired as part of a Permitted Acquisition, the Borrowers shall at the time of the acquisition thereof, grant a Lien covering such real property to the Lender under the provisions of a mortgage, deed of trust or other document, as appropriate. Each Financing Document to be executed and delivered pursuant hereto shall: (a) be in form and substance satisfactory to the Lender; (b) create a first priority Lien in such real property in favor of the Lender subject only to Permitted Liens, zoning ordinances, and such other matters as the Lender may approve; (c) be accompanied by a current appraisal of the fair market value of the subject real property prepared by appraisers satisfactory to the Lender; (d) except as set forth in subsection (c) above be accompanied by a current survey satisfactory in all respects to the Lender of the subject real property, prepared by a registered land surveyor or engineer satisfactory to the Lender; (e) be accompanied by evidence satisfactory to the Lender regarding the current and past pollution control practices at such real property in connection with the discharge, emission, handling, disposal or existence of Hazardous Materials, which may include, at the Lender's request, an environmental audit of such real property prepared by a person or firm acceptable to the Lender; (f) be accompanied by a mortgagee's title insurance policy or marked-up unconditional commitment or binder for such insurance in form and substance satisfactory to the Lender and issued by a title insurance company satisfactory to the Lender; and (g) upon request of the Lender, be accompanied by a signed opinion of counsel, in form and substance satisfactory to the Lender, and from counsel, satisfactory to the Lender, licensed to practice in the state where the subject real property is located. Section 3.6 Costs. ------ The Borrowers agree to pay, as part of the Enforcement Costs and to the fullest extent permitted by applicable Laws, on demand all costs, fees and expenses incurred by the Lender in connection with the taking, perfection, preservation, protection and/or release of a Lien on the Collateral, including, without limitation: (a) customary fees and expenses incurred in preparing Financing Documents from time to time (including, without limitation, reasonable attorneys' 41 fees incurred in connection with preparing the Financing Documents, other than Financing Documents, including, without limitation, this Agreement, prepared for the Closing Date); (b) all filing and/or recording taxes or fees; (c) all title insurance premiums and costs; (d) all costs of Lien and record searches; reasonable attorneys' fees in connection with all legal opinions required (other than Financing Documents, including, without limitation, this Agreement, prepared for the Closing Date); (e) appraisal and/or survey costs; and (f) all related costs, fees and expenses. Section 3.7 Release. -------- Upon the payment and performance of all Obligations of the Borrowers and all obligations and liabilities of each other Person, other than the Lender, under this Agreement and all other Financing Documents, the termination and/or expiration of the Commitments, upon the Borrowers' request and at the Borrowers' sole cost and expense, the Lender shall release and/or terminate any Financing Document but only if and provided that there is no commitment or obligation (whether or not conditional) of the Lender to re-advance amounts which would be secured thereby. Section 3.8 Inconsistent Provisions. ------------------------ In the event that the provisions of any Financing Document directly conflict with any provision of this Agreement, the provision of this Agreement governs. ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.1 Representations and Warranties. ------------------------------- Each of the Borrowers represents and warrants to the Lender and shall be deemed to represent and warrant at the time of each request for an advance under the Loans under the terms of this Agreement and again at the time of the making of any advance under the Loans, as follows: 4.1.1 Subsidiaries. ------------- The Borrower has the Subsidiaries listed on the Collateral Disclosure List attached hereto and made a part hereof and no others. Each of the Borrower's Subsidiaries is a Wholly Owned Subsidiary except as shown on the Collateral Disclosure List, which correctly indicates the nature and amount of the Borrower's ownership interests therein. 42 4.1.2 Good Standing. -------------- The Borrower and its Subsidiaries (a) is a corporation duly organized, existing and in good standing under the laws of the jurisdiction of its incorporation, (b) has the corporate power to own its property and to carry on its business as now being conducted, and (c) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary. 4.1.3 Power and Authority. -------------------- The Borrower has full corporate power and authority to execute and deliver this Agreement and the other Financing Documents to which it is a party, to make the borrowings under this Agreement, and to incur and perform the Obligations whether under this Agreement, the other Financing Documents or otherwise, all of which have been duly authorized by all proper and necessary corporate action. No consent or approval of shareholders or any creditors of the Borrower, and no consent, approval, filing or registration with or notice to any Governmental Authority on the part of the Borrower, is required as a condition to the execution, delivery, validity or enforceability of this Agreement or the other Financing Documents or the performance by the Borrower of the Obligations. 4.1.4 Binding Agreements. ------------------- This Agreement and the other Financing Documents executed and delivered by the Borrower have been properly executed and delivered and constitute the valid and legally binding obligations of the Borrower and are fully enforceable against the Borrower in accordance with their respective terms. 4.1.5 No Conflicts. ------------- Neither the execution, delivery and performance of the terms of this Agreement or of any of the other Financing Documents executed and delivered by the Borrower nor the consummation of the transactions contemplated by this Agreement will conflict with, violate or be prevented by (a) the Borrower's charter or bylaws, (b) any existing mortgage, indenture, contract or agreement binding on the Borrower or affecting its property, or (c) any Laws. 4.1.6 No Defaults, Violations. ------------------------ (a) No Default or Event of Default has occurred and is continuing. (b) Except as set forth in Schedule 4.1.6 neither the Borrower -------------- nor any of its Subsidiaries is in default under or with respect to any obligation under any existing mortgage, indenture, contract or agreement binding on it or affecting its property in any respect which could be materially adverse to the business, operations, property or financial condition of the Borrower, or which could materially adversely affect the ability of the Borrower to perform its obligations under this Agreement or the other Financing Documents, to which the Borrower is a party. 43 4.1.7 Compliance with Laws. --------------------- Neither the Borrower nor any of its Subsidiaries is in violation of any applicable Laws (including, without limitation, any Laws relating to employment practices, to environmental, occupational and health standards and controls) or order, writ, injunction, decree or demand of any court, arbitrator, or any Governmental Authority affecting the Borrower or any of its properties, the violation of which, considered in the aggregate, could materially adversely affect the business, operations or properties of the Borrower and/or its Subsidiaries. 4.1.8 Margin Stock. ------------- None of the proceeds of the Loans will be used, directly or indirectly, by the Borrower or any Subsidiary for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry, any "margin security" within the meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve System or for any other purpose which might make the transactions contemplated in this Agreement a "purpose credit" within the meaning of said Regulation G or Regulation U, or cause this Agreement to violate any other regulation of the Board of Governors of the Federal Reserve System or the Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as amended, or any rules or regulations promulgated under any of such statutes. 4.1.9 Investment Company Act; Margin Securities. ------------------------------------------ Neither the Borrower nor any of its Subsidiaries is an investment company within the meaning of the Investment Company Act of 1940, as amended, nor is it, directly or indirectly, controlled by or acting on behalf of any Person which is an investment company within the meaning of said Act. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying "margin security" within the meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve System. 4.1.10 Litigation. ----------- There are no proceedings, actions or investigations pending or, so far as the Borrower knows, threatened before or by any court, arbitrator any Governmental Authority which, in any one case or in the aggregate, if determined adversely to the interests of the Borrower or any Subsidiary, would have a material adverse effect on the business, properties, condition (financial or otherwise) or operations, present or prospective, of the Borrower. 4.1.11 Financial Condition. -------------------- The consolidated financial statements of the Borrower dated April 30, 1998, are complete and correct and fairly present the financial position of the Borrower and its Subsidiaries and the results of their operations and transactions in their surplus accounts as of the date and for the period referred to and have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved. There are no liabilities, direct or indirect, 44 fixed or contingent, of the Borrower or its Subsidiaries as of the date of such financial statements which are not reflected therein or in the schedule thereto. There has been no adverse change in the financial condition or operations of the Borrower or its Subsidiaries since the date of such financial statements and to the Borrower's knowledge no such adverse change is pending or threatened. Neither the Borrower nor any Subsidiary has guaranteed the obligations of, or made any investment in or advances to, any Person, except as disclosed in such financial statements and except for the guaranty of the Senior Subordinated Notes by the Borrowers other than Coyne. The representations and warranties contained in this Section shall also cover financial statements furnished from time to time to the Lender pursuant to Section 6.1.1 (Financial Statements) of this Agreement. 4.1.12 Full Disclosure. ---------------- The financial statements referred to in Section 4.1.11 (Financial Condition) of this Agreement, the Financing Documents (including, without limitation, this Agreement), and the statements, reports or certificates furnished by the Borrower in connection with the Financing Documents (a) do not contain any untrue statement of a material fact and (b) when taken in their entirety, do not omit any material fact necessary to make the statements contained therein not misleading. There is no fact known to the Borrower which the Borrower has not disclosed to the Lender in writing prior to the date of this Agreement with respect to the transactions contemplated by the Financing Documents which materially and adversely affects or in the future could, in the reasonable opinion of the Borrower materially adversely affect the condition, financial or otherwise, results of operations, business, or assets of the Borrower or of any Subsidiary. 4.1.13 Indebtedness for Borrowed Money. -------------------------------- Except for the Obligations, the obligations under the Senior Subordinated Notes, the Indenture and the Senior Subordinated Notes Documents and except as set forth in Schedule 4.1.13 attached to and made a part of this --------------- Agreement, the Borrower has no Indebtedness for Borrowed Money. The Lender has received photocopies of all promissory notes (including, without limitation, the "Global Note," as that term is defined in the Indenture) evidencing any Indebtedness for Borrowed Money set forth in Schedule 4.1.13 and a copy of the --------------- Indenture which contains the guaranty of the Senior Subordinated Notes by the Borrowers other than Coyne, together with together with any and all subordination agreements, other agreements, documents, or instruments securing, evidencing, guarantying or otherwise executed and delivered in connection with such Indebtedness for Borrowed Money. 4.1.14 Offering. --------- The Lender has received true and correct photocopies of the Offering Memorandum, and each of the Senior Subordinated Notes Documents, executed, delivered and/or furnished on or before the Closing Date in connection with the transactions contemplated by the Senior Subordinated Notes Documents. Neither the Offering Memorandum nor any of the Senior Subordinated Notes Documents has been modified, changed, supplemented, canceled, amended or otherwise altered or affected, except as otherwise disclosed to the Lender in writing on or before the Closing Date. The Offering Transaction has been effected, closed and consummated 45 pursuant to, and in accordance with, the terms and conditions of the Offering Memorandum and all applicable Laws. 4.1.15 Taxes. ------ Each Borrower and its Subsidiaries has filed all returns, reports and forms for Taxes which, to the knowledge of the Borrower, are required to be filed, with inadvertent exceptions relating to Taxes of less than $100,000 in the aggregate, and has paid all Taxes as shown on such returns or on any assessment received by it, to the extent that such Taxes have become due, unless and to the extent only that such Taxes, assessments and governmental charges are currently contested in good faith and by appropriate proceedings by the Borrower, such Taxes are not the subject of any Liens other than Permitted Liens, and adequate reserves therefor have been established as required under GAAP. All tax liabilities of the Borrower were as of the date of audited financial statements referred to in Section 4.1.11 (Financial Condition) above, and are now, adequately provided for on the books of the Borrower or its subsidiaries, as appropriate. No tax liability has been asserted by the Internal Revenue Service or any state or local authority against the Borrower for taxes in excess of those already paid, with inadvertent exceptions relating to Taxes of less than $100,000 in the aggregate. 4.1.16 ERISA. ------ With respect to any "pension plan" as defined in SECTION 3(2) of ERISA, which plan is now or previously has been maintained or contributed to by the Borrower and/or by any commonly controlled entity: (a) no "accumulated funding deficiency" as defined in Code (S)412 or ERISA (S)302 has occurred, whether or not that accumulated funding deficiency has been waived; (b) no Reportable Event has occurred; (c) no termination of any plan subject to Title IV of ERISA has occurred; (d) neither the Borrower nor any commonly controlled entity (as defined under ERISA) has incurred a "complete withdrawal" within the meaning of ERISA (S)4203 from any multiemployer plan; (e) neither the Borrower nor any commonly controlled entity has incurred a "partial withdrawal" within the meaning of ERISA (S)4205 with respect to any multiemployer plan; (f) no Multiemployer Plan to which the Borrower or any commonly controlled entity has an obligation to contribute is in "reorganization" within the meaning of ERISA (S)4241 nor has notice been received by the Borrower or any commonly controlled entity that such a multiemployer plan will be placed in "reorganization". 4.1.17 Title to Properties. -------------------- The Borrower has good and marketable title to all of its properties, including, without limitation, the Collateral and the properties and assets reflected in the balance sheets described in Section 4.1.11 (Financial Condition) above. The Borrower has legal, enforceable and uncontested rights to use freely such property and assets. All of such properties, including, without limitation, the Collateral which were purchased, were purchased for fair consideration and reasonably equivalent value in the ordinary course of business of both the seller and the Borrower and not, by way of example only, as part of a bulk sale. 46 4.1.18 Patents, Trademarks, Etc. ------------------------- Each of the Borrowers and its Subsidiaries owns, possesses, or has the right to use all necessary patents, patent rights, licenses, trademarks, trademark rights, trade names, trade name rights, logos, copyrights, permits and franchises to own its properties conduct its business as now conducted, without known conflict with the rights of any other Person. Any and all obligations to pay royalties or other charges with respect to such properties and assets are properly reflected on the financial statements described in Section 4.1.11 (Financial Condition) above. 4.1.19 Presence of Hazardous Materials or Hazardous Materials ------------------------------------------------------ Contamination. -------------- To the best of the Borrower's knowledge and except as set forth in Schedule 4.1.19 to this Agreement, (a) no Hazardous Materials are located on any - --------------- real property covered by a Mortgage; and (b) no real property covered by a Mortgage has ever been used as a manufacturing, storage, or dump site for Hazardous Materials nor is affected by Hazardous Materials Contamination at any other property. 4.1.20 Perfection and Priority of Collateral. -------------------------------------- The Lender has, or upon execution and recording of this Agreement and the Security Documents will have, and will continue to have as security for the Obligations, a valid and perfected Lien on and security interest in all Collateral, free of all other Liens, claims and rights of third parties whatsoever except Permitted Liens. 4.1.21 Places of Business and Location of Collateral. ---------------------------------------------- The information contained in the Collateral Disclosure List is complete and correct. The Collateral Disclosure List completely and accurately identifies the address of (a) the Borrower's chief executive office, (b) any and each other place of business of the Borrower, (c) the location of all books and records pertaining to the Collateral, and (d) each location, other than the foregoing, where any of the Collateral is located. The proper and only places to file financing statements with respect to the Collateral within the meaning of the Uniform Commercial Code are the filing offices for those jurisdictions in which the Borrower maintains a place of business as identified on the Collateral Disclosure List. 4.1.22 Business Names and Addresses. ----------------------------- In the twelve years preceding the date hereof, the Borrower has not changed its name, identity or corporate structure, has not conducted business under any name other than its current name, and has not conducted its business in any jurisdiction other than those disclosed on the Collateral Disclosure List. 47 4.1.23 Equipment. ---------- All Equipment is personalty and is not and will not be affixed to real estate in such manner as to become a fixture or part of such real estate. No equipment is held by the Borrower on a sale on approval basis. 4.1.24 Inventory. ---------- The Inventory of the Borrower is (a) of good and merchantable quality, (b) not stored with a bailee, warehouseman, carrier, or similar party, (c) not on consignment, sale on approval, or sale or return, and (d) located at the places of business set forth on the Collateral Disclosure List. No goods offered for sale by, or in the possession or control of, the Borrower are consigned to or held on sale or return terms by the Borrower. 4.1.25 Accounts. --------- With respect to all Accounts and to the best of the Borrower's knowledge (a) they are genuine, and in all respects what they purport to be, and are not evidenced by a judgment, an Instrument, or Chattel Paper (unless such judgment has been assigned and such Instrument or Chattel Paper has been endorsed and delivered to the Lender); (b) they represent bona fide transactions completed in accordance with the terms and provisions contained in the invoices, purchase orders and other contracts relating thereto, and the underlying transaction therefor is in accordance with all applicable Laws; (c) the amounts shown on the Borrower's books and records, with respect thereto are actually and absolutely owing to the Borrower and are not contingent or subject to reduction for any reason other than regular discounts, credits or adjustments allowed by the Borrower in the ordinary course of its business; (d) no payments have been or shall be made thereon except payments turned over to the Lender by the Borrower; (e) all Account Debtors thereon have the capacity to contract; and (f) the goods sold, leased or transferred or the services furnished giving rise thereto are not subject to any Liens except the security interest granted to the Lender by this Agreement and Permitted Liens. 4.1.26 Compliance with Eligibility Standards. -------------------------------------- Each Account and all Inventory included in the calculation of the Borrowing Base does and will at all times meet and comply with all of the standards for Eligible Receivables and Eligible Inventory. 4.1.27 Subordinated Debt. ------------------ None of the Subordinated Debt Loan Documents has been amended, supplemented, restated or otherwise modified except as otherwise disclosed to the Lender in writing on or before the Closing Date. In addition, there does not exist any default or any event which upon notice or lapse of time or both would constitute a default under the terms of any of the Subordinated Debt Loan Documents. 48 4.1.28 Year 2000. ---------- Each Borrower has (a) initiated a review and assessment of all areas within its and each of its Subsidiaries' businesses and operations (including those affected by suppliers, vendors and customers) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications used by such Borrower or any of its Subsidiaries (or suppliers, vendors and customers) may be unable to recognize and perform properly date- sensitive functions involving certain dates prior to and any date after December 31, 1999), (b) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (c) to date, implemented that plan in accordance with that timetable. Based on the foregoing, each Borrower believes that all computer applications (including those of its suppliers, vendors and customers) that are material to its or any of its Subsidiaries' business and operations are reasonably expected on a timely basis to be able to perform properly date- sensitive functions for all dates before and after January 1, 2000 (that is, be `Year 2000 compliant"), except to the extent that a failure to do so could not reasonably expected to have a material adverse effect on the business, properties, condition (financial or otherwise) or operations, present or prospective, of the Borrower. Section 4.2 Survival. --------- All representations and warranties contained in or made under or in connection with this Agreement and the other Financing Documents shall survive the Closing Date, the making of any advance under the Loans and extension of credit made hereunder, and the incurring of any other Obligations. ARTICLE V CONDITIONS PRECEDENT Section 5.1 Conditions to the Initial Advance. ---------------------------------- The making of the initial advance under the Loans is subject to the fulfillment of the following conditions precedent in a manner satisfactory to the Lender on or before the Closing Date: 5.1.1 Good Standing etc. ------------------ The Lender shall have received a certificate of good standing for the Borrowers certified by the Secretary of State, or other appropriate Governmental Authority, of the state of incorporation for the Borrowers. 5.1.2 Corporate Proceedings of the Borrowers. --------------------------------------- The Lender shall have received a certificate dated as of the Closing Date by the Secretaries or Assistant Secretaries of the Borrowers covering: (a) true and complete copies of the Borrowers' corporate charter, bylaws, and all amendments thereto; 49 (b) true and complete copies of the resolutions of its Board of Directors authorizing (i) the execution, delivery and performance of the Financing Documents, (ii) the borrowings by the Borrowers hereunder, and (iii) the granting of the Liens contemplated by this Agreement and the Financing Documents to which the Borrowers are parties; and (c) the incumbency, authority and signatures of the officers of the Borrowers authorized to sign this Agreement and the other Financing Documents to which any one or more of the Borrowers are parties. 5.1.3 Consents, Licenses, Approvals, Etc. ----------------------------------- The Lender shall have received copies of all consents, licenses and approvals, required in connection with the execution, delivery, performance, validity and enforceability of the Financing Documents, and such consents, licenses and approvals shall be in full force and effect. 5.1.4 Notes. ------ The Lender shall have received the Acquisition Loan Note, the Capital Expenditure Line Note, and the Revolving Credit Note each, conforming to the requirements hereof and executed by a Responsible Officer of each of the Borrowers and attested by a duly authorized representative of each of the Borrowers. 5.1.5 Financing Documents and Collateral. ----------------------------------- Each of the Borrowers shall have executed and delivered the Financing Documents to be executed by it, and shall have delivered original Chattel Paper, Instruments, Securities, and related collateral and all opinions, title insurance, and other documents contemplated by Article 3 hereof, all the foregoing to be in form and substance satisfactory to the Lender. 5.1.6 Recordings and Filings. ----------------------- The Borrowers shall have: (a) executed and delivered all Financing Documents (including, without limitation, UCC-1 and UCC-3 statements) required to be filed, registered or recorded in order to create, in favor of the Lender, a perfected Lien in the Collateral (subject only to the Permitted Liens) in form and in sufficient number for filing, registration, and recording in each office in each jurisdiction in which such filings, registrations and recordations are required, and (b) delivered such evidence as the Lender may deem satisfactory that all necessary filing fees and all recording and other similar fees, and all Taxes and other expenses related to such filings, registrations and recordings will be or have been paid in full. 5.1.7 Opinion of Borrowers' Counsel. ------------------------------ The Lender shall have received the favorable opinion of counsel for the Borrowers addressed to the Lender in form satisfactory to the Lender. 50 5.1.8 Other Documents, Etc. -------------------- The Lender shall have received such other certificates, opinions, documents and instruments confirmatory of or otherwise relating to the transactions contemplated hereby as may have been reasonably requested by the Lender. 5.1.9 Payment of Fees. --------------- The Lender shall have received payment of any Fees due on or before the Closing Date. 5.1.10 Additional Matters. ------------------ All other documents and legal matters in connection with the transactions contemplated by this Agreement and the other Financing Documents shall be satisfactory in form and substance to the Lender and its counsel. 5.1.11 Other Financing Documents. ------------------------- In addition to the Financing Documents to be delivered by the Borrowers, the Lender shall have received the Financing Documents duly executed and delivered by Persons other than the Borrowers. 5.1.12 Insurance Certificate. --------------------- The Lender shall have received an insurance certificate in accordance with the provisions of 6.1.8 (Insurance) and Section 6.1.24 (Insurance With Respect to Equipment and Inventory) of this Agreement. 5.1.13 Field Examination. ----------------- The Lender shall have completed a field examination of the Borrowers' business, operations and income, the results of which audit shall be in all respects acceptable to the Lender in its sole and absolute discretion. 5.1.14 'Proforma Balance Sheet and Projections. --------------------------------------- The Lender shall have received and approved the Borrowers' proforma balance sheet and proforma financial projections, which proforma balance sheet and proforma financial projections must be in form and content acceptable to the Lender in its sole and absolute discretion. 5.1.15 Senior Subordinated Notes. ------------------------- The Lender shall have received a certificate signed by a Responsible Officer of Coyne, certifying to the Lender that Coyne (a) has received the proceeds of sale of the Senior Subordinated Notes, in accordance with, and pursuant to, the terms and conditions of the Senior Subordinated Note Documents, and have applied the same to such purposes as has been 51 previously disclosed to, and approved by, the Lender, and (b) has delivered to the Lender a true and correct photocopy of all Senior Subordinated Note Documents. Section 5.2 Conditions to all Extensions of Credit. -------------------------------------- The making of all advances under the Loans is subject to the fulfillment of the following conditions precedent in a manner satisfactory to the Lender: 5.2.1 Compliance. ---------- The Borrowers shall have complied and shall then be in compliance with all terms, covenants, conditions and provisions of this Agreement and the other Financing Documents which are binding upon them. 5.2.2 Borrowing Base. -------------- The Borrowers shall have furnished all Borrowing Base Reports required by Section 2.1.4 (Borrowing Base Report) of this Agreement, there shall exist no Borrowing Base Deficiency, and as evidence thereof, the Borrowers shall have furnished to the Lender such reports, schedules, certificates, records and other papers as may be requested by the Lender. 5.2.3 Default. ------- There shall exist no Event of Default or Default hereunder. 5.2.4 Representations and Warranties. ------------------------------ The representations and warranties of the Borrowers contained among the provisions of this Agreement shall be true and with the same effect as though such representations and warranties had been made at the time of the making of each of advance under the Loans, except that the representation and warranty pertaining to balance sheets, financial statements and other financial condition information or data shall refer to the latest balance sheets, financial statements, and financial condition information and data furnished to the Lender pursuant to the provisions of this Agreement. 5.2.5 Adverse Change. -------------- No adverse change shall have occurred in the financial condition of the Borrowers which would, in the good faith judgment of the Lender, materially impair the ability of the Borrowers to pay or perform any of the Obligations. 5.2.6 Legal Matters. ------------- All legal documents incident to each advance under the Loans shall be reasonably satisfactory to counsel for the Lender. 52 ARTICLE VI COVENANTS OF THE BORROWERS Section 6.1 Affirmative Covenants. --------------------- So long as any of the Obligations (the Commitments therefor) shall be outstanding hereunder, the Borrowers agree with the Lender as follows: 6.1.1 Financial Statements. -------------------- The Borrowers shall furnish to the Lender: (a) Annual Statements and Certificates. The Borrowers ---------------------------------- shall furnish to the Lender as soon as available, but in no event more than ninety (90) days after the close of the Borrowers' fiscal years, (i) a copy of the annual financial statement in reasonable detail satisfactory to the Lender relating to the Borrowers and their Subsidiaries, prepared in accordance with GAAP and examined and certified by independent certified public accountants satisfactory to the Lender, which financial statement shall include a consolidated (and consolidating, if the Lender requests with respect to operating Borrowers) balance sheet of the Borrowers and their Subsidiaries as of the end of such fiscal year and consolidated (and consolidating, if the Lender requests with respect to operating Borrowers) statements of income, cash flows and changes in shareholders equity of the Borrowers and their Subsidiaries for such fiscal year, and (ii) a detailed computation of each financial covenant in this Agreement which is applicable for the period reported, and a cash flow projection report, each prepared by a Responsible Officer of the Borrowers in a format acceptable to the Lender and (iii) a management letter in the form prepared by the independent certified public accountants, provided, however, that such management letter shall, if not then available, shall be furnished to the Lender as soon as available, but in no event more than forty-five (45) days after the Borrowers' annual financial statements are furnished to the Lender. (b) Annual Opinion of Accountant. The Borrowers ---------------------------- shall furnish to the Lender as soon as available, but in no event more than ninety (90) days after the close of the Borrowers' fiscal years, a letter or opinion of the accountant who examined and certified the annual financial statement relating to the Borrowers and their Subsidiaries stating whether anything in such accountant's examination has revealed the occurrence of a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto. (c) Monthly Statements and Certificates. The ----------------------------------- Borrowers shall furnish to the Lender as soon as available, but in no event more than thirty (30) days after the close of each month, consolidated (and consolidating, if the Lender requests with respect to operating Borrowers) balance sheets of the Borrowers and their subsidiaries as of the close of such period, consolidated (and consolidating, if the Lender requests with respect to operating Borrowers) cash flows and changes in shareholders equity statements for such period, projected cash flow on a month to month basis and projected income statements, and a detailed computation of each financial covenant in this Agreement which is applicable for the period reported, all as prepared and certified by a Responsible Officer of Coyne and accompanied by a certificate of a Responsible Officer of each of the Borrowers stating whether any event has 53 occurred which constitutes a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto, and further to include: (i) a summary aging schedule of all Receivables by Account Debtor, to be accompanied by such detailed supporting information, as the Lender may from time to time reasonably request; (ii) a detailed aging of all accounts payable by supplier, in such detail, and accompanied by such supporting information, as the Lender may from time to time reasonably request; (iii) a listing of all Inventory by category and location, in such detail, and accompanied by such supporting information as the Lender may from time to time reasonably request; and (iv) such other information as the Lender may reasonably request. (d) Annual Budget and Projections. The Borrowers shall ----------------------------- furnish to the Lender as soon as available, but in no event later than the 14th day before the end of each fiscal year: (i) a consolidated (and consolidating, if the Lender requests) budget and pro forma financial statements on a month-to-month basis for the following fiscal year, and (ii) five year projections. (e) Additional Reports and Information. The Borrowers shall ---------------------------------- furnish to the Lender promptly, such additional information, reports or statements as the Lender may from time to time reasonably request. (f) Certain Information Furnished to Trustee. The Borrowers ---------------------------------------- will furnish to the Lender, at the same time sent to the Trustee, at least one (l) copy of all financial statements, reports, and other information sent by the Borrowers to the holders of the Senior Subordinated Notes and the Trustee pursuant to Section 4.03 and 4.04 of the Indenture as in effect on the Closing Date. 6.1.2 Reports to SEC and to Stockholders. ---------------------------------- The Borrowers will furnish to the Lender, promptly upon the filing or making thereof, at least one (l) copy of all financial statements, reports, notices and proxy statements sent by the Borrowers to their stockholders, and of all regular and other reports filed by the Borrowers with any securities exchange or with the Securities and Exchange Commission. 54 6.1.3 Recordkeeping, Rights of Inspection, Field Examination, ------------------------------------------------------ Etc. - --- (a) The Borrowers shall, and shall cause each of their Subsidiaries to, maintain (i) a standard system of accounting in accordance with GAAP, and (ii) proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its properties, business and activities. (b) The Borrowers shall, and shall cause each of their Subsidiaries to, permit authorized, representatives of the Lender to visit and inspect the properties and the properties of the Borrowers and their Subsidiaries, to review, audit, check and inspect the Collateral at any time with or without notice, to review, audit, ch eck and inspect the Borrowers' other books of record at any time with or without notice and to make abstracts and photocopies thereof, and to discuss the affairs, finances and accounts of the Borrowers and their Subsidiaries, with the officers, directors, employees and other authorized representatives of the Borrowers and their Subsidiaries and their respective accountants, all at such times during normal business hours and other reasonable times and as often as the Lender may reasonably request. (c) The Borrowers hereby irrevocably authorize and direct all accountants and auditors employed by the Borrowers and their Subsidiaries at any time prior to the repayment in full of the Obligations to exhibit and deliver to the Lender copies of any and all of the financial statements, trial balances, management letters, or other accounting records of any nature of the Borrowers and their Subsidiaries in the accountant's or auditor's possession, and to disclose to the Lender any information they may have concerning the financial status and business operations of the Borrowers' and its Subsidiaries. Further, the Borrowers hereby authorize all Governmental Authorities to furnish to the Lender copies of reports or examinations relating to the Borrowers and their Subsidiaries, whether made by the Borrowers or otherwise. (d) Any and all costs and expenses incurred by, or on behalf of, the Lender in connection with the conduct of any of the foregoing shall be part of the Enforcement Costs and shall be payable to the Lender upon demand. The Borrowers acknowledge and agree that such expenses may include, but shall not be limited to, any and all out-of-pocket costs and expenses of the Lender's employees and agents in, and when, travelling to the Borrowers' facilities. 6.1.4 Corporate Existence. ------------------- Each of the Borrowers shall maintain, and cause each of its Subsidiaries to maintain, its corporate existence in good standing in the jurisdiction in which it is incorporated and in each other jurisdiction where it is required to register or qualify to do business if the failure to do so in such other jurisdiction might have a material adverse effect on the ability of the Borrower to perform the Obligations, on the conduct of the Borrower's operations, on the Borrower's financial condition, or on the value of, or the ability of the Lender to realize upon, the Collateral. 6.1.5 Compliance with Laws. -------------------- Each of the Borrowers shall comply, and cause each of its Subsidiaries to comply, with all applicable Laws and observe the valid requirements of Governmental 55 Authorities, the noncompliance with or the nonobservance of which might have a material adverse effect on the ability of the Borrower to perform the Obligations, on the conduct of the Borrower's operations, on the Borrower's financial condition, or on the value of, or the ability of the Lender to realize upon, the Collateral. 6.1.6 Preservation of Properties. --------------------------- Each of the Borrowers will, and will cause each of its Subsidiaries to, at all times (a) maintain, preserve, protect and keep its properties, whether owned or leased, in good operating condition, working order and repair (ordinary wear and tear excepted), and from time to time will make all proper repairs, maintenance, replacements, additions and improvements thereto needed to maintain such properties in good operating condition, working order and repair, and (b) do or cause to be done all things necessary to preserve and to keep in full force and effect its material franchises, leases of real and personal property, trade names, patents, trademarks and permits which are necessary for the orderly continuance of its business. 6.1.7 Line of Business. ----------------- The Borrowers will continue to engage substantially only in the industrial laundry business. 6.1.8 Insurance. ---------- Each of the Borrowers will, and will cause each of its Subsidiaries to, at all times maintain with A-rated insurance companies such insurance as is required by applicable Laws and such other insurance, in such amounts, of such types and against such risks, hazards, liabilities, casualties and contingencies as are usually insured against in the same geographic areas by business entities engaged in the same or similar business. Without limiting the generality of the foregoing, each of the Borrowers will, and will cause each of its Subsidiaries to, keep adequately insured all of its property against loss or damage resulting from fire or other risks insured against by extended coverage and maintain public liability insurance against claims for personal injury, death or property damage occurring upon, in or about any properties occupied or controlled by it, or arising in any manner out of the businesses carried on by it, all in such amounts not less than the Lender shall reasonably determine from time to time. Each of the Borrowers shall deliver to the Lender on the Closing Date (and thereafter on each date there is a material change in the insurance coverage) a certificate of a Responsible Officer of the Borrower containing a detailed list of the insurance then in effect and stating the names of the insurance companies, the types, the amounts and rates of the insurance, dates of the expiration thereof and the properties and risks covered thereby. Within thirty (30) days after notice in writing from the Lender, the Borrowers will obtain such additional insurance as the Lender may reasonably request. 6.1.9 Taxes. ----- Except to the extent that the validity or amount thereof is being contested in good faith and by appropriate proceedings, the Borrowers will, and will cause each of their Subsidiaries to, pay and discharge all Taxes prior to the date when any interest or penalty would accrue for the nonpayment thereof, except that, with respect to Taxes which do not exceed 56 $100,000 in the aggregate, the Borrowers will not be in violation of this Section if the Taxes are paid by the Borrowers not later than thirty (30) days after they have actual knowledge that the Taxes are due. The Borrowers shall furnish to the Lender at such times as the Lender may require proof satisfactory to the Lender of the making of payments or deposits required by applicable Laws including, without limitation, payments or deposits with respect to amounts withheld by the Borrowers from wages and salaries of employees and amounts contributed by the Borrowers on account of federal and other income or wage taxes and amounts due under the Federal Insurance Contributions Act, as amended. 6.1.10 ERISA. ----- The Borrowers will, and will cause each of their Subsidiaries and Affiliates to, comply with the funding requirements of ERISA with respect to employee pension benefit plans for its respective employees. The Borrowers will not permit with respect to any employee benefit plan or plans covered by Title IV of ERISA (a) any prohibited transaction or transactions under ERISA or the Internal Revenue Code, which results, or may result, in any material liability of the Borrowers and their Subsidiaries and Affiliates, or (b) any Reportable Event if, upon termination of the plan or plans with respect to which one or more such Reportable Events shall have occurred, there is or would be any material liability of the Borrowers and their Subsidiaries and Affiliates to the PBGC. Upon the Lender's request, the Borrowers will deliver to the Lender a copy of the most recent actuarial report, financial statements and annual report completed with respect to any "defined benefit plan", as defined in ERISA. 6.1.11 Notification of Events of Default and Adverse --------------------------------------------- Developments. - ------------ The Borrowers shall promptly notify the Lender upon obtaining knowledge of the occurrence of: (a) any Event of Default; (b) any Default; (c) any litigation instituted or threatened against the Borrowers or their Subsidiaries and of the entry of any judgment or Lien against any of the assets or properties of the Borrowers or any Subsidiary where the claims against any Borrower or Subsidiary exceed One Hundred Thousand Dollars ($100,000) and are not covered by insurance; (d) any event, development or circumstance whereby the financial statements furnished hereunder fail in any material respect to present fairly, in accordance with GAAP, the financial condition and operational results of any of the Borrowers or any of their Subsidiaries; (e) any judicial, administrative or arbitral proceeding pending against any of the Borrowers or any of their Subsidiaries and any judicial or administrative proceeding known by any of the Borrowers to be threatened 57 against it or any of their Subsidiaries which, if adversely decided, could materially adversely affect its financial condition or operations (present or prospective); (f) the receipt by any of the Borrowers or any Subsidiary of any notice, claim or demand from any Governmental Authority which alleges that any of the Borrowers or any Subsidiary is in violation of or has failed to comply with any of the terms of (i) the Occupational Safety and Health Act and related regulations, or environmental Laws including, without limitation, the Environmental Protection Act or other Laws related to handling and disposal of Hazardous Materials, or (ii) any other applicable Laws regulating a Borrower's operation and business, the noncompliance with or the nonobservance of which (A) is claimed or alleged by the Governmental Authority, or believed by senior management of the Borrowers, to involve liability in excess of $10,000 or (B) may result in a material adverse effect on the ability of the Borrower or any Subsidiary to perform the Obligations, on the conduct of the Borrower's operations, on the Borrower's financial condition, or on the value of, or the ability of the Lender to realize upon, the Collateral; and (g) any other development in the business or affairs of any of the Borrowers and any of their Subsidiaries which may be materially adverse; in each case describing in detail satisfactory to the Lender the nature thereof and the action the Borrowers propose to take with respect thereto. 6.1.12 Hazardous Materials; Contamination. ---------------------------------- The Borrowers agree to: (a) give notice to the Lender immediately upon the Borrowers' acquiring knowledge of the presence of any Hazardous Materials on any property owned or controlled by the Borrowers or for which the Borrowers are responsible (provided that such notice shall not be required for Hazardous Materials placed or stored on such property in accordance with applicable Laws in the ordinary course (including, without limitation, quantity) of the Borrowers' line of business expressly described in this Agreement) or of any Hazardous Materials Contamination with a full description thereof; (b) promptly comply with any Laws requiring the removal, treatment or disposal of Hazardous Materials or Hazardous Materials Contamination and provide the Lender with satisfactory evidence of such compliance;' and (c) as part of the Obligations, defend, indemnify and hold harmless the Lender and its agents, employees, trustees, successors and assigns from any and all claims which may now or in the future (whether before or after the termination of this Agreement) be asserted as a result of the presence of any Hazardous Materials on any property owned or controlled by the Borrowers for which the Borrowers are responsible for any Hazardous Materials Contamination. 58 The Borrowers acknowledge and agree that this indemnification shall survive the termination of this Agreement and the Commitments and the payment and performance of all of the other Obligations. 6.1.13 Disclosure of Significant Transactions. -------------------------------------- The Borrowers shall deliver to the Lender a written notice describing in detail each transaction by it involving the purchase, sale, lease, or other acquisition or loss or casualty to or disposition of an interest in Fixed or Capital Assets which exceeds Two Hundred Fifty Thousand Dollars ($250,000.00), said notices to be delivered to the Lender within thirty (30) days of the occurrence of each such transaction. 6.1.14 Environmental Staff. ------------------- The Borrowers shall at all times maintain a staff of qualified environmental engineers sufficient in number to monitor the Borrowers compliance with all Laws relating to Hazardous Materials and other environmental matters. 6.1.15 EBITDA. ------ The Borrowers will maintain, tested commencing October 31, 1998 as of the last day of each of the Borrowers' fiscal quarters for the four (4) quarter period ending on such date, EBITDA of not less than the following:
- ---------------------------------------------------------------------- Quarters EBITDA - ---------------------------------------------------------------------- October 31, 1998 $13,100,000 - ---------------------------------------------------------------------- October 31, 1999 through and including July $15,200,000 31, 2000 - ---------------------------------------------------------------------- October 31, 2000 through and including July $17,500,000 31, 2001 - ---------------------------------------------------------------------- October 31, 2001 through and including July $19,400,000 31, 2002 - ---------------------------------------------------------------------- October 31, 2002 through and including July $21,300,000 31, 2003 - ---------------------------------------------------------------------- October 31, 2003 and thereafter(applicable $23,000,000 if the Revolving Credit Termination Date has not sooner occurred) - ----------------------------------------------------------------------
59 6.1.16 Fixed Charge Coverage Ratio. ------------------------------ The Borrowers will maintain, tested commencing October 31, 1998 as of the last day of each of the Borrowers' fiscal quarters for the four (4) quarter period ending on such date, a Fixed Charge Coverage Ratio of not less than the following:
- ---------------------------------------------------------------------- Quarters Ratio - ---------------------------------------------------------------------- October 31, 1998 through and including July 1.00 to 1.0 31, 1999 - ---------------------------------------------------------------------- October 31, 1999 through and including July 1.15 to 1.0 31, 2000 - ---------------------------------------------------------------------- October 31, 2000 through and including July 1.20 to 1.0 31, 2001 - ---------------------------------------------------------------------- October 31, 2001 through and thereafter 1.25 to 1.0 - ----------------------------------------------------------------------
6.1.17 Leverage Ratio. -------------- The Borrowers will maintain, tested commencing October 31, 1998 as of the last day of each of the Borrowers' fiscal quarters for the four (4) quarter period ending on such date, a ratio of Funded Debt to EBITDA so that it is not more than the following:
- ---------------------------------------------------------------------- Quarters Ratio - ---------------------------------------------------------------------- October 31, 1998 through and including July 6.25 to 1.0 31, 1999 - ---------------------------------------------------------------------- October 31, 1999 through and including July 5.40 to 1.0 31, 2000 - ---------------------------------------------------------------------- October 31, 2000 through and including July 4.70 to 1.0 31, 2001 - ---------------------------------------------------------------------- October 31, 2001 through and including July 4.20 to 1.0 31, 2002 - ---------------------------------------------------------------------- October 31, 2002 through and including July 3.90 to 1.0 31, 2003 - ---------------------------------------------------------------------- October 31, 2003 and thereafter(applicable 3.75 to 1.0 if the Revolving Credit Termination Date has not sooner occurred) - ----------------------------------------------------------------------
60 6.1.18 Capital Expenditures. --------------------- The Borrowers will not, and will not permit any Subsidiary to, directly or indirectly (by way of the acquisition of the securities of a Person or otherwise), make any Capital Expenditures in the aggregate for the Borrowers and their Subsidiaries (taken as a whole) exceeding the following in the applicable fiscal quarters in each of the following fiscal years for the year to date:
Fiscal Year Capital Expenditures ----------------------------------------------------------------- 1998 $6,800,000 ----------------------------------------------------------------- 1999 $5,000,000 ----------------------------------------------------------------- 2000 $5,000,000 ----------------------------------------------------------------- 2001 $5,500,000 ----------------------------------------------------------------- 2002 and any $5,750,000 applicable time thereafter -----------------------------------------------------------------
6.1.19 Collection of Receivables. -------------------------- Until such time that the Lender shall notify the Borrowers of the revocation of such privilege, each of the Borrowers and each of the Subsidiaries shall at its own expense have the privilege for the account of, and in trust for, the Lender of collecting its Receivables and receiving in respect thereto all Items of Payment and shall otherwise completely service all of the Receivables including (a) the billing, posting and maintaining of complete records applicable thereto, (b) the taking of such action with respect to the Receivables as the Lender may request or in the absence of such request, as each of the Borrowers and each of the Subsidiaries may deem advisable; and (c) the granting, in the ordinary course of business, to any Account Debtor, any rebate, refund or adjustment to which the Account Debtor may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to a Receivable and may take such other actions relating to the settling of any Account Debtor's claim as may be commercially reasonable. The Lender may, at its option, at any time or from time to time after and during the continuance of an Event of Default hereunder, revoke the collection privilege given in this Agreement to any one or more of the Borrowers and the Subsidiaries by either giving notice of its assignment of, and lien on the Collateral to the Account Debtors or giving notice of such revocation to the Borrowers. The Lender shall not have any duty to, and the Borrowers hereby release the Lender from all claims of loss or damage caused by the delay or failure to collect or enforce any of the Receivables or to preserve any rights against any other party with an interest in the Collateral. The Lender shall be entitled at any time and from time to time to confirm and verify Receivables. 61 6.1.20 Assignments of Receivables. --------------------------- The Borrowers will promptly, upon request, execute and deliver to the Lender written assignments, in form and content acceptable to the Lender, of specific Receivables or groups of Receivables; provided, however, the Lien and/or security interest granted to the Lender under this Agreement shall not be limited in any way to or by the inclusion or exclusion of Receivables within such assignments. Receivables so assigned shall secure payment of the Obligations and are not sold to the Lender whether or not any assignment thereof, which is separate from this Agreement, is in form absolute. The Borrower agrees that neither any assignment to the Lender nor any other provision contained in this Agreement or any of the other Financing Documents shall impose on the Lender any obligation or liability of the Borrower with respect to that which is assigned and the Borrower hereby agrees to indemnify the Lender and hold the Lender harmless from any and all claims, actions, suits, losses, damages, costs, expenses, fees, obligations and liabilities which may be incurred by or imposed upon the Lender by virtue of the assignment of and Lien on the Borrower's rights, title and interest in, to, and under the Collateral. 6.1.21 Government Accounts. -------------------- The Borrowers will immediately notify the Lender if any of the Receivables, in any amount alone or in the aggregate of more than $500,000 arise out of contracts with the United States or with any other Governmental Authority, and execute any instruments and take any steps required by the Lender in order that all moneys due and to become due under such contracts shall be assigned to the Lender and notice thereof given to the Governmental Authority under the Federal Assignment of Claims Act or any other applicable Laws. 6.1.22 Notice of Returned Goods, etc. ------------------------------ The Borrowers will promptly notify, and will cause the Subsidiaries to promptly notify, the Lender of the return, rejection or repossession of any goods sold or delivered in respect of any Receivables (other than goods returned in the ordinary course of the Borrowers' rental business), and of any claims made in regard thereto to the extent that the aggregate purchase price of any such goods in any given calendar month exceeds in the aggregate One Hundred Thousand Dollars ($100,000.00) for such month. 6.1.23 Inventory. ---------- With respect to the Inventory, the Borrowers and the Subsidiaries will: (a) as soon as possible upon demand by the Lender from time to time, prepare and deliver to the Lender designations of Inventory specifying the Borrowers' and Subsidiaries' cost of Inventory, the retail price thereof, and such other matters and information relating to the Inventory as the Lender may reasonably request; (b) keep correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, the Borrowers' and Subsidiaries' cost therefor and the selling price thereof, all of which records shall be available to the officers, employees or agents of the Lender upon demand for inspection and copying thereof; (c) not store any of its Inventory with a bailee, warehouseman or similar Person without the Lender's prior written 62 consent, which consent may be conditioned on, among other things, delivery by the bailee, warehouseman or similar Person to the Lender of warehouse receipts, in form acceptable to the Lender, in the name of the Lender evidencing the storage of Inventory and the Lender's interests therein; and (d) permit the Lender and its agents or representatives to inspect and examine the Inventory and to check and test the same as to quality, quantity, value and condition at any time or times hereafter during the Borrowers' and Subsidiaries' usual business hours or at other reasonable times. The Borrowers shall be permitted to sell Inventory in the ordinary course of their business until the occurrence of a Default. 6.1.24 Insurance With Respect to Equipment and Inventory. -------------------------------------------------- The Borrowers will (a) maintain and cause each of their Subsidiaries to maintain hazard insurance with fire and extended coverage and naming the Lender as an additional insured with loss payable to the Lender as its respective interest may appear on the Equipment and Inventory in an amount at least equal to the lesser amount of the outstanding principal amount of the Obligations or the fair market value of the Equipment and Inventory (but in any event sufficient to avoid any co-insurance obligations) and with a specific endorsement to each such insurance policy pursuant to which the insurer agrees to give the Lender at least thirty (30) days written notice before any alteration or cancellation of such insurance policy and that no act or default of the Borrowers shall affect the right of the Lender to recover under such policy in the event of loss or damage; (b) file, and cause each of their Subsidiaries to file, with the Lender, upon its request, a detailed list of the insurance then in effect and stating the names of the insurance companies, the amounts and rates of the insurance, dates of the expiration thereof and the properties and risks covered thereby; and, within thirty (30) days after notice in writing from the Lender; and (c) obtain, and cause each of their Subsidiaries to obtain, such additional insurance as the Lender may reasonably request. 6.1.25 Maintenance of the Collateral. ------------------------------ The Borrowers will maintain the Collateral in good working order, saving and excepting ordinary wear and tear, and will not permit anything to be done to the Collateral which may materially impair the value thereof. The Lender, or an agent designated by the Lender, shall be permitted to enter the premises of the Borrowers and their Subsidiaries and examine, audit and inspect the Collateral at any reasonable time and from time to time without notice. The Lender agrees to act in a commercially reasonable manner when inspecting the premises of the Borrowers and their Subsidiaries and when examining, auditing and/or inspecting the Collateral. The Lender shall not have any duty to, and the Borrowers hereby release the Lender from all claims of loss or damage caused by the delay or failure to collect or enforce any of the Receivables or to, preserve any rights against any other party with an interest in the Collateral. 6.1.26 Equipment. ---------- The Borrowers shall (a) maintain all Equipment as personalty, (b) not affix any Equipment to any real estate in such manner as to become a fixture or part of such real estate, which is not covered by a Mortgage and (c) shall hold no Equipment on a sale on approval basis. The Borrowers hereby declare their intent that, notwithstanding the means of 63 attachment, no goods of the Borrowers hereafter attached to any realty are intended to be deemed a fixture, which declaration shall be irrevocable, without the Lender's consent, until all of the Obligations have been paid in full and all of the Commitments have been terminated. 6.1.27 Defense of Title and Further Assurances. --------------------------------------- At their expense, the Borrowers will defend the title to the Collateral (and any part thereof), and will immediately execute, acknowledge and deliver any financing statement, renewal, affidavit, deed, assignment, continuation statement, security agreement, certificate or other document which the Lender may require in order to perfect, preserve, maintain, continue, protect and/or extend the Lien granted to the Lender under this Agreement, under any of the other Financing Documents and the first priority of that Lien subject only to the Permitted Liens. The Borrowers will from time to time do whatever the Lender may require by way of obtaining, executing, delivering, and/or filing financing statements, landlords' or mortgagees' waivers, notices of assignment and other notices and amendments and renewals thereof and the Borrowers will take any and all steps and observe such formalities as the Lender may require, in order to create and maintain a valid Lien upon, pledge of, or paramount security interest in, the Collateral, subject to the Permitted Liens. The Borrowers shall pay to the Lender on demand all taxes, reasonable costs and expenses incurred by the Lender in connection with the preparation, execution, recording and filing of any such document or instrument. To the extent that the proceeds of any of the Accounts or Receivables of the Borrowers are expected to become subject to the control of, or in the possession of, a party other than the Borrowers or the Lender, the Borrowers shall cause all such parties to execute and deliver on the Closing Date security documents, financing statements or other documents as requested by the Lender and as may be necessary to evidence and/or perfect the security interest of the Lender in those proceeds. The Borrowers agree that a copy of a fully executed security agreement and/or financing statement shall be sufficient to satisfy for all purposes the requirements of a financing statement as set forth in Article 9 of the applicable Uniform Commercial Code. Each of the Borrowers hereby irrevocably appoints the Lender as the Borrower's attorney-in-fact, with power of substitution, in the name of the Lender or in the name of the Borrower or otherwise, for the use and benefit of the Lender for itself and/or the Lenders, but at the cost and expense of the Borrower and without notice to the Borrower to execute and deliver any and all of the instruments and other documents and take any action which the Lender may require pursuant the foregoing provisions of this Section. 6.1.28 Business Names; Locations. -------------------------- Each Borrower will notify and cause each of the Subsidiaries to notify the Lender not less than thirty (30) days prior to (a) any change in the name under which the Borrower or the applicable Subsidiary conducts its business, (b) any change of the location of the chief executive office of the Borrower or the applicable Subsidiary, and (c) the opening of any new place of business or the closing of any existing place of business, and any change in the location of the places where the Collateral, or any part thereof, or the books and records, or any part thereof, are kept. 64 6.1.29 Subsequent Opinion of Counsel as to Recording Requirements. ----------------------------------------------------------- In the event that any of the Borrowers or any Subsidiary shall transfer its principal place of business or the office where it keeps its records pertaining to the Collateral, the Borrowers will provide to the Lender a subsequent opinion of counsel as to the filing, recording and other requirements with which the Borrowers and the Subsidiaries have complied to maintain the Lien and security interest in favor of the Lender in the Collateral. 6.1.30 Use of Premises and Equipment. ------------------------------ The Borrowers agree that until the Obligations are fully paid and this Agreement has been terminated, the Lender (a) after and during the continuance of a Default or an Event of Default, may use any of the Borrowers' owned or leased lifts, hoists, trucks and other facilities or equipment for handling or removing the Collateral; and (b) shall have, and is hereby granted, a right of ingress and egress to the places where the Collateral is located, and may proceed over and through any of the Borrowers' owned or leased property. 6.1.31 Protection of Collateral. ------------------------- The Borrowers agree that the Lender may at any time take such steps as the Lender deems reasonably necessary to protect the Lender's interest in, and to preserve the Collateral. The Borrowers agree to cooperate fully with the Lender's efforts to preserve the Collateral and will take such actions to preserve the Collateral as the Lender may reasonably direct. All of the Lender's expenses of preserving the Collateral, including any reasonable expenses relating to the compensation and bonding of a custodian, shall part of the Enforcement Costs. 6.1.32 Landlord's Waivers. ------------------- The Borrowers shall use its best efforts to obtain a landlord's waiver from each landlord of each and every business premise leased by the Borrowers and on which any of the Collateral is or may hereafter be located, which landlords' waivers must be reasonably acceptable to the Lender and its counsel in their sole and absolute discretion. 6.1.33 Funds Transfer Services. ------------------------ (a) Each Borrower acknowledges that the Lender has made available to the Borrowers Wire Transfer Procedures a copy of which is attached to this Agreement as EXHIBIT B and which include a description of security procedures regarding funds transfers executed by the Lender or an Affiliate bank at the request of the Borrowers (the "Security Procedures"). The Borrowers and the Lender agree that the Security Procedures are commercially reasonable. Each Borrower further acknowledges that the full scope of the Security Procedures which the Lender or such Affiliate bank offers and strongly recommends for funds transfers is available only if the Borrowers communicate directly with the Lender or such Affiliate bank as applicable in accordance with said procedures. If a Borrower attempts to communicate by any other method or otherwise not in accordance with the Security Procedures, the Lender or such Affiliate bank, as applicable, shall not be required to execute such instructions, but if the Lender or such Affiliate bank, as applicable, does so, the Borrowers will 65 be deemed to have refused the Security Procedures that the Lender or such Affiliate bank as applicable offers and strongly recommends, and the Borrowers will be bound by any funds transfer, whether or not authorized, which is issued in any Borrower's name and accepted by the Lender or such Affiliate bank, as applicable, in good faith. The Lender or such Affiliate bank, as applicable, may modify Wire Transfer Procedures including, without limitation, the Security Procedures at such time or times and in such manner as the Lender or such Affiliate bank, as applicable, in its sole discretion, deems appropriate to meet prevailing standards of good banking practice. By continuing to use the Lender's or such Affiliate bank's, as applicable, wire transfer services after receipt of any modification of the Wire Transfer Procedures including, without limitation, the Security Procedures, each Borrower agrees that the Security Procedures, as modified, are likewise commercially reasonable. Each Borrower further agrees to establish and maintain procedures to safeguard the Security Procedures and any information related thereto. Neither the Lender nor any Affiliate of the Lender is responsible for detecting any error in payment order sent by any Borrower to the Lender or any of the Lenders. (b) The Lender or such Affiliate bank, as applicable, will generally use the Fedwire funds transfer system for domestic funds transfers, and the funds transfer system operated by the Society for Worldwide International Financial Telecommunication (SWIFT) for international funds transfers. International funds transfers may also be initiated through the Clearing House InterBank Payment System (CHIPs) or international cable. However, the Lender or such Affiliate bank, as applicable, may use any means and routes that the Lender or such Affiliate bank, as applicable, in its sole discretion, may consider suitable for the transmission of funds. Each payment order, or cancellation thereof, carried out through a funds transfer system or a clearinghouse will be governed by all applicable funds transfer system rules and clearing house rules and clearing arrangements, whether or not the Lender or such Affiliate bank, as applicable, is a member of the system, clearinghouse or arrangement and each Borrower acknowledges that the Lender's or such Affiliate bank's, as applicable, right to reverse, adjust, stop payment or delay posting of an executed payment order is subject to the laws, regulations, rules, circulars and arrangements described herein. 6.1.34 Year 2000 Compliance. --------------------- Each Borrower will promptly notify the Lender in the event such Borrower discovers or determines that any computer application (including those of its suppliers, vendors and customers) that is material to its or any of its Subsidiaries' business and operations will not be Year 2000 compliant, except to the extent that such failure could not reasonably be expected to have a material adverse effect on the business, properties, condition (financial or otherwise) or operations, present or prospective, of the Borrower. Section 6.2 Negative Covenants. ------------------- So long as any of the Obligations (or Commitments therefor) shall be outstanding hereunder, the Borrowers agree with the Lender as follows: 66 6.2.1 Merger, Acquisition or Sale of Assets. -------------------------------------- The Borrowers will not enter into any merger or consolidation or amalgamation, windup or dissolve themselves (or suffer any liquidation or dissolution) or acquire all or substantially all the assets of any Person, (other than by Permitted Acquisitions) or sell, lease or otherwise dispose of any of their assets except prior to a Default or Event of Default: (a) Inventory disposed of, by rental contract or otherwise, in the ordinary course of business, and (b) Equipment which is part of the Collateral and which has become worn out or obsolete, is the subject of a casualty, or is no longer necessary for the uninterrupted operation of the Borrower's business at its then current level, provided: (i) at the time of, or prior to, such removal, any such Equipment is replaced with other Equipment which is subject to a Lien perfected by fling in favor of the Lender and free from other Liens and has a value at least equal to that of the replaced Equipment, or (ii) such Equipment is sold or disposed of for scrap or at fair market value for cash and the cash proceeds (net of reasonable expenses of sale or disposition) received are paid over immediately to the Lender to be applied to the Obligations in such order as the Lender may elect with respect to the Capital Expenditure Line (if the Equipment was related to an advance under the Capital Expenditure Line) or to Acquisition Loan (if the Equipment was related to an advance under the Acquisition Loan), provided, however, in the event the proceeds of such sale or disposition which are received by the Lender for application to the applicable Loan are not sufficient to pay in full an amount equal to the aggregate of the quarterly installment payments of principal remaining with respect to the advance under the Capital Expenditure Line for such Equipment or, the fair market value of the Equipment (without giving effect to any casualty) then there shall be immediately due owing and the Borrowers shall pay to the Lender the amount of such deficiency for application to the applicable Loan. Where the fair market value of Equipment (excluding motor vehicles) disposed exceeds $500,000 in any fiscal year, the Borrowers shall make a Mandatory Prepayment in the amount of the excess, such payment shall be at the time the Borrowers annual financial statements for that fiscal year are forwarded to the Lender. Any consent of the Lender to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition. 6.2.2 Subsidiaries. ------------- The Borrowers will not create or acquire any Subsidiaries other than the Subsidiaries identified on the Collateral Disclosure List, other than by Perm Acquisitions. 67 6.2.3 Issuance of Stock. ------------------ The Borrowers will not issue, or grant any option or right to purchase, any of their capital stock which results, or could result in, a violation of Section 7.1.11 or Section 7.1.12 of this Agreement. 6.2.4 Purchase or Redemption of Securities, Dividend Restrictions. ------------------------------------------------------------ The Borrowers will not purchase, redeem or otherwise acquire any shares of their capital stock or warrants now or hereafter outstanding, declare or pay any dividends thereon (other than stock dividends), apply any of their property or assets to the purchase, redemption or other retirement of, set apart any sum for the payment of any dividends on, or for the purchase, redemption (other than the Permitted Payments), or other retirement of, make any distribution by reduction of capital or otherwise in respect of, any shares of any class of capital stock of the Borrowers, or any warrants, permit any Subsidiary to purchase or acquire any shares of any class of capital stock of, or warrants issued by, the Borrowers, make any distribution to stockholders or set aside any funds for any such purpose, and, except for Permitted Senior Subordinated Note Purchases, not prepay, purchase or redeem any Indebtedness for Borrowed Money other than the Obligations; provided, however, that nothing in this Section shall prevent payments on the Subordinated Debt permitted by the Subordination Agreement. 6.2.5 Indebtedness. ------------- The Borrowers will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness for Borrowed Money, or permit any Subsidiary so to do, except: (a) the Obligations; (b) operating leases (c) current accounts payable arising in the ordinary course; (d) Indebtedness secured by Permitted Liens (provided, however, that in the case of each Permitted Lien for Equipment purchase money related to Permitted Acquisitions, the Lender shall have previously declined to provide such financing on identical terms); (e) Subordinated Indebtedness; (f) the guaranty of the Senior Subordinated Notes by the Borrowers (other than Coyne); and (g) Indebtedness of the Borrowers existing on the date hereof and reflected on the financial statements furnished pursuant to Section 4.1.11 (Financial Condition); and Indebtedness represented by the Senior Subordinated Notes. 68 6.2.6 Subordinated Indebtedness. -------------------------- The Borrowers will not, and will not permit any Subsidiary to make any payment on the Subordinated Indebtedness except as required by the terms thereof (without regard to any amendment thereto which has not been approved by the Lender. 6.2.7 Investments, Loans and Other Transactions. ------------------------------------------ Except as otherwise provided below and except for Permitted Senior Subordinated Note Purchases, the Borrowers will not, and will not permit any of their Subsidiaries to, (a) make, assume, acquire or continue to hold any investment in any real property (unless used in connection with their business and treated as a Fixed or Capital Asset of the Borrowers or the Subsidiary) or any Person (other than by Permitted Acquisition), whether by stock purchase, capital contribution, acquisition of indebtedness of such Person or otherwise (including, without limitation, investments in any joint venture or partnership), (b) guaranty or otherwise become contingently liable for the indebtedness or obligations of any Person, or (c) make any loans or otherwise extend credit to any Person, except: (i) any advance to an officer of the Borrowers or of any Subsidiary for travel or other business expenses in the ordinary course of business, provided that the aggregate amount of all such advances by the Borrowers and their Subsidiaries (taken as a whole) outstanding at any time shall not exceed One Hundred Fifty Thousand Dollars ($150,000); (ii) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (iii) any investment in Cash Equivalents, which are pledged to the Lender as collateral and security for the Obligations; (iv) trade credit extended to customers in the ordinary course of business; and (v) except as set forth in Schedule 6.2.7 of this -------------- Agreement. 6.2.8 Stock of Subsidiaries. ------------------------ The Borrowers will not sell or otherwise dispose of any shares of capital stock of any Subsidiary (except in connection with a merger or consolidation of a Wholly Owned Subsidiary into the Borrowers or another Wholly Owned Subsidiary or with the dissolution of any Subsidiary) or permit any Subsidiary to issue any additional shares of its capital stock except pro rata --- ---- to its stockholders. 6.2.9 Liens. ------ The Borrowers (a) will not create, incur, assume or suffer to exist any Lien upon any of their properties or assets, whether now owned or hereafter acquired, or permit any 69 Subsidiary so to do, except for Liens securing the Obligations and Permitted Liens, (b) will not allow or suffer to exist any Permitted Liens, other than purchase money security interests in and Capital Leases of Equipment, to be superior to Liens securing the Obligations and other Permitted Liens, and (c) will not allow or suffer to exist the failure of any Lien described in the Security Documents to attach to, and/or remain at all times perfected on, any of the property described in the Security Documents. 6.2.10 Transactions with Affiliates. ----------------------------- The Borrowers and their Subsidiaries will not enter into or participate in any transaction with any Affiliate other than in a manner and on terms which are in the ordinary course of business, are commercially reasonable and arm's length basis and which do not otherwise violate the provisions of the Financing Documents, except that Coyne may, after notice to the Lender, institute a stock option plan in favor of Thomas M. Coyne and may make Permitted Payments and may engage in those "Certain Transactions with Members of the Coyne Family" described on page 36 of the Offering memorandum. 6.2.11 Other Businesses. ----------------- The Borrowers and their Subsidiaries will not engage directly or indirectly in any business other than their current line of business described elsewhere in this Agreement. 6.2.12 ERISA Compliance. ----------------- Neither the Borrowers nor any Commonly Controlled Entity shall: (a) engage in or permit any "prohibited transaction" (as defined in ERISA); (b) cause any "accumulated funding deficiency" as defined in ERISA and/or the Internal Revenue Code; (c) terminate any pension plan in a manner which could result in the imposition of a lien on the property of the Borrowers pursuant to ERISA; (d) terminate or consent to the termination of any Multiemployer Plan or incur a complete or partial withdrawal with respect to any Multiemployer Plan which termination or withdrawal, either in any case or in the aggregate, might result in any material adverse change in the business, prospects, condition, affairs or operations of a Borrower or in any of its properties or assets, or in any material impairment of the right or ability of a Borrower to carry on its operations as now conducted or proposed to be conducted or in any material liability on the part of a Borrower or on the value of, or the ability of the Lender to realize upon, the Collateral. 6.2.13 Prohibition on Hazardous Materials. ----------------------------------- The Borrowers shall not place, manufacture or store or permit to be placed, manufactured or stored any Hazardous Materials on any property owned or controlled by the Borrowers or for which the Borrowers are responsible other than Hazardous Materials placed or stored on such property in accordance with applicable Laws in the ordinary course (including, without limitation, quantity) of the Borrowers' business expressly described in this Agreement. 70 6.2.14 Method of Accounting; Fiscal Year. ---------------------------------- Without the prior written consent of the Lender, the Borrowers shall not change the method of accounting employed in the preparation of the financial statements furnished prior to the date of this Agreement to the Lender, unless required to conform to GAAP and on the condition that the Borrowers' accountants shall furnish such information as the Lender may request to reconcile the changes with the Borrowers' prior financial statements. The Borrowers shall not change their fiscal year from a year ending October 31. 6.2.15 Compensation. ------------- Neither any of the Borrowers nor any of their Subsidiaries will pay any bonuses, fees, compensation, commissions, salaries, drawing accounts, or other payments (cash and non-cash), whether direct or indirect, to any stockholders of the Borrowers or their Subsidiaries, or any Affiliate of the Borrowers or their Subsidiaries, other than reasonable compensation for actual services rendered by stockholders in their capacity as officers or employees of the Borrowers and the payments described in Section 6.2.10. 6.2.16 Transfer of Collateral. ----------------------- The Borrowers and the Subsidiaries will not transfer, or permit the transfer, to another location of any of the Collateral or the books and records related to any of the Collateral. ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES Section 7.1 Events of Default. ------------------ The occurrence of any one or more of the following events shall constitute an "Event of Default" under the provisions of this Agreement: 7.1.1 Failure to Pay. --------------- The failure of the Borrowers to pay any of the Obligations as and when due and payable in accordance with the provisions of this Agreement, the Notes and/or any of the other Financing Documents. 7.1.2 Breach of Representations and Warranties . ------------------------------------------ Any representation or warranty made in this Agreement or in any report, statement, schedule, certificate, opinion (including any opinion of counsel for the Borrowers), financial statement or other document furnished in connection with this Agreement, any of the other Financing Documents, or the Obligations, shall prove to have been false or misleading when made (or, if applicable, when reaffirmed) in any material respect. 71 7.1.3 Failure to Comply with Covenants. --------------------------------- The failure of the Borrowers to perform, observe or comply with any covenant, condition or agreement contained in this Agreement and, (i) only with respect to a failure under Section 6.1.1, such failure continues uncured for a period of five (5) days, or (ii) only with respect to a failure under Sections 6.1.3(a), 6.1.4, 6.1.5 or 6.1.25, if the Borrowers after discovering such failure, fail to diligently and continuously pursue the cure of such failure, or (iii) only with respect to a failure under Section 6.1.9 which does not relate to Taxes due or claimed to be due in excess of $100,000 in the aggregate, if the Borrowers after discovering such failure, fail to diligently and continuously pursue the cure of such failure, or such failure continues uncured thirty (30) days after discovery. 7.1.4 Default Under Other Financing Documents or Obligations. ------------------------------------------------------- A default shall occur under any of the other Financing Documents or under any other Obligations, and such default is not cured within any applicable grace period provided therein. 7.1.5 Receiver; Bankruptcy. --------------------- Any Borrower or any Subsidiary shall (a) apply for or consent to the appointment of a receiver, trustee or liquidator of itself or any of its property, (b) admit in writing its inability to pay its debts as they mature, (c) make a general assignment for the benefit of creditors, (d) be adjudicated a bankrupt or insolvent, (e) file a voluntary petition in bankruptcy or a petition or an answer seeking or consenting to reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or take corporate action for the purposes of effecting any of the foregoing, or (f) by any act indicate its consent to, approval of or acquiescence in any such proceeding or the appointment of any receiver of or trustee for any of its property, or suffer any such receivership, trusteeship or proceeding to continue undischarged for a period of sixty (60) days, or (g) by any act indicate its consent to, approval of or acquiescence in any order, judgment or decree by any court of competent jurisdiction or any Governmental Authority enjoining or otherwise prohibiting the operation of a material portion of the Borrower's or any Subsidiary's business or the use or disposition of a material portion of the Borrower's or any Subsidiary's assets. 7.1.6 Involuntary Bankruptcy, etc. ---------------------------- (a) An order for relief shall be entered in any involuntary case brought against any Borrower or any Subsidiary under the Bankruptcy Code, or (b) any such case shall be commenced against any Borrower or any Subsidiary and shall not be dismissed within sixty (60) days after the filing of the petition, or (c) an order, judgment or decree under any other Law is entered by any court of competent jurisdiction or by any other Governmental Authority on the application of a Governmental Authority or of a Person other than any Borrower or any Subsidiary (i) adjudicating any Borrower, or any Subsidiary bankrupt or insolvent, or (ii) appointing a receiver, trustee or liquidator of any Borrower or of any Subsidiary, or of a material portion of the Borrower's or any Subsidiary's assets, or (iii) enjoining, prohibiting or otherwise limiting the operation of a material portion of the Borrower's or any Subsidiary's business or the use or disposition of a material 72 portion of the Borrower's or any Subsidiary's assets, and such order, judgment or decree continues unstayed and in effect for a period of thirty (30) days from the date entered. 7.1.7 Judgment. --------- Unless adequately insured in the opinion of the Lender, the entry of a final judgment for the payment of money involving more than $100,000 against any Borrower or any Subsidiary, and the failure by such Borrower or such Subsidiary to discharge the same, or cause it to be discharged, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered, or to secure a stay of execution pending appeal of such judgment. 7.1.8 Execution; Attachment. ---------------------- Any execution or attachment shall be levied against the Collateral, or any part thereof, and such execution or attachment shall not be set aside, discharged, bonded over or stayed within thirty (30) days after the same shall have been levied or, if later, within thirty (30) days after the Borrower learns of such levy, but in no event later than the Business Day prior to the date on which Collateral which is the subject of the attachment or levy may be the sale of sale or other disposition on account of such levy or attachment. 7.1.9 Default Under Other Borrowings. ------------------------------- Default shall be made with respect to any Indebtedness for Borrowed Money (other than the Loans) if the effect of such default is to accelerate the maturity of such evidence of the Indebtedness for Borrowed Money or to permit the holder or obligee thereof or other party thereto to cause any indebtedness to become due prior to its stated maturity. 7.1.10 Material Adverse Change. ------------------------ If the Lender in its reasonable discretion determines that a material adverse change has occurred in the financial condition of the Borrowers. 7.1.11 Change in Ownership. -------------------- Any change in the ownership of the Borrowers other than Coyne. 7.1.12 Liquidation, Termination, Dissolution, Change in ------------------------------------------------ Management, etc. ---------------- (a) If the Borrowers shall liquidate, dissolve or terminate its existence or shall suspend or terminate a substantial portion of its business operations or if Thomas M. Coyne is no longer actively involved in the management of Coyne. 73 (b) If there shall occur any change in the ownership or control of Coyne with the effect that Thomas M. Coyne (or a trust in which Thomas M. Coyne is a trustee and, as trustee, has the same powers as those set forth in the J. Stanley Coyne Irrevocable Inter Vivos Trust dated September 3, 1994) is not entitled by vote of securities which Thomas M. Coyne owns (or through such trust controls) (i) to authorize the taking of any and all corporate actions (including, without limitation, extraordinary corporate actions such as mergers and dissolutions), and (ii) to elect the number of directors of the Board of Coyne necessary to authorize the taking of all such corporate actions, all without the vote or consent of the holders of any other securities of Coyne. Section 7.2 Remedies. --------- Upon the occurrence of any Event of Default, the Lender may at any time thereafter exercise any one or more of the following rights, powers or remedies: 7.2.1 Acceleration. ------------- The Lender may declare the Obligations to be immediately due and payable, notwithstanding anything contained in this Agreement or in any of the other Financing Documents to the contrary, without presentment, demand, protest, notice of protest or of dishonor, or other notice of any kind, all of which the Borrowers hereby waive. THE OCCURRENCE OR NON-OCCURRENCE OF A DEFAULT OR AN EVENT OF DEFAULT UNDER THIS AGREEMENT OR UNDER ANY OF THE OTHER FINANCING DOCUMENTS SHALL IN NO WAY AFFECT OR CONDITION THE LENDER'S RIGHT TO IMMEDIATE PAYMENT AT ANY TIME OF ANY OF THE OBLIGATIONS WHICH ARE PAYABLE ON DEMAND REGARDLESS OF WHETHER OR NOT A DEFAULT OR AN EVENT OF DEFAULT HAS OCCURRED. 7.2.2 Further Advances. ----------------- The Lender may from time to time without notice to the Borrowers suspend, terminate or limit any further loans or other extensions of credit under this Agreement and under any of the other Financing Documents. Further, upon the occurrence of an Event of Default or Default specified in Sections 7.1.5 (Receiver; Bankruptcy) or 7.1.6 (Involuntary Bankruptcy, etc.) above, the Revolving Credit Commitment and any agreement in any of the Financing Documents to provide additional credit shall immediately and automatically terminate and the unpaid principal amount of the Notes (with accrued interest thereon) and all other Obligations then outstanding, shall immediately become due and payable without further action of any kind and without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrowers. 7.2.3 Uniform Commercial Code. ------------------------ The Lender shall have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code and other applicable Laws. Upon demand by the Lender, the Borrowers shall assemble the Collateral and make it available to the Lender, at a place designated by the Lender. The Lender or its agents may without notice from time to time 74 enter upon the Borrowers' premises to take possession of the Collateral, to remove it, to render it unusable, to process it or otherwise prepare it for sale, or to sell or otherwise dispose of it. Any written notice of the sale, disposition or other intended action by the Lender with respect to the Collateral which is sent by regular mail, postage prepaid, to the Borrowers at the address set forth in ARTICLE 8 of this Agreement, or such other address of the Borrowers which may from time to time be shown on the Lender's records, at least ten (10) days prior to such sale, disposition or other action, shall constitute commercially reasonable notice to the Borrowers. The Lender may alternatively or additionally give such notice in any other commercially reasonable manner. Nothing in this Agreement shall require the Lender to give any notice not required by applicable Laws. If any consent, approval, or authorization of any state, municipal or other governmental department, agency or authority or of any person, or any person, corporation, partnership or other entity having any interest therein, should be necessary to effectuate any sale or other disposition of the Collateral, the Borrowers agree to execute all such applications and other instruments, and to take all other action, as may be required in connection with securing any such consent, approval or authorization. The Borrowers recognize that the Lender may be unable to effect a public sale of all or a part of the Collateral consisting of Securities by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and other applicable federal and state Laws. The Lender may, therefore, in its discretion, take such steps as it may deem appropriate to comply with such Laws and may, for example, at any sale of the Collateral consisting of securities restrict the prospective bidders or purchasers as to their number, nature of business and investment intention, including, without limitation, a requirement that the Persons making such purchases represent and agree to the satisfaction of the Lender that they are purchasing such securities for their account, for investment, and not with a view to the distribution or resale of any thereof. The Borrowers covenant and agree to do or cause to be done promptly all such acts and things as the Lender may request from time to time and as may be necessary to offer and/or sell the securities or any part thereof in a manner which is valid and binding and in conformance with all applicable Laws. Upon any such sale or disposition, the Lender shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral consisting of securities so sold. 7.2.4 Specific Rights With Regard to Collateral. ------------------------------------------ In addition to all other rights and remedies provided hereunder or as shall exist at law or in equity from time to time, the Lender may (but shall be under no obligation to), without notice to the Borrowers, and each Borrower hereby irrevocably appoints the Lender as the Borrower's attorney-in-fact, with power of substitution, in the name of the Lender or in the name of the Borrower or otherwise, for the use and benefit of the Lender, but at the cost and expense of the Borrowers and without notice to the Borrowers: (a) request any account debtor obligated on any of the Accounts to make payments thereon directly to the Lender, with the Lender taking control of the cash and non-cash proceeds thereof; 75 (b) compromise, extend or renew any of the Collateral or deal with the same as it may deem advisable; (c) make exchanges, substitutions or surrenders of all or any part of the Collateral; (d) copy, transcribe, or remove from any place of business of the Borrowers or any Subsidiary all books, records, ledger sheets, correspondence, invoices and documents, relating to or evidencing any of the Collateral or without cost or expense to the Lender, make such use of the Borrowers' or any Subsidiary's place(s) of business as may be reasonably necessary to administer, control and collect the Collateral; (e) repair, alter or supply goods if necessary to fulfill in whole or in part the purchase order of any account debtor; (f) demand, collect, receipt for and give renewals, extensions, discharges and releases of any of the Collateral; (g) institute and prosecute legal and equitable proceedings to enforce collection of, or realize upon, any of the Collateral; (h) settle, renew, extend, compromise, compound, exchange or adjust claims in respect of any of the Collateral or any legal proceedings brought in respect thereof; (i) endorse or sign the name of the Borrowers upon any items of payment, certificates of title, instruments, securities, stock powers, documents, documents of title, financing statements, assignments, notices, or other writing relating to or part of the Collateral and on any Proof of Claim in Bankruptcy against an account debtor; (j) notify the Post Office authorities to change the address for the delivery of mail to the Borrowers to such address or Post Office Box as the Lender may designate and receive and open all mail addressed to the Borrowers; and (k) take any other action necessary or beneficial to realize upon or dispose of the Collateral or to carry out the terms of this Agreement. 7.2.5 Application of Proceeds. ------------------------ Any proceeds of sale or other disposition of the Collateral will be applied by the Lender to the payment of the Enforcement Costs, and any balance of such proceeds will be applied by the Lender to the payment of the balance of the Obligations in such order and manner of application as the Lender may from time to time in its sole and absolute discretion determine. If the sale or other disposition of the Collateral fails to fully satisfy the Obligations, the Borrowers shall remain liable to the Lender for any deficiency. 76 7.2.6 Performance by Lender. ---------------------- If the Borrowers shall fail to pay the Obligations or otherwise fail to perform, observe or comply with any of the conditions, covenants, terms, stipulations or agreements contained in this Agreement or any of the other Financing Documents, the Lender without notice to or demand upon the Borrowers and without waiving or releasing any of the Obligations or any Default or Event of Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of the Borrowers, and may enter upon the premises of the Borrowers for that purpose and take all such action thereon as the Lender may consider necessary or appropriate for such purpose and each Borrower hereby irrevocably appoints the Lender as the Borrower's attorney-in-fact to do so, with power of substitution, in the name of the Lender or in the name of the Borrower or otherwise, for the use and benefit of the Lender, but at the cost and expense of the Borrowers and without notice to the Borrowers. All sums so paid or advanced by the Lender together with interest thereon from the date of payment, advance or incurring until paid in full at the Post-Default Rate and all costs and expenses, shall be deemed part of the Enforcement Costs, shall be paid by the Borrowers to the Lender on demand, and shall constitute and become a part of the Obligations. 7.2.7 Other Remedies. --------------- The Lender may from time to time proceed to protect or enforce its rights by an action or actions at law or in equity or by any other appropriate proceeding, whether for the specific performance of any of the covenants contained in this Agreement or in any of the other Financing Documents, or for an injunction against the violation of any of the terms of this Agreement or any of the other Financing Documents, or in aid of the exercise or execution of any right, remedy or power granted in this Agreement, the Financing Documents, and/or applicable Laws. The Lender is authorized to offset and apply to all or any part of the Obligations all moneys, credits and other property of any nature whatsoever of the Borrowers now or at any time hereafter in the possession of, in transit to or from, under the control or custody of, or on deposit with, the Lender. ARTICLE VIII MISCELLANEOUS Section 8.1 Notices. -------- All notices, requests and demands to or upon the parties to this Agreement shall be in writing and shall be deemed to have been given or made when delivered by hand on a Business Day, or two (2) days after the date when deposited in the mail, postage prepaid by registered or certified mail, return receipt requested, or when sent by overnight courier, on the Business Day next following the day on which the notice is delivered to such overnight courier, addressed as follows: Borrowers: Coyne International Enterprises Corp. 140 Cortland Avenue Syracuse, New York 13202 77 Attention: Donald F. X. Keegan Chief Financial Officer with a copy to: O'Hara, Hanlon, Knych & Pobedinsky, LLP One Park Place Syracuse, New York 13202 Attention: Alexander Pobedinsky, Esq. Lender: NationsBank, N.A. 100 South Charles Street Baltimore, Maryland 21201 Attention: Stephen V. Rieger with a copy to: Frederick W. Runge, Jr., Esquire Miles & Stockbridge P.C. 10 Light Street Baltimore, Maryland 21202 By written notice, each party to this Agreement may change the address to which notice is given to that party, provided that such changed notice shall include a street address to which notices may be delivered by overnight courier in the ordinary course on any Business Day. Section 8.2 Amendments; Waivers. -------------------- This Agreement and the other Financing Documents may not be amended, modified, or changed in any respect except by an agreement in writing signed by the Lender and the Borrowers. No waiver of any provision of this Agreement or of any of the other Financing Documents, nor consent to any departure by the Borrowers therefrom, shall in any event be effective unless the same shall be in writing. No course of dealing between the Borrowers and the Lender and no act or failure to act from time to time on the part of the Lender shall constitute a waiver, amendment or modification of any provision of this Agreement or any of the other Financing Documents or any right or remedy under this Agreement, under any of the other Financing Documents or under applicable Laws. Without implying any limitation on the foregoing: (a) Any waiver or consent shall be effective only in the specific instance, for the terms and purpose for which given, subject to such conditions as the Lender may specify in any such instrument. (b) No waiver of any Default or Event of Default shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereto. (c) No notice to or demand on the Borrowers in any case shall entitle the Borrowers to any other or further notice or demand in the same, similar or other circumstance. 78 (d) No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant or agreement of this Agreement or of any of the other Financing Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver, amendment or modification of any such term, condition, covenant or agreement or of any such breach or preclude the Lender from exercising any such right, power or remedy at any time or times. (e) By accepting payment after the due date of any amount payable under this Agreement or under any of the other Financing Documents, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under this Agreement or under any of the other Financing Documents, or to declare a default for failure to effect such prompt payment of any such other amount. Section 8.3 Cumulative Remedies. -------------------- The rights, powers and remedies provided in this Agreement and in the other Financing Documents are cumulative, may be exercised concurrently or separately, may be exercised from time to time and in such order as the Lender shall determine and are in addition to, and not exclusive of, rights, powers and remedies provided by existing or future applicable Laws. In order to entitle the Lender to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly required in this Agreement. Without limiting the generality of the foregoing, the Lender may: (a) proceed against any one or more of the Borrowers, with or without proceeding against any one or more of the other Borrowers or any other Person who may be liable for all or any part of the Obligations; (b) proceed against any one or more of the Borrowers with or without proceeding under any of the other Financing Documents or against any Collateral or other collateral and security for all or any part of the Obligations; (c) without reducing or impairing the obligation of the Borrowers and without notice, release or compromise with any Borrower, guarantor or other Person liable for all or any part of the Obligations under the Financing Documents or otherwise; (d) without reducing or impairing the obligations of the Borrowers and without notice thereof: (i) fail to perfect the Lien in any or all Collateral or to release any or all the Collateral or to accept substitute Collateral, (ii) approve the making of advances under the Revolving Loan under this Agreement, (iii) waive any provision of this Agreement or the other Financing Documents, (iv) exercise or fail to exercise rights of set-off or other rights, or (v) accept partial payments or extend from time to time the maturity of all or any part of the Obligations. 79 Section 8.4 Severability. ------------- In case one or more provisions, or part thereof, contained in this Agreement or in the other Financing Documents shall be invalid, illegal or unenforceable in any respect under any Law, then without need for any further agreement, notice or action: (a) the validity, legality and enforceability of the remaining provisions shall remain effective and binding on the parties thereto and shall not be affected or impaired thereby; (b) the obligation to be fulfilled shall be reduced to the limit of such validity; (c) if such provision or part thereof pertains to repayment of the Obligations, then, at the sole and absolute discretion of the Lender, all of the Obligations of any one or more of the Borrowers to the Lender shall become immediately due and payable; and (d) if affected provision or part thereof does not pertain to repayment of the Obligations, but operates or would prospectively operate to invalidate this Agreement in whole or in part, then such provision or part thereof only shall be void, and the remainder of this Agreement shall remain operative and in full force and effect. Section 8.5 Assignments by Lender. ---------------------- The Lender may, without notice to, or consent of, the Borrowers, sell, assign or transfer to or participate with any Person or Persons all or any part of the Obligations, and each such Person or Persons shall have the right to enforce the provisions of this Agreement and any of the other Financing Documents as fully as the Lender, provided that the Lender shall continue to have the unimpaired right to enforce the provisions of this Agreement and any of the other Financing Documents as to so much of the Obligations that the Lender has not sold, assigned or transferred. In connection with the foregoing, the Lender shall have the right to disclose to any such actual or potential purchaser, assignee, transferee or participant all financial records, information, reports, financial statements and documents obtained in connection with this Agreement and any of the other Financing Documents or otherwise. In the event of an assignment by the Lender, the Borrowers and the Lender's assignee shall execute and deliver a written assignment agreement in a form acceptable to the Lender, which shall set forth the respective rights and obligations of the Lender and its assignee and shall constitute an amendment to this Agreement to the extent necessary to reflect such assignment. Upon the request of the Lender made in accordance with this Section, the Borrowers shall issue new Notes to the Lender and its assignee reflecting such assignment, in exchange for the Notes held by the Lender, and shall execute such additional documents as the Lender may require to reflect the respective interests of the Lender and its assignee in the Financing Documents and the Collateral. 80 Section 8.6 Successors and Assigns. ---------------------- This Agreement and all other Financing Documents shall be binding upon and inure to the benefit of the Borrowers and the Lender and their respective successors and assigns, except that the Borrowers shall not have the right to assign their rights hereunder or any interest herein without the prior written consent of the Lender. Section 8.7 Continuing Agreements. --------------------- All covenants, agreements, representations and warranties made by the Borrowers in this Agreement, in any of the other Financing Documents, and in any certificate delivered pursuant hereto or thereto shall survive the making by the Lender of the Loans and the execution and delivery of the Notes, shall be binding upon the Borrowers regardless of how long before or after the date hereof any of the Obligations were or are incurred, and shall continue in full force and effect so long as any of the Obligations are outstanding and unpaid. From time to time upon the Lender's request, and as a condition of the release of any one or more of the Security Documents, the Borrowers and other Persons obligated with respect to the Obligations shall provide the Lender with such acknowledgments and agreements as the Lender may require to the effect that there exists no defenses, rights of setoff or recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against the Lender, its agents and others, or to the extent there are, the same are waived and released. Section 8.8 Enforcement Costs. ----------------- The Borrowers agree to pay to the Lender on demand all reasonable Enforcement Costs, together with interest thereon from the date incurred or advanced until paid in full at a per annum rate of interest equal at all times to the Post-Default Rate. Enforcement Costs shall be immediately due and payable at the time advanced or incurred, whichever is earlier. Without implying any limitation on the foregoing, the Borrowers agree, as part of the Enforcement Costs, to pay upon demand any and all stamp and other Taxes and fees payable or determined to be payable in connection with the execution and delivery of this Agreement and the other Financing Documents and to save the Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay any Taxes or fees referred to in this Section. The provisions of this Section shall survive the execution and delivery of this Agreement, the repayment of the other Obligations and shall survive the termination of this Agreement. Section 8.9 Applicable Law; Jurisdiction. ---------------------------- 8.9.1 Governing Law. ------------- As a material inducement to the Lender to enter into this Agreement, the Borrowers acknowledge and agree that the Financing Documents, including, this Agreement, shall be governed by the Laws of the State, as if each of the Financing Documents and this Agreement had each been executed, delivered, administered and performed solely within the State even though for the convenience and at the request of the Borrowers, one or more of the Financing Documents may be executed elsewhere. The Lender acknowledges, however, that 81 remedies under certain of the Financing Documents which relate to property outside the State may be subject to the laws of the state in which the property is located. 8.9.2 Jurisdiction. ------------- Each of the Borrowers irrevocably submits to the jurisdiction of any state or federal court sitting in the State over any suit, action or proceeding arising out of or relating to this Agreement or any of the other Financing Documents. Each of the Borrowers irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon the applicable Borrower and may be enforced in any court in which the Borrower is subject to jurisdiction, by a suit upon such judgment, provided that service of process is effected upon the applicable Borrower in one of the manners specified in this Section or as otherwise permitted by applicable Laws. 8.9.3 Agent for Service. ------------------ Each of the Borrowers hereby irrevocably designates and appoints CT Corporation System, 300 East Lombard Street, Baltimore, Maryland 21202, as the Borrower's authorized agent to receive on the Borrower's behalf service of any and all process that may be served in any suit, action or proceeding of the nature referred to in this Section in any state or federal court sitting in the State. If such agent shall cease so to act, each Borrower shall irrevocably designate and appoint without delay another such agent in the State satisfactory to the Lender and shall promptly deliver to the Lender evidence in writing of such other agent's acceptance of such appointment and its agreement that such appointment shall be irrevocable. 8.9.4 Service of Process. ------------------- Each of the Borrowers hereby consents to process being served in any suit, action or proceeding of the nature referred to in this Section by (i) the mailing of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to the Borrower at the address designated for notice in or pursuant to Section 8.1 hereof, and (ii) serving a copy thereof upon the agent, if any, designated and appointed by the Borrowers as the Borrower's agent for service of process by or pursuant to this Section. Each of the Borrowers irrevocably agrees that such service (i) shall be deemed in every respect effective service of process upon the Borrowers in any such suit, action or proceeding, and (ii) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon the Borrowers. Nothing in this Section shall affect the right of the Lender to serve process in any manner otherwise permitted by law or limit the right of the Lender otherwise to bring proceedings against any one or more of the Borrowers in the courts of any jurisdiction or jurisdictions. 82 Section 8.10 Duplicate Originals and Counterparts. ------------------------------------ This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Section 8.11 Headings. -------- The headings in this Agreement are included herein for convenience only, shall not constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or construction of any of the provisions hereof. Section 8.12 No Agency. --------- Nothing herein contained shall be construed to constitute the Borrowers as the Lender's agent for any purpose whatsoever or to permit the Borrowers to pledge any of the Lender's credit. The Lender shall not be responsible nor liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof. The Lender shall not, by anything herein or in any of the Financing Documents or otherwise, assume any of the Borrowers' obligations under any contract or agreement assigned to the Lender, and the Lender shall not be responsible in any way for the performance by the Borrowers of any of the terms and conditions thereof. Section 8.13 Date of Payment. --------------- Should the principal of or interest on the Notes become due and payable on other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and in the case of principal, interest shall be payable thereon at the rate per annum specified in the Notes during such extension. Section 8.14 Entire Agreement. ---------------- This Agreement is intended by the Lender and the Borrowers to be a complete, exclusive and final expression of the agreements contained herein. Neither the Lender nor the Borrowers shall hereafter have any rights under any prior agreements pertaining to the matters addressed by this Agreement but shall look solely to this Agreement for definition and determination of all of their respective rights, liabilities and responsibilities under this Agreement. Section 8.15 Waiver of Trial by Jury. ----------------------- THE BORROWERS AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWERS AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL 83 PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. This waiver is knowingly, willingly and voluntarily made by the Borrowers and the Lender, and the Borrowers and the Lender hereby represent that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Borrowers and the Lender further represent that they have been represented in the signing of this Agreement and in the making of this waiver by independent legal counsel, selected of their own free will, and that they have had the opportunity to discuss this waiver with counsel. Section 8.16 Liability of the Lender. ----------------------- The Borrowers hereby agree that the Lender shall not be chargeable for any negligence, mistake, act or omission, except the gross negligence or willful misconduct, of any accountant, examiner, agency or attorney employed by the Lender in making examinations, investigations or collections, or otherwise in perfecting, maintaining, protecting or realizing upon any lien or security interest or any other interest in the Collateral or other security for the Obligations. By inspecting the Collateral or any other properties of the Borrowers or by accepting or approving anything required to be observed, performed or fulfilled by the Borrowers or to be given to the Lender pursuant to this Agreement or any of the other Financing Documents, the Lender shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by the Lender. Section 8.17 Confidentiality. --------------- The Lender agrees to take reasonable precautions to maintain the confidentiality of information designated in writing as confidential and provided to it by any Borrower in connection with this Agreement; provided, -------- however, that the Lender may disclose such information (i) at the request of any - ------- bank regulatory authority or other Governmental Authority or in connection with an examination of such Lender by any such Governmental Authority, (ii) pursuant to subpoena or other court process, (iii) to the extent the Lender is required (or believes in good faith that it is required) to do so in accordance with any applicable Law, (iv) to the Lender's independent auditors and other professional advisors, (v) in connection with the enforcement of any of its rights under or under applicable Laws in connection with any Financing Document or any of the Obligations, (vi) in connection with credit inquiries from the Borrower's trade creditors, and (vii) to any actual or potential participant, assignee or other transferee, so long as, in the case of this clause (vii), such actual or potential participant, assignee or transferee agrees to comply with the provisions of this Section. 84 IN WITNESS WHEREOF, each of the parties hereto have executed and delivered this Agreement under their respective seals as of the day and year first written above. WITNESS OR ATTEST: NATIONSBANK, N.A. /s/ Carole Furner By: /s/ Stephen V. Rieger (Seal) - --------------------------- ----------------------------------- Stephen V. Rieger Vice President WITNESS OR ATTEST: COYNE INTERNATIONAL ENTERPRISES CORP. OHIO GARMENT RENTAL, INC. BLUE RIDGE TEXTILE MANUFACTURING, INC. MIDWAY-CTS BUFFALO, LTD. CLEAN TOWEL SERVICE, INC. /s/ Thomas E. Krebbecks By: /s/ Donald F. X. Keegan (Seal) - --------------------------- ---------------------------------- Donald F. X. Keegan Vice President and Chief Financial Officer for each 85 LIST OF EXHIBITS* A-1. Revolving Credit Note A-2. Acquisition Note A-3. Acquisition Loan Installment Payment Schedule A-4. Capital Expenditure Line Note A-5 Capital Expenditure Line Installment Payment Schedule B. Wire Transfer Procedures * Exhibits A-1, A-2 and A-4 of this Agreement are filed as Exhibits 10.2, 10.4 and 10.3, respectively of this Registration Statement. Exhibit B has been omitted. Exhibit A-3 to Financing And Security Agreement ----------------------------------------------- ACQUISITION LOAN INSTALLMENT PAYMENT SCHEDULE --------------------------------------------- THIS ACQUISITION LOAN INSTALLMENT PAYMENT SCHEDULE is furnished as of ______________, ______, by COYNE INTERNATIONAL ENTERPRISES CORP., a corporation organized under the laws of the State of New York ("Coyne"), to NATIONSBANK, N.A., a national banking association (the "Lender"), pursuant to Section 2.3.3 of the Amended and Restated Financing and Security Agreement dated June __, 1998 (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the "Financing Agreement"), by and among Coyne, the parties identified as the "Borrowers" in the Financing Agreement, and the Lender. I, ______________________, hereby certify that I am the __________________ of Coyne and am a Responsible Officer (as that term is defined in the Financing Agreement) authorized to certify to the Lender on behalf of the Borrowers as follows: 1. This Schedule is given to induce the Lenders to make an advance to _________________________ in the amount of $___________________ under the Acquisition Loan (as that term is defined in the Financing Agreement). 2. Immediately after the advance described in paragraph 1, the aggregate outstanding principal balance of the Acquisition Loan shall be $___________________. 3. The aggregate of all installment payments of principal due and payable after the advance described in paragraph 1 on all Acquisition Loan advances shall be $_____________ quarterly commencing _______________, _______ and on the first day of each June, September, December and March after the date of such advance. IN WITNESS WHEREOF, Coyne has executed and delivered this Acquisition Loan Payment Schedule on behalf of the Borrowers under seal as of the day and year first written above. WITNESS: COYNE INTERNATIONAL ENTERPRISES CORP. ________________________ By:____________________________(Seal) Thomas M. Coyne President Exhibit A-5 to Financing And Security Agreement ----------------------------------------------- CAPITAL EXPENDITURE LINE INSTALLMENT PAYMENT SCHEDULE THIS CAPITAL EXPENDITURE LINE INSTALLMENT PAYMENT SCHEDULE is furnished as of ______________, 200_, by COYNE INTERNATIONAL ENTERPRISES CORP., a corporation organized under the laws of the State of New York ("Coyne"), to NATIONSBANK, N.A., a national banking association (the "Lender"), pursuant to Section 2.4.4 of the Amended and Restated Financing and Security Agreement dated June __, 1998 (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the "Financing Agreement"), by and among Coyne, the parties identified as the "Borrowers" in the Financing Agreement and the Lender. I, ______________________, hereby certify that I am the __________________ of Coyne and am a Responsible Officer (as that term is defined in the Financing Agreement) authorized to certify to the Lender on behalf of the Borrowers as follows: 1. This Schedule is given to induce the Lenders to make an advance to _________________________ in the amount of $___________________ under the Capital Expenditure Line (as that term is defined in the Financing Agreement). 2. Immediately after the advance described in paragraph 1, the aggregate outstanding principal balance of the Capital Expenditure Line shall be $___________________. 3. The aggregate of all installment payments of principal due and payable after the advance described in paragraph 1 on all Capital Expenditure Line advances shall be $_____________ quarterly commencing _______________, _______ and on the first day of each June, September, December and March after the date of such advance. IN WITNESS WHEREOF, Coyne has executed and delivered this Capital Expenditure Line Payment Schedule on behalf of the Borrowers under seal as of the day and year first written above. WITNESS: COYNE INTERNATIONAL ENTERPRISES CORP. ________________________ By:____________________________(Seal) Thomas M. Coyne President LIST OF SCHEDULES* Schedule 2.5.1 Applicable Interest Rate Provisions -------------- Schedule 4.1.6 Defaults -------------- Schedule 4.1.10 Litigation --------------- Schedule 4.1.13 Other Indebtedness for Borrowed Money --------------- Schedule 4.1.19 Hazardous Materials --------------- Schedule 4.1.20 Other Permitted Liens --------------- * Schedules 4.1.6, 4.1.10, 4.1.13, 4.1.19 and 4.1.20 have been omitted. Upon request, the Company will provide such Schedules to the Commission. SCHEDULE 2.5.1 APPLICABLE INTEREST RATE PROVISIONS --------------
- ------------------------------------------------------------------------- Applicable Applicable Margin Margin for for Base Rate Loans Credit Facility Eurodollar Loans (basis points) (basis points) - ------------------------------------------------------------------------- Revolving Loan 225 37.5 - ------------------------------------------------------------------------- apital Expenditure Line 250 62.5 - ------------------------------------------------------------------------- Acquisition Loan 250 62.5 - -------------------------------------------------------------------------
2 EX-10.2 16 REVOLING CREDIT NOTE EXHIBIT 10.2 REVOLVING CREDIT NOTE --------------------- $25,000,000 Baltimore, Maryland June 26, 1998 FOR VALUE RECEIVED, COYNE INTERNATIONAL ENTERPRISES CORP., a corporation organized under the laws of the State of New York, BLUE RIDGE TEXTILE MANUFACTURING, INC., a corporation organized under the laws of the State of Georgia, OHIO GARMENT RENTAL, INC., a corporation organized under the laws of the State of Ohio, MIDWAY-CTS BUFFALO, LTD., a corporation organized under the laws of the State of New York, and CLEAN TOWEL SERVICE, INC., a corporation organized under the laws of the State of Georgia (each of the foregoing corporations, a "Borrower" and collectively, the "Borrowers"), jointly and severally, promise to pay to the order of NATIONSBANK, N.A., a national banking association (the "Lender") TWENTY-FIVE MILLION DOLLARS ($25,000,000) (the "Principal Sum"), or so much thereof as has been or may be advanced or readvanced to or for the account of the Borrowers pursuant to the terms and conditions of the Financing Agreement (as hereinafter defined), together with interest thereon at the rate or rates hereinafter provided, in accordance with the following: 1. Interest. -------- Commencing as of the date hereof and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the Applicable Interest Rate or the Post-Default Rate in effect from time to time for the Revolving Loan. The Applicable Interest Rate shall be determined in the manner provided in the Financing Agreement. 2. Payments and Maturity. --------------------- The unpaid Principal Sum, together with interest thereon at the rate or rates provided above, shall be payable as follows: (a) Interest only on the unpaid Principal Sum shall be due and payable at the times provided in Section 2.5.5 of the Financing Agreement; and (b) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on the Revolving Credit Expiration Date. The fact that the balance hereunder may be reduced to zero from time to time pursuant to the Financing Agreement will not affect the continuing validity of this Note or the Financing Agreement, and the balance may be increased to the Principal Sum after any such reduction to zero. 3. Default Interest. ---------------- During the continuation of an Event of Default (as hereinafter defined), the unpaid Principal Sum shall bear interest thereafter at the Post-Default Rate until such Event of Default is cured. 4. Late Charges. ------------ If the Borrowers shall fail to make any payment under the terms of this Note within ten (10) days after the date such payment is due, the Borrowers shall pay to the Lender on demand a late charge equal to five percent (5%) of such payment. 5. Application and Place of Payments. --------------------------------- All payments made on account of this Note shall be applied first to the payment of any prepayment fee then due hereunder, second to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid Principal Sum, with application first made to all principal installments then due hereunder, next to the outstanding principal balance due and owing at maturity and thereafter to the principal payments due in the inverse order of maturities. All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds during regular business hours of the Lender at its principal office in Baltimore, Maryland or at such other times and places as the Lender may at any time and from time to time designate in writing to the Borrowers. 6. Prepayment. ---------- The Borrowers may prepay (and reborrow) the Principal Sum at the times and in the manner provided in the Financing Agreement. 7. Financing Agreement and Other Financing Documents. ------------------------------------------------- This Note is the "Revolving Credit Note" described in a Financing and Security Agreement of even date herewith by and between the Borrowers and the Lender (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the "Financing Agreement"). All terms used in this Note which are not otherwise defined herein shall have the meanings set forth in the Financing Agreement. The indebtedness evidenced by this Note is included within the meaning of the term "Obligations" as defined in the Financing Agreement. The term "Financing Documents" as used in this Note shall mean collectively this Note, the Financing Agreement and any other instrument, agreement, or document previously, simultaneously, or hereafter executed and delivered by the Borrowers and/or any other person, singularly or jointly with any other person, evidencing, securing, guaranteeing, or in connection with the Principal Sum, this Note and/or the Financing Agreement. 8. Security. -------- This Note is secured as provided in the Financing Agreement. 9. Events of Default. ----------------- The occurrence of any one or more of the following events shall constitute an event of default (individually, an "Event of Default" and collectively, the "Events of Default") under the terms of this Note: (a) The failure of the Borrowers to pay to the Lender when due any and all amounts payable by the Borrowers to the Lender under the terms of this Note; or -2- (b) The occurrence of an Event of Default under the Financing Agreement. 10. Remedies. -------- Upon the occurrence of an Event of Default, at the option of the Lender, all amounts payable by the Borrowers to the Lender under the terms of this Note shall immediately become due and payable by the Borrowers to the Lender without notice to the Borrowers or any other person, and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note, any of the other Financing Documents and all applicable laws. The Borrowers and all endorsers, guarantors, and other parties who may now or in the future be primarily or secondarily liable for the payment of the indebtedness evidenced by this Note hereby severally waive presentment, protest and demand, notice of protest, notice of demand and of dishonor and non-payment of this Note and expressly agree that this Note or any payment hereunder may be extended from time to time without in any way affecting the liability of the Borrowers, guarantors and endorsers. 11. Expenses. -------- The Borrowers, jointly and severally, promise to pay to the Lender on demand by the Lender all costs and expenses incurred by the Lender in connection with the collection and enforcement of this Note, including, without limitation, reasonable attorneys' fees and expenses and all court costs. 12. Notices. ------- Any notice, request, or demand to or upon the Borrowers or the Lender shall be deemed to have been properly given or made when delivered in accordance with Section 8.1 of the Financing Agreement. 13. Miscellaneous. ------------- Each right, power, and remedy of the Lender as provided for in this Note or any of the other Financing Documents, or now or hereafter existing under any applicable law or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Note or any of the other Financing Documents or now or hereafter existing under any applicable law, and the exercise or beginning of the exercise by the Lender of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Lender of any or all such other rights, powers, or remedies. No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant, or agreement of this Note or any of the other Financing Documents, or to exercise any right, power, or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant, or agreement or of any such breach, or preclude the Lender from exercising any such right, power, or remedy at a later time or times. By accepting payment after the due date of any amount payable under the terms of this Note, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under the terms of this Note or to declare an Event of Default for the failure to effect such prompt payment of any such other amount. No course of dealing or conduct shall be effective to amend, modify, waive, release, or change any provisions of this Note. -3- 14. Partial Invalidity. ------------------ In the event any provision of this Note (or any part of any provision) is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note; but this Note shall be construed as if such invalid, illegal, or unenforceable provision (or part thereof) had not been contained in this Note, but only to the extent it is invalid, illegal, or unenforceable. 15. Captions. -------- The captions herein set forth are for convenience only and shall not be deemed to define, limit, or describe the scope or intent of this Note. 16. Applicable Law. -------------- The Borrowers acknowledge and agrees that this Note shall be governed by the laws of the State of Maryland, even though for the convenience and at the request of the Borrowers, this Note may be executed elsewhere. 17. Consent to Jurisdiction. ----------------------- Each Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the State of Maryland over any suit, action, or proceeding arising out of or relating to this Note or any of the other Financing Documents. Each Borrower irrevocably waives, to the fullest extent permitted by law, any objection that such Borrower may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon such Borrower and may be enforced in any court in which such Borrower is subject to jurisdiction by a suit upon such judgment, provided that service of process is effected upon such Borrower as provided in this Note or as otherwise permitted by applicable law. 18. Service of Process. ------------------ Each Borrower hereby irrevocably designates and appoints CT Corporation System, 300 East Lombard Street, Baltimore, Maryland, 21202, as such Borrower's authorized agent to receive on such Borrower's behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Note in any state or federal court sitting in the State of Maryland. If such agent shall cease so to act, such Borrower shall irrevocably designate and appoint without delay another such agent in the State of Maryland satisfactory to the Lender and shall promptly deliver to the Lender evidence in writing of such agent's acceptance of such appointment and its agreement that such appointment shall be irrevocable. Each Borrower hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by (a) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to such Borrower and (b) serving a copy thereof upon CT Corporation System, the agent hereinabove designated and appointed by such Borrower as such Borrower's agent for service of process. Each Borrower irrevocably agrees that such service shall be -4- deemed in every respect effective service of process upon such Borrower in any such suit, action or proceeding, and shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon such Borrower. Nothing in this Section shall affect the right of the Lender to serve process in any manner otherwise permitted by law or limit the right of the Lender otherwise to bring proceedings against such Borrower in the courts of any jurisdiction or jurisdictions. 19. WAIVER OF TRIAL BY JURY. ----------------------- EACH OF THE BORROWERS HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWERS, OR EITHER OF THEM, AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWERS, AND THE BORROWERS HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWERS FURTHER REPRESENT THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed under seal by its duly authorized partners/officers as of the date first written above. WITNESS OR ATTEST: COYNE INTERNATIONAL ENTERPRISES CORP. OHIO GARMENT RENTAL, INC. BLUE RIDGE TEXTILE MANUFACTURING, INC. MIDWAY-CTS BUFFALO, LTD. CLEAN TOWEL SERVICE, INC. ____________________________ By: /s/ Donald F. X. Keegan (Seal) ------------------------ Donald F. X. Keegan Vice President and Chief Financial Officer for each -5- EX-10.3 17 CAPITAL EXPENDITURE NOTE EXHIBIT 10.3 CAPITAL EXPENDITURE LINE NOTE ----------------------------- $10,000,000 Baltimore, Maryland June 26, 1998 FOR VALUE RECEIVED, COYNE INTERNATIONAL ENTERPRISES CORP., a corporation organized under the laws of the State of New York, BLUE RIDGE TEXTILE MANUFACTURING, INC., a corporation organized under the laws of the State of Georgia, OHIO GARMENT RENTAL, INC., a corporation organized under the laws of the State of Ohio, MIDWAY-CTS BUFFALO, LTD., a corporation organized under the laws of the State of New York, and CLEAN TOWEL SERVICE, INC., a corporation organized under the laws of the State of Georgia (each of the foregoing corporations, a "Borrower" and collectively, the "Borrowers"), jointly and severally, promise to pay to the order of NATIONSBANK, N.A., a national banking association (the "Lender"), the principal sum of TEN MILLION DOLLARS ($10,000,000) (the "Principal Sum"), or so much thereof as has been or may be advanced or readvanced under the Capital Expenditure Line, to or for the account of the Borrowers pursuant to the terms and conditions of the Financing Agreement (as hereinafter defined), together with interest thereon at the rate or rates hereinafter provided, in accordance with the following: 1. Interest. -------- Commencing as of the date hereof and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the Applicable Interest Rate or the Post-Default Rate in effect from time to time for the Capital Expenditure Line. The Applicable Interest Rate shall be determined in the manner provided in the Financing Agreement. 2. Payments and Maturity. --------------------- The unpaid Principal Sum, together with interest thereon at the rate or rates provided above, shall be payable as follows: (a) Interest only on the unpaid Principal Sum shall be due and payable at the times provided in Section 2.5.5 of the Financing Agreement; and (b) The Borrowers shall pay installments of principal in accordance with the Capital Expenditure Line Installment Payment Schedule at the times and in the manner set forth in Section 2.4.4 of the Financing Agreement; and (c) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on the earlier of the Capital Expenditure Line Maturity Date or the Revolving Credit Termination Date. The fact that the balance hereunder may be reduced to zero from time to time pursuant to the Financing Agreement will not affect the continuing validity of this Note or the Financing Agreement, and the balance may be increased to the Principal Sum after any such reduction to zero. 3. Default Interest. ---------------- During the continuation of an Event of Default, the unpaid Principal Sum shall bear interest at the Post-Default Rate until such Event of Default is cured. 4. Late Charges. If the Borrowers shall fail to make any payment under the terms of this Note within ten (10) days after the date such payment is due, the Borrowers shall pay to the Lender on demand a late charge equal to five percent (5%) of such payment. 5. Application and Place of Payments. --------------------------------- All payments made on account of this Note shall be applied in the manner provided in the Financing Agreement. All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds during regular business hours of the Lender at its principal office in Baltimore, Maryland or at such other times and places as the Lender may at any time and from time to time designate in writing to the Borrower. 6. Prepayment. ---------- The Borrowers may prepay the Principal Sum at the times and in the manner provided in the Financing Agreement. 7. Financing Agreement and Other Financing Documents. ------------------------------------------------- This Note is the "Capital Expenditure Line Note" described in a Financing and Security Agreement of even date herewith by and between the Lender and the Borrowers (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the "Financing Agreement"). All terms used in this Note which are not otherwise defined herein shall have the meaning set forth in the Financing Agreement. The indebtedness evidenced by this Note is included within the meaning of the term "Obligations" as defined in the Financing Agreement. The term "Financing Documents" as used in this Note shall mean collectively this Note, the Financing Agreement and any other instrument, agreement, or document previously, simultaneously, or hereafter executed and delivered by the Borrowers and/or any other person, singularly or jointly with any other person, evidencing, securing, guaranteeing, or in connection with the Principal Sum, this Note and/or the Financing Agreement. 8. Security. -------- This Note is secured as provided in the Financing Agreement. 9. Events of Default. ----------------- The occurrence of any one or more of the following events shall constitute an event of default (individually, an "Event of Default" and collectively, the "Events of Default") under the terms of this Note: -2- (a) The failure of the Borrowers to pay to the Lender when due any and all amounts payable by the Borrowers to the Lender under the terms of this Note; or (b) The occurrence of an Event of Default under the Financing Agreement. 1. Remedies. -------- Upon the occurrence of an Event of Default, at the option of the Lender, all amounts payable by the Borrowers to the Lender under the terms of this Note shall immediately become due and payable by the Borrowers to the Lender without notice to the Borrowers or any other person, and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note, any of the other Financing Documents and all applicable laws. The Borrowers and all endorsers, guarantors, and other parties who may now or in the future be primarily or secondarily liable for the payment of the indebtedness evidenced by this Note hereby severally waive presentment, protest and demand, notice of protest, notice of demand and of dishonor and non-payment of this Note and expressly agree that this Note or any payment hereunder may be extended from time to time without in any way affecting the liability of the Borrowers, guarantors and endorsers. 2. Expenses. -------- The Borrowers, jointly and severally, promise to pay to the Lender on demand by the Lender all costs and expenses incurred by the Lender in connection with the collection and enforcement of this Note, including, without limitation, reasonable attorneys' fees and expenses and all court costs. 3. Notices. ------- Any notice, request, or demand to or upon the Borrowers or the Lender shall be deemed to have been properly given or made when delivered in accordance with Section 8.1 of the Financing Agreement. 4. Miscellaneous. ------------- Each right, power, and remedy of the Lender as provided for in this Note or any of the other Financing Documents, or now or hereafter existing under any applicable law or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Note or any of the other Financing Documents or now or hereafter existing under any applicable law, and the exercise or beginning of the exercise by the Lender of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Lender of any or all such other rights, powers, or remedies. No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant, or agreement of this Note or any of the other Financing Documents, or to exercise any right, power, or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant, or agreement or of any such breach, or preclude the Lender from exercising any such right, power, or remedy at a later time or times. By accepting payment after the due date of any amount payable under the terms of this Note, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under -3- the terms of this Note or to declare an Event of Default for the failure to effect such prompt payment of any such other amount. No course of dealing or conduct shall be effective to amend, modify, waive, release, or change any provisions of this Note. 5. Partial Invalidity. ------------------ In the event any provision of this Note (or any part of any provision) is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note; but this Note shall be construed as if such invalid, illegal, or unenforceable provision (or part thereof) had not been contained in this Note, but only to the extent it is invalid, illegal, or unenforceable. 6. Captions. -------- The captions herein set forth are for convenience only and shall not be deemed to define, limit, or describe the scope or intent of this Note. 7. Applicable Law. -------------- The Borrowers acknowledge and agrees that this Note shall be governed by the laws of the State of Maryland, even though for the convenience and at the request of the Borrowers, this Note may be executed elsewhere. 8. Consent to Jurisdiction. ----------------------- Each Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the State of Maryland over any suit, action, or proceeding arising out of or relating to this Note or any of the other Financing Documents. Each Borrower irrevocably waives, to the fullest extent permitted by law, any objection that such Borrower may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon such Borrower and may be enforced in any court in which such Borrower is subject to jurisdiction by a suit upon such judgment, provided that service of process is effected upon such Borrower as provided in this Note or as otherwise permitted by applicable law. 9. Service of Process. ------------------ Each Borrower hereby irrevocably designates and appoints CT Corporation System, 300 East Lombard Street, Baltimore, Maryland, 21202, as such Borrower's authorized agent to receive on such Borrower's behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Note in any state or federal court sitting in the State of Maryland. If such agent shall cease so to act, such Borrower shall irrevocably designate and appoint without delay another such agent in the State of Maryland satisfactory to the Lender and shall promptly deliver to the Lender evidence in writing of such agent's acceptance of such appointment and its agreement that such appointment shall be irrevocable. -4- Each Borrower hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by (a) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to such Borrower and (b) serving a copy thereof upon CT Corporation System, the agent hereinabove designated and appointed by such Borrower as such Borrower's agent for service of process. Each Borrower irrevocably agrees that such service shall be deemed in every respect effective service of process upon such Borrower in any such suit, action or proceeding, and shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon such Borrower. Nothing in this Section shall affect the right of the Lender to serve process in any manner otherwise permitted by law or limit the right of the Lender otherwise to bring proceedings against such Borrower in the courts of any jurisdiction or jurisdictions. 10. WAIVER OF TRIAL BY JURY. ----------------------- EACH OF THE BORROWERS HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWERS, OR EITHER OF THEM, AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWERS, AND THE BORROWERS HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWERS FURTHER REPRESENT THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. WITNESS OR ATTEST: COYNE INTERNATIONAL ENTERPRISES CORP. OHIO GARMENT RENTAL, INC. BLUE RIDGE TEXTILE MANUFACTURING, INC. MIDWAY-CTS BUFFALO, LTD. CLEAN TOWEL SERVICE, INC. ____________________________ By: /s/ Donald F. X. Keegan (Seal) ------------------------ Donald F. X. Keegan Vice President and Chief Financial Officer for each -5- EX-10.4 18 ACQUISITION LOAN NOTE EXHIBIT 10.4 ACQUISITION LOAN NOTE --------------------- $10,000,000 Baltimore, Maryland June 26, 1998 FOR VALUE RECEIVED, COYNE INTERNATIONAL ENTERPRISES CORP., a corporation organized under the laws of the State of New York, BLUE RIDGE TEXTILE MANUFACTURING, INC., a corporation organized under the laws of the State of Georgia, OHIO GARMENT RENTAL, INC., a corporation organized under the laws of the State of Ohio, MIDWAY-CTS BUFFALO, LTD., a corporation organized under the laws of the State of New York, and CLEAN TOWEL SERVICE, INC., a corporation organized under the laws of the State of Georgia (each of the foregoing corporations, a "Borrower" and collectively, the "Borrowers"), jointly and severally, promise to pay to the order of NATIONSBANK, N.A., a national banking association (the "Lender"), the principal sum of TEN MILLION DOLLARS ($10,000,000) (the "Principal Sum"), or so much thereof as has been or may be advanced or readvanced under the Acquisition Loan, to or for the account of the Borrowers pursuant to the terms and conditions of the Financing Agreement (as hereinafter defined), together with interest thereon at the rate or rates hereinafter provided, in accordance with the following: 1. Interest. -------- Commencing as of the date hereof and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the Applicable Interest Rate or the Post-Default Rate in effect from time to time for the Acquisition Loan. The Applicable Interest Rate shall be determined in the manner provided in the Financing Agreement. 2. Payments and Maturity. --------------------- The unpaid Principal Sum, together with interest thereon at the rate or rates provided above, shall be payable as follows: (a) Interest only on the unpaid Principal Sum shall be due and payable at the times provided in Section 2.5.5 of the Financing Agreement; and (b) The Borrowers shall pay installments of principal in accordance with the Acquisition Loan Installment Payment Schedule at the times and in the manner set forth in Section 2.3.3 of the Financing Agreement; and (c) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on the earlier of the Acquisition Loan Maturity Date or the Revolving Credit Termination Date. The fact that the balance hereunder may be reduced to zero from time to time pursuant to the Financing Agreement will not affect the continuing validity of this Note or the Financing Agreement, and the balance may be increased to the Principal Sum after any such reduction to zero. 3. Default Interest. ---------------- During the continuation of an Event of Default, the unpaid Principal Sum shall bear interest at the Post-Default Rate until such Event of Default is cured. 4. Late Charges. If the Borrowers shall fail to make any payment under the terms of this Note within ten (10) days after the date such payment is due, the Borrowers shall pay to the Lender on demand a late charge equal to five percent (5%) of such payment. 5. Application and Place of Payments. --------------------------------- All payments made on account of this Note shall be applied in the manner provided in the Financing Agreement. All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds during regular business hours of the Lender at its principal office in Baltimore, Maryland or at such other times and places as the Lender may at any time and from time to time designate in writing to the Borrower. 6. Prepayment. ---------- The Borrowers may prepay (and reborrow) the Principal Sum at the times and in the manner provided in the Financing Agreement. 7. Financing Agreement and Other Financing Documents. ------------------------------------------------- This Note is the "Acquisition Loan Note" described in a Financing and Security Agreement of even date herewith by and between the Lender and the Borrowers (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the "Financing Agreement"). All terms used in this Note which are not otherwise defined herein shall have the meaning set forth in the Financing Agreement. The indebtedness evidenced by this Note is included within the meaning of the term "Obligations" as defined in the Financing Agreement. The term "Financing Documents" as used in this Note shall mean collectively this Note, the Financing Agreement and any other instrument, agreement, or document previously, simultaneously, or hereafter executed and delivered by the Borrowers and/or any other person, singularly or jointly with any other person, evidencing, securing, guaranteeing, or in connection with the Principal Sum, this Note and/or the Financing Agreement. 8. Security. -------- This Note is secured as provided in the Financing Agreement. 9. Events of Default. ----------------- The occurrence of any one or more of the following events shall constitute an event of default (individually, an "Event of Default" and collectively, the "Events of Default") under the terms of this Note: -2- (a) The failure of the Borrowers to pay to the Lender when due any and all amounts payable by the Borrowers to the Lender under the terms of this Note; or (b) The occurrence of an Event of Default under the Financing Agreement. 1. Remedies. -------- Upon the occurrence of an Event of Default, at the option of the Lender, all amounts payable by the Borrowers to the Lender under the terms of this Note shall immediately become due and payable by the Borrowers to the Lender without notice to the Borrowers or any other person, and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note, any of the other Financing Documents and all applicable laws. The Borrowers and all endorsers, guarantors, and other parties who may now or in the future be primarily or secondarily liable for the payment of the indebtedness evidenced by this Note hereby severally waive presentment, protest and demand, notice of protest, notice of demand and of dishonor and non-payment of this Note and expressly agree that this Note or any payment hereunder may be extended from time to time without in any way affecting the liability of the Borrowers, guarantors and endorsers. 2. Expenses. -------- The Borrowers, jointly and severally, promise to pay to the Lender on demand by the Lender all costs and expenses incurred by the Lender in connection with the collection and enforcement of this Note, including, without limitation, reasonable attorneys' fees and expenses and all court costs. 3. Notices. ------- Any notice, request, or demand to or upon the Borrowers or the Lender shall be deemed to have been properly given or made when delivered in accordance with Section 8.1 of the Financing Agreement. 4. Miscellaneous. ------------- Each right, power, and remedy of the Lender as provided for in this Note or any of the other Financing Documents, or now or hereafter existing under any applicable law or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Note or any of the other Financing Documents or now or hereafter existing under any applicable law, and the exercise or beginning of the exercise by the Lender of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Lender of any or all such other rights, powers, or remedies. No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant, or agreement of this Note or any of the other Financing Documents, or to exercise any right, power, or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant, or agreement or of any such breach, or preclude the Lender from exercising any such right, power, or remedy at a later time or times. By accepting payment after the due date of any amount payable under the terms of this Note, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under -3- the terms of this Note or to declare an Event of Default for the failure to effect such prompt payment of any such other amount. No course of dealing or conduct shall be effective to amend, modify, waive, release, or change any provisions of this Note. 5. Partial Invalidity. ------------------ In the event any provision of this Note (or any part of any provision) is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note; but this Note shall be construed as if such invalid, illegal, or unenforceable provision (or part thereof) had not been contained in this Note, but only to the extent it is invalid, illegal, or unenforceable. 6. Captions. -------- The captions herein set forth are for convenience only and shall not be deemed to define, limit, or describe the scope or intent of this Note. 7. Applicable Law. -------------- The Borrowers acknowledge and agrees that this Note shall be governed by the laws of the State of Maryland, even though for the convenience and at the request of the Borrowers, this Note may be executed elsewhere. 8. Consent to Jurisdiction. ----------------------- Each Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the State of Maryland over any suit, action, or proceeding arising out of or relating to this Note or any of the other Financing Documents. Each Borrower irrevocably waives, to the fullest extent permitted by law, any objection that such Borrower may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon such Borrower and may be enforced in any court in which such Borrower is subject to jurisdiction by a suit upon such judgment, provided that service of process is effected upon such Borrower as provided in this Note or as otherwise permitted by applicable law. 9. Service of Process. ------------------ Each Borrower hereby irrevocably designates and appoints CT Corporation System, 300 East Lombard Street, Baltimore, Maryland, 21202, as such Borrower's authorized agent to receive on such Borrower's behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Note in any state or federal court sitting in the State of Maryland. If such agent shall cease so to act, such Borrower shall irrevocably designate and appoint without delay another such agent in the State of Maryland satisfactory to the Lender and shall promptly deliver to the Lender evidence in writing of such agent's acceptance of such appointment and its agreement that such appointment shall be irrevocable. -4- Each Borrower hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by (a) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to such Borrower and (b) serving a copy thereof upon CT Corporation System, the agent hereinabove designated and appointed by such Borrower as such Borrower's agent for service of process. Each Borrower irrevocably agrees that such service shall be deemed in every respect effective service of process upon such Borrower in any such suit, action or proceeding, and shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon such Borrower. Nothing in this Section shall affect the right of the Lender to serve process in any manner otherwise permitted by law or limit the right of the Lender otherwise to bring proceedings against such Borrower in the courts of any jurisdiction or jurisdictions. 10. WAIVER OF TRIAL BY JURY. ----------------------- EACH OF THE BORROWERS HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWERS, OR EITHER OF THEM, AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWERS, AND THE BORROWERS HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWERS FURTHER REPRESENT THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. WITNESS OR ATTEST: COYNE INTERNATIONAL ENTERPRISES CORP. OHIO GARMENT RENTAL, INC. BLUE RIDGE TEXTILE MANUFACTURING, INC. MIDWAY-CTS BUFFALO, LTD. CLEAN TOWEL SERVICE, INC. ____________________________ By: /s/ Donald F. X. Keegan ------------------------------ (Seal) Donald F. X. Keegan Vice President and Chief Financial Officer for each -5- EX-10.5 19 ERIE COUNTY DEVELOMENT AUTHORITY LEASE AGREE. EXHIBIT 10.5 ________________________________________________________________________________ ________________________________________________________________________________ ERIE COUNTY INDUSTRIAL DEVELOPMENT AGENCY AND MIDWAY-CTS BUFFALO, LTD. ____________________ LEASE AGREEMENT ____________________ Dated as of December 1, 1994 $2,600,000.00 Erie County Industrial Development Agency Industrial Development Revenue Bond (1994 Midway-CTS Buffalo Project) ________________________________________________________________________________ ________________________________________________________________________________ TABLE OF CONTENTS -----------------
Page ---- ARTICLE I INTRODUCTORY STATEMENTS................................................ 1 Section 1.1. Lease Agreement Terms Defined.......................... 1 Section 1.2. Construction of Words.................................. 1 Section 1.3. Nature and Functions of the Agency..................... 1 Section 1.4. Economic Development Purpose........................... 2 Section 1.5. Agency Resolutions Authorizing this Lease Agreement.... 2 Section 1.6. No Industry Relocation or Abandonment.................. 2 Section 1.7. Agency Bond Financing.................................. 2 Section 1.8. Limitation and Liability of the Agency, the State and the County............................................. 3 Section 1.9. Representations and Warranties of the Lessee........... 3 Section 1.10. Inducement to Bondholder............................... 5 Section 1.11. Agency Litigation...................................... 5 Section 1.12. Prohibition Against Retail Sales....................... 6 ARTICLE II ISSUANCE OF BOND; CONVEYANCE OF PROPERTY; PROJECT COSTS, PERFORMANCE AND COMPLETION......................................................... 6 Section 2.1. Issuance of Bond; Use of Proceeds...................... 6 Section 2.2. Conveyance of Property to the Agency................... 6 Section 2.3. Title Insurance........................................ 7 Section 2.4. Identification of Facility Equipment................... 7 Section 2.5. Responsibilities for Project Performance............... 7 Section 2.6. Payment and Disbursement of Project Costs.............. 8 Section 2.7. Expenses Chargeable to the Lessee...................... 8 Section 2.8. Completion of the Project; Status...................... 9 Section 2.9. Limitation on Sales Tax Exemption...................... 9 ARTICLE III LEASE OF FACILITY AND RENTAL PROVISIONS................................ 10 Section 3.1. Lease of the Facility; Duration........................ 10 Section 3.2. Occupation and Use of the Facility..................... 10
i Section 3.3. Rental Provisions...................................... 11 Section 3.4. Obligations of Lessee Unconditional.................... 12 Section 3.5. Assignment of Agency Rights............................ 12 Section 3.6. Grant of Security Interest to the Agency............... 12 Section 3.7. Assignment of Sublease................................. 13 ARTICLE IV MAINTENANCE, TAXES AND CHARGES, INSURANCE AND INDEMNITY................ 14 Section 4.1. Maintenance, Alterations, Improvements................. 14 Section 4.2. Taxes, Assessments and Charges......................... 16 Section 4.3. Insurance.............................................. 17 Section 4.4. Indemnity.............................................. 20 Section 4.5. Advances by Agency or Bondholder....................... 21 ARTICLE V DAMAGE TO AND CONDEMNATION OF THE FACILITY AND STATUS OF THE PROJECT................................................................ 22 Section 5.1. Damage, Destruction and Condemnation................... 22 Section 5.2. No Warranty of Condition or Suitability................ 24 Section 5.3. Depreciation........................................... 25 Section 5.4. Assignment and Sublease................................ 25 Section 5.5. Maintain Existence..................................... 27 ARTICLE VI MISCELLANEOUS COVENANTS................................................ 27 Section 6.1. Payment of Bondholder's Compensation and Expenses...... 27 Section 6.2. Financial Statements................................... 27 Section 6.3. Certificate of Compliance.............................. 27 Section 6.4. Furnishing of Information.............................. 28 Section 6.5. Right to Cure Agency Defaults.......................... 28 Section 6.6. Retention of Title to the Facility; Grant of Easement; or Other Interest...................................... 28 Section 6.7. Discharge of Liens..................................... 29 Section 6.8. Further Assurances..................................... 30 Section 6.9. Recording and Filing................................... 31 Section 6.10. Notice of Default Under Sublease....................... 31 Section 6.11. Equal Employment Opportunities......................... 32
ii ARTICLE VII EVENTS OF DEFAULT AND REMEDIES........................................ 32 Section 7.1. Events of Default..................................... 32 Section 7.2. Remedies on Default................................... 34 Section 7.3. Waivers............................................... 36 Section 7.4. Effect on Discontinuance of Proceedings............... 37 Section 7.5. Agreement to Pay Attorneys' Fees and Expenses......... 37 ARTICLE VIII REDEMPTION OF BOND; OBLIGATION TO PURCHASE UPON TERMINATION OF LEASE.. 37 Section 8.1. Redemption of the Bond in Whole....................... 37 Section 8.2. Payments Required for Redemption in Whole............. 37 Section 8.3. Obligation to Purchase the Facility................... 38 Section 8.4. Conveyance on Purchase................................ 38 Section 8.5. Amounts Remaining on Deposit with the Bondholder upon Payment of the Bond................................... 39 ARTICLE IX MISCELLANEOUS......................................................... 39 Section 9.1. Force Majeure......................................... 39 Section 9.2. Notices............................................... 40 Section 9.3. Binding Effect........................................ 41 Section 9.4. Severability.......................................... 41 Section 9.5. Amendments............................................ 41 Section 9.6. Execution of Counterparts............................. 41 Section 9.7. Net Lease............................................. 41 Section 9.8. Applicable Law........................................ 41 Section 9.9. Waiver of Trial by Jury............................... 41 Section 9.10. Priority of Rights of Bondholder...................... 42 APPENDIX A Definitions........................................... A-1 APPENDIX B Description of Facility Equipment..................... B-1 APPENDIX C Description of Facility Realty........................ C-1 APPENDIX D Description of Project................................ D-1
iii LEASE AGREEMENT --------------- THIS LEASE AGREEMENT dated as of December 1, 1994, by and between the ERIE COUNTY INDUSTRIAL DEVELOPMENT AGENCY (the "Agency") and MIDWAY-CTS BUFFALO, LTD. (the "Lessee") for the lease by the Agency of certain property to the Lessee. The Agency and the Lessee each accepts or agrees to the following statements or terms. ARTICLE I INTRODUCTORY STATEMENTS ----------------------- Section 1.1. Lease Agreement Terms Defined. Unless the context ----------------------------- otherwise indicates, terms used in this Lease Agreement shall have the meanings set forth in Appendix A attached hereto. Section 1.2. Construction of Words. In this Lease Agreement, unless --------------------- the context requires otherwise: (1) Words of the masculine gender mean and include correlative words of the feminine and neuter genders and words importing the singular number mean and include the plural number and vice versa. (2) Headings of articles and sections and the table of contents are solely for convenience of reference and do not constitute a part of this Lease Agreement or affect its meaning or effect. (3) Wherever under this Lease Agreement any document, notice or other communication is to be delivered to the Agency and some other Person, the provision shall be construed as requiring a separate delivery, notice or communication to the Agency in its own behalf. (4) Words not otherwise defined herein shall have the meanings commonly ascribed to them unless the context otherwise requires. Section 1.3. Nature and Functions of the Agency. The Agency is a ---------------------------------- corporate governmental agency, constituting a public benefit Corporation of the State of New York. The Agency represents that it has been properly organized and exists as such. It has a principal place of business at 424 Main Street, Buffalo, New York. It has 1 been authorized by New York laws (defined in the Lease Agreement as the "Act") to promote, attract, encourage and develop economically sound commerce and industry for the purpose of preventing unemployment and economic deterioration. The Agency may acquire, construct, reconstruct, lease, improve, maintain, equip or furnish and dispose of real property interests and industrial and commercial facilities. The Agency may exercise appropriate financing powers, including the issuance of bonds or other obligations and the securing of such obligations by the granting of mortgages and indentures of mortgage. Section 1.4. Economic Development Purpose. The Lessee represents ---------------------------- that the Project from which this Lease Agreement arises is within the definition of a "project" under the Act. The Project is necessary to provide employment in the County to benefit the economy of the County. To that end, following negotiations, the Agency, by the Inducement Resolution, has induced the Lessee to commence the Project for the purpose of providing employment within the County. The Lessee represents that it has been so induced. The Lessee also represents that the Agency's financing of part of the costs of the Project and this Lease Agreement and any Sublease are reasonably necessary to provide that inducement; and the Agency has so determined, based on that and other representations and warranties of the Lessee and any other statements of, or information provided by, the Lessee. Section 1.5. Agency Resolutions Authorizing this Lease Agreement. --------------------------------------------------- The Agency represents that it has the necessary corporate authority and has, by proper and authorized resolutions, acknowledged its inducement to the Lessee to participate in the Project, and authorized the Project, the granting of this Lease Agreement, and the issuance and sale of its Industrial Development Revenue Bond to finance the Project. Section 1.6. No Industry Relocation or Abandonment. The Lessee ------------------------------------- represents that the completion of the Project will not result in the removal of a facility or plant of the Lessee, the Sublessee or of any other occupant of the Project from one area of the State to another area of the State or in the abandonment of one or more plants or facilities of the Lessee, the Sublessee or other occupant of the Project located within the State, in violation of the Act. Section 1.7. Agency Bond Financing. In order to provide funds for --------------------- the Project, the Agency will issue and sell its Industrial Development Revenue Bond (1994 Midway-CTS Buffalo Project), in the total principal amount of $2,600,000.00. This will be done under the Mortgage Agreement and the Building Loan Contract. The Agency represents that the Bond will mature, bear interest, be redeemable, and be 2 subject to other provisions set forth in the Bond. Section 1.8. Limitation on Liability of the Agency, the State and ---------------------------------------------------- the County. - ---------- (1) The liability of the Agency to the Lessee under this Lease Agreement and to the Bondholder shall be enforceable only out of, and limited to, the Agency's interest under this Lease Agreement and the security interest created by the Mortgage Agreement. There shall be no other recourse against the Agency, its members, directors, officers, agents, servants and employees and persons under the Agency's control or supervision, past, present or future, or against any of the property now or hereafter owned by it or them. (2) All obligations of the Agency under this Lease Agreement shall be deemed to be the obligations of the Agency, and not of any member, director, officer, servant, employee or agent of the Agency or person under the Agency's control or supervision, past, present or future, in his individual capacity. No recourse shall be had against any such persons, or against any natural person executing the Bond, for any claim against the Agency arising under this Lease Agreement or any Sublease, including, without limitation, any claim for the payment of the principal of, redemption premium, if any, or interest on the Bond. (3) Any obligation the Agency may incur for the payment of money in the performance of this Lease Agreement shall not create a debt of the State or of the County, and neither the State nor the County shall be liable on any obligation so incurred. Any such obligation shall be payable solely out of any rents or other proceeds or funds derived from this Lease Agreement. Section 1.9. Representations and Warranties of the Lessee. The -------------------------------------------- Lessee makes the following representations and warranties, among others made elsewhere in this Lease Agreement. (1) The Lessee (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, (b) has the power and authority to own its property and assets and to carry out its present business, and (c) by all requisite action, execute and perform this Lease Agreement. (2) The Lessee is not in violation of any provision of its certificate of incorporation, bylaws, or any other agreement governing its affairs. 3 (3) The Lessee is qualified to do business in every jurisdiction in which such qualification is necessary. (4) The Sublessee is a corporation duly organized, validly existing and in good standing under the laws of the State. (5) The Sublessee is not in violation of any provision of its certificate of incorporation or by-laws. (6) The Sublessee is authorized to (a) own its assets, (b) carry on the business now being conducted by it, and (c) by all requisite corporate and shareholder action, execute and perform the Sublease Agreement. (7) The Sublessee is qualified to do business in every jurisdiction in which such qualification is necessary. (8) This Lease Agreement and the design, acquisition, construction, equipping and operation of the Facility will not (a) violate (i) any law, government regulation or order or court order, (ii) the Lessee's certificate of incorporation, its bylaws or any other agreement governing its affairs or (iii) any agreement binding the Lessee or its property; or (b) result in the imposition of any charge or encumbrance other than Permitted Encumbrances. (9) This Lease Agreement constitutes the legal, valid and binding obligation of the Lessee, enforceable against the Lessee in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors rights generally. (10) There is no proceeding or investigation before or by any federal, state or local court or body pending or, to the knowledge of the Lessee, threatened against or affecting the Lessee or the Sublessee; nor to the knowledge of the Lessee is there any basis for such proceeding or investigation from which an unfavorable decision, ruling or finding would, in any way, adversely affect this Lease Agreement, the transactions contemplated by this Lease Agreement or any other agreement entered into in connection with the Project, or the financial condition of the Lessee or the Sublessee. (11) No expense for supervision by an officer, director or employee of the Lessee or the Sublessee and no expense for work done by any such officer, director 4 or employee in connection with the Project is or will be paid from the Net Proceeds of the sale of the Bond, except to the extent any such officer, director or employee was specially employed or designated by the Lessee for such particular purpose, the expenses do not exceed the actual cost thereof and are treated on the books of the Lessee or the Sublessee as a capital expenditure in conformity with generally accepted accounting principles applied on a consistent basis. (12) The total cost of the Project being funded with the Bond is at least equal to the principal amount of the Bond, which represents only a portion of the total cost to the Lessee. The Lessee will pay or cause to be paid all costs of the Project not paid from the proceeds of the sale of the Bond, as provided in Section 2.7 of this Lease Agreement. Any costs incurred with respect to that part of the Project paid from the proceeds of the sale of the Bond shall be treated on the books of the Lessee as capital expenditures in conformity with generally accepted accounting principles applied on a consistent basis. No part of the proceeds of the Bond will be used to finance inventory or for working capital. (13) The property included in the Facility is either property of the character subject to the allowance for depreciation under applicable tax laws or land. (14) Work of the Project has been commenced by the Lessee on behalf of the Agency in accordance with the Inducement Resolution. (15) To the best of Lessee's knowledge, the activities of the Lessee, and the activities of any past and present owner or operator of the Facility, have not resulted and will not result in any (a) release or threatened release of Hazardous Substances on, from, or under the Facility other than in accordance with applicable law, (b) use, generation, storage, disposal or discharge of Hazardous Substances on or from the Facility other than in accordance with applicable law, (c) transportation of any Hazardous Substances to or from the Facility other than in accordance with applicable law, or (d) violation of any federal, state or local laws, ordinances, or regulations relating to Hazardous Substances. Section 1.10. Inducement to Bondholder. Since one of the purposes of ------------------------ this Lease Agreement is to induce the Bondholder to purchase the Bond, all representations and obligations of the Agency and the Lessee are declared to be for the benefit of the Bondholder. Section 1.11. Agency Litigation. The Agency represents that (a) there ----------------- is 5 no litigation or governmental proceeding pending or, to the knowledge of the Agency, threatened, to restrain or enjoin the entry into this Lease Agreement, the PILOT Agreement, the Bond or the Mortgage Agreement, or in any manner questioning the proceedings or authority under which this Lease Agreement is authorized; (b) the corporate existence of the Agency is not being contested; and (c) the right of the Agency to acquire and hold or to grant security interests in or mortgage liens on the Facility is not being contested. Section 1.12. Prohibition Against Retail Sales. The Lessee -------------------------------- represents, warrants and covenants that no portion of the Facility will be utilized for the making of retail sales to customers who personally visit the Facility. For purposes of this Section 1.12, retail sales shall mean: (i) sales by a registered vendor under Article 28 of the Tax Law of the State of New York primarily engaged in the retail sale of tangible personal property, as defined in Section 1101(b)(4)(i) of the Tax Law of the State of New York; or (ii) sales of a service to such customers. ARTICLE II ISSUANCE OF BOND: CONVEYANCE OF PROPERTY: ---------------------------------------- PROJECT COSTS, PERFORMANCE AND COMPLETION ----------------------------------------- Section 2.1. Issuance of Bond: Use of Proceeds. The Agency shall --------------------------------- deliver the Bond as authorized by the Bond Resolution and pursuant to the Mortgage Agreement. The proceeds of sale of the Bond shall be disbursed by the Bondholder and applied to the payment of the Project Costs in accordance with the provisions of this Lease Agreement, the Mortgage Agreement and the Building Loan Contract. Section 2.2. Conveyance of Property to the Agency. ------------------------------------ (1) The Lessee shall convey or cause to be conveyed to the Agency good and marketable title to the Facility. To evidence the conveyance, the Lessee shall execute and deliver or cause to be executed and delivered to the Agency one or more deeds and, as appropriate, one or more bills of sale or other instruments. (2) Title to every item of property thereafter acquired by the Lessee and intended to be made part of the Facility in connection with the Project shall vest in the Agency immediately upon delivery to the Lessee, or installation, or incorporation into the Facility Realty, or payment for the item, whichever shall occur first. The Lessee shall execute, deliver and record or file all instruments necessary to so 6 vest title in the Agency. (3) Each conveyance made under this Section shall be free of all claims and encumbrances other than Permitted Encumbrances, and the Lessee shall take all action necessary to protect such title against claims of any third Persons. The Lessee shall also cause each such item to be subjected to the lien and security interest of the Bondholder. Section 2.3 Title Insurance. --------------- (1) Prior to the delivery of the Bond to the original purchaser or purchasers, the Lessee will obtain from the Title Company (a) fee title insurance in an amount not less than $2,600,000.00 insuring the Agency's title to the Facility Realty against loss as a result of defects in the title of the Agency; (b) mortgagee title insurance in form and substance satisfactory to the Bondholder and in an amount not less than $2,600,000.00 insuring the Bondholder's interest under the Mortgage Agreement as holder of a mortgage lien on the Facility Realty, in each case subject only to Permitted Encumbrances; and (c) a current survey of the site of the Facility Realty certified to the Agency, and the Bondholder and the Title Company. (2) Any proceeds of the fee title insurance shall be deposited with the Bondholder. If requested by the Agency within thirty (30) days from the date the proceeds shall have been so deposited, the proceeds shall be applied to remedy the defect in title. If such request is not made, the proceeds shall be applied as provided in the Mortgage Agreement. (3) Any proceeds of the mortgagee title insurance against loss as a result of defects affecting the Bondholder's interest as holder of a mortgage lien on the Facility Realty shall be paid to the Bondholder and shall be applied as provided in the Mortgage Agreement. Section 2.4. Identification of Facility Equipment. All Facility ------------------------------------ Equipment is identified in the Description of Facility Equipment in Appendix B attached hereto. Section 2.5 Responsibilities for Project Performance. ---------------------------------------- (1) The Agency appoints the Lessee its agent for the sole purpose of carrying out the Project in the name of the Agency, and the Lessee shall serve in that 7 capacity, and as such agent: (a) The Lessee may make, or arrange for making, all purchases of materials and equipment necessary for completion of the Project. (b) The Lessee shall replace or arrange for the replacement of any and all tangible personal property that becomes obsolete. (c) The Lessee shall make or be responsible for making all necessary repairs to the Project. (2) The Lessee shall be responsible for design and completion of the Project and shall appoint the Facility Supervisor to supervise and complete the Project. (3) The design and quality of the Project, as described in the Plans and Specifications shall not be changed without the written consent of the Agency and the Bondholder. (4) The Lessee shall comply with all manufacturer's instructions and warranty requirements relating to the Facility and shall secure all warranties for the benefit of the Agency and the Bondholder. (5) The Lessee, upon notifying the Agency, shall take such action as may be necessary to ensure that the contractors and suppliers for the Project fulfill their obligations related to the Project. The Lessee may take such action in the name of the Agency if the Agency so consents in writing. The costs of such action shall be Project Costs; any recoveries shall be deposited with the Bondholder. (6) All necessary permits and approvals for the Project or for Facility operation shall be obtained by the Lessee at its own expense. Section 2.6. Payment and Disbursement of Project Costs. The Project ----------------------------------------- Costs shall be paid as provided in the Mortgage Agreement and the Building Loan Contract or as otherwise provided in this Lease Agreement. Section 2.7. Expenses Chargeable to the Lessee. The Lessee shall --------------------------------- pay all expenses or other costs incurred in connection with the Project including, but not limited to: 8 (1) All charges incurred in connection with the preparation, delivery, filing, recording (if required) or effectuation of any instruments of conveyance or transfer required by this Lease Agreement or by the Mortgage Agreement; (2) Any closing costs or costs relating to issuance of the Bond other than those in Paragraph (1) above; (3) All lawful claims which might or could if unpaid become a lien or charge on the Facility, (4) All pre-closing and post-closing taxes, assessments or other governmental or utility charges or impositions relating to the Facility; (5) The Agency's administrative fee; (6) Any reasonable legal fees or expenses incurred by the Agency or the Bondholder in connection with the foregoing items of cost; and (7) Any other costs incurred by the Agency in constructing or otherwise carrying out the Project. Section 2.8. Completion of the Project: Status. --------------------------------- (1) The Lessee shall complete the Project on or before the Project Completion Date. (2) If requested by the Agency or the Bondholder, or as provided in the Mortgage Agreement, the Lessee or the Sublessee shall prepare and submit to either or both a certificate or certificates containing such information relating to the status of completion of the Project as shall be sought in such request. Section 2.9. Limitation on Sales Tax Exemption. --------------------------------- (1) Any exemption from Sales Taxes resulting from or occasioned by Agency involvement with the Project shall be limited to purchases of Exempt Property by or for the Lessee as agent for the Agency, it being the intent of the parties that no operating expenses of the Lessee and no purchases of equipment or other personal property (other than Exempt Property) shall be subject to an exemption from Sales Taxes because of Agency involvement with the Project. Nothing herein shall be 9 construed as a representation by the Agency that any property included within the definition of Exempt Property is, in fact, exempt from Sales Taxes. (2) The Lessee shall annually file, and shall cause any operator of the Project to annually file, a statement with the New York State Department of Taxation and Finance, on a form and in a manner as is prescribed by the Commissioner of the New York State Department of Taxation and Finance, of the value of all sales and use tax exemptions claimed by the Lessee or agents of the I emcee or any operators of the Project, including, but not limited to, consultants or subcontractors of such agents or Project operators, under the authority granted pursuant to this Lease Agreement. Should the Lessee fail to comply with the foregoing requirement, the Lessee shall immediately cease to be the agent for the Agency in connection the Project (such Agency relationship being deemed to be immediately revoked) and shall cease to be an operator of the Project without any further action of the parties, and the Agency shall be authorized to immediately reconvey the Facility to the Lessee pursuant to Section 7.2(6) of this Lease Agreement. ARTICLE III LEASE OF FACILITY AND RENTAL PROVISIONS --------------------------------------- Section 3.1. Lease of the Facility. Duration. -------------------------------- (1) The Agency hereby leases the Facility to the Lessee, and the Lessee hereby accepts the lease, subject to the terms and conditions of this Lease Agreement. (2) The term of the lease shall commence on the date of execution and delivery of this Lease Agreement and expire on the Lease Expiration Date. Section 3.2. Occupation and Use of the Facility. ----------------------------------- (1) During the term of this Lease Agreement, the Lessee shall be entitled to physical possession and control of the Facility, and shall be liable at all times for all risk, loss and damage with respect to the Facility. (2) The Lessee shall continue to operate the Facility, or cause it to be operated, at all times during the term of this Lease Agreement after completion of the Facility, except, as appropriate and for such period as may be necessary, in the case of an event described in Section 5.1. Such operation shall be solely for the purpose 10 described on Appendix D and in accordance with the provisions of the Act. If the Lessee ceases to operate the Facility for the purposes described herein for any reason other than an event described in Section 5.1, the Lessee shall, commencing with the tax fiscal year next following such cessation of or change in operations, make payments in lieu of taxes on the Facility to all applicable taxing authorities in such amounts as would be payable as Real Estate Taxes levied on the Facility if the Facility were owned by the Lessee. Such payments shall be in addition to any other rights or remedies of the Agency under this Lease Agreement. For the purpose of this Lease Agreement, the Lessee shall be deemed to have ceased to operate the Facility for the purposes described herein if it (a) materially alters the use of the Facility, in the Agency's judgment, except as permitted hereunder, (b) closes the Facility other than for routine maintenance, observance of national holidays or regularly scheduled seasonal closings, or by reason of an event described in Section 9.1 of this Lease Agreement, or (c) reduces the operations of the Facility to such an extent that, in the Agency's judgment, the economic benefit to be derived from the Project in accordance with Section 1.4 of this Lease Agreement has been substantially impaired. Any of the foregoing notwithstanding, the Lessee may use the Facility for some purpose other than that described on Appendix D with the prior written consent of the Agency and the Bondholder, which consent may be withheld in the Agency's or the Bondholder's absolute discretion, and provided further that such proposed use constitutes a qualified "project" in accordance with Agency policy and as defined under the Act. (3) In using the Facility or causing it to be used, the Lessee shall, at its own expense, ensure compliance with all applicable laws, ordinances, regulations, orders, permits or judicial decisions, whether foreseen or unforeseen, ordinary or extraordinary. Notwithstanding the foregoing, the Lessee may in good faith contest the validity or applicability of any such requirement. In that event, the Lessee may fail to comply with the contested requirement during the period of contest and any appeal, unless the Agency or the Bondholder shall notify the Lessee that by failure to comply with the requirement the Facility may be subject to loss or forfeiture, in which event the Lessee shall promptly take action satisfactory to the Agency or the Bondholder. The Lessee shall not use the Facility or permit it to be used in such a way as to constitute a nuisance or violate the terms of any insurance policy relating to the Facility. (4) The Agency shall not take any action, other than pursuant to Article VII, to interfere with the quiet and peaceable possession of the Facility during the term of this Lease Agreement. 11 (5) The Agency and Bondholder shall have such rights to enter and inspect the Facility, at all reasonable times, as either shall deem necessary to exercise its or their rights under this Lease Agreement and the Mortgage Agreement. Section 3.3. Rental Provisions. ----------------- (1) The Lessee shall pay or cause to be paid rents directly to the Bondholder, as follows: The rents shall be paid, in immediately available funds, in amounts necessary to meet (a) all obligations under this Lease Agreement, the Bond, the Building Loan Contract and the Mortgage Agreement for payment of installments of principal or Redemption Price, and interest, and (b) the Lessee's obligations to pay all other fees or expenses under this Lease Agreement, the Bond and the Mortgage Agreement, which fees and expenses shall be deemed to constitute rents. Each payment shall be made on the due date for the installment or other obligation or within any applicable grace period as provided in the Mortgage Agreement. The required payments and their disposition shall be in accordance with applicable provisions of the Bond and Mortgage Agreement. Such rental payments shall be made until the principal and interest on the Bond and other such obligations shall have been fully paid. (2) The Lessee may prepay rents at such times and on the terms and conditions provided in the Bond. Section 3.4. Obligations of Lessee Unconditional. The obligations of ----------------------------------- the Lessee under this Lease Agreement to make rental or any other payments, or to maintain the Facility in accordance with Section 4.1 of this Lease Agreement, shall be absolute and unconditional. The Lessee shall meet such obligations, irrespective of any defense or any rights of setoff, recoupment, suspension, reduction or counterclaim by reason of any default of the Lessee, the Agency or the Bondholder under this Lease Agreement, the Mortgage Agreement or any other agreement, or for any other reason. The defenses or other rights referred to here shall include, without limitation, those arising out of any of the following circumstances: a default, act or omission of any contractor engaged for the Project or any supplier or manufacturer of Facility Equipment or fixtures constituting part of the Facility Realty; an act constituting an eviction or constructive eviction; failure of title; failure of consideration; commercial frustration of purpose; any change in law, a failure to complete the Project; and any destruction or condemnation of, or damage to or impairment of the use of, the entire or any part of the Facility. The Lessee waives all rights now or hereafter conferred by statute or otherwise to quit, terminate, cancel or surrender this Lease Agreement or 12 any obligation of the Lessee under this Lease Agreement or the Facility or any part thereof except as provided in this Lease Agreement or to any abatement, suspension, deferment, diminution or reduction in the rentals or other payments hereunder. Section 3.5. Assignment of Agency Rights. Pursuant to the Mortgage --------------------------- Agreement, the Agency will grant a lien on and security interest in the Facility and pledge and assign to the Bondholder as security for the Bond all the Agency's right, title and interest (except for the Agency's Reserved Rights) in this Lease Agreement and in any Sublease, including all rental and other payments. This Lease Agreement shall be subject and subordinate to the Mortgage Agreement and to such lien, security interest, pledge and assignment. The Lessee hereby consents to such lien, security interest, pledge and assignment. Section 3.6. Grant of Security Interest to the Agency. The Lessee ---------------------------------------- hereby grants to the Agency a present security interest in and to all the fixtures constituting part of the Facility Realty, and in any Sublease and substitutions, replacements and proceeds from the sale thereof, to secure the Lessee's performance and payment of all its obligations and covenants in this Lease Agreement. In the event that the Lessee breaches its covenants contained in Section 4.1(4) of this Lease Agreement with respect to the removal of any part of the Facility, then the Agency's security interest in the removed property shall continue until such Section 4.1(4) shall have been complied with, anything to the contrary contained herein notwithstanding. The Lessee shall execute and deliver to the Agency and the Bondholder a financing statement or statements (including fixture filings if appropriate) in accordance with the Uniform Commercial Code in form and substance satisfactory to the Agency and to the Bondholder as the assignee of the Agency's security interest herein and under the Mortgage Agreement. Section 3.7. Assignment of Sublease. ---------------------- (1) The Lessee hereby assigns to the Agency all the Lessee's right, title and interest in and to any Sublease, including all sublease rentals, revenues and receipts therefrom, and the right to enforce all of the Lessee's rights and remedies thereunder. The Lessee hereby empowers the Agency and the Bondholder, and their respective agents or attorneys, to collect, sue for, settle, compromise and give acquittances for all of the rents that may become due under any Sublease (to the extent set forth in this Lease Agreement and the Mortgage Agreement) and avail themselves of and pursue all remedies for the enforcement of any Sublease and the Lessee's rights in and under any Sublease as the Lessee might have pursued but for this assignment. Notwithstanding 13 anything herein to the contrary, the Agency and the Bondholder agree not to exercise any of the rights granted pursuant to this paragraph so long as no Event of Default (as defined in this Lease Agreement and any other Security Document) shall have occurred under this Lease Agreement or any other Security Document. (2) The Lessee shall not terminate or amend any Sublease or any of its terms, or grant any concessions in connection therewith, either orally or in writing, or accept a surrender thereof, without the prior written consent of the Agency and the Bondholder. The Lessee shall furnish or cause to be furnished to the Agency and the Bondholder a copy of any such termination, amendment or concessions of any Sublease in substantially final form prior to the execution thereof. Any attempted termination or amendment of any Sublease without such written consent shall be null and void. (3) In the exercise of the powers granted by this Section, no liability shall be asserted or enforced against the Agency or the Bondholder, all such liability being hereby expressly waived and released by the Lessee. Neither the Agency nor the Bondholder shall be obligated to perform or discharge any obligation, duty or liability under any Sublease, or under or by reason of this assignment, and the Lessee shall and does hereby agree to indemnify the Agency and the Bondholder for and to hold them harmless of and from any and all liability, loss or damage which either may or might incur under any Sublease or under or by reason of this assignment and of and from any and all claims and demands whatsoever which may be asserted against either or both by reason of any alleged obligations or undertakings on their part to perform or discharge any of the terms, covenants or agreements contained in any Sublease. Should the Agency or the Bondholder incur any such liability, loss or damage under any Sublease or by reason of this assignment, or in the defense of any such claims or demands, the amount thereof, including costs, expenses and reasonable attorneys' fees, shall be secured hereby, and the Lessee shall reimburse the Agency and the Bondholder therefor immediately upon demand. This assignment shall include any extensions and renewals of any Sublease and reference herein to any Sublease shall be construed as including any such extensions and renewals. ARTICLE IV MAINTENANCE, TAXES AND CHARGES, ------------------------------ INSURANCE AND INDEMNITY ----------------------- Section 4.1. Maintenance, Alterations, Improvements. -------------------------------------- 14 (1) The Lessee shall maintain the Facility in good and safe operating condition, ordinary wear and tear excepted. The Lessee shall make all repairs and replacements to the Facility necessary for that purpose, and to protect the security for the Bond. The Agency shall be under no obligation to replace, service, test, adjust, erect, maintain or effect replacements, renewals or repairs of the Facility, to effect the replacement of any inadequate, obsolete, worn-out or unsuitable parts of the Facility, or to furnish any utilities or services for the Facility or Project, and the Lessee hereby agrees to assume full responsibility therefor. (2) After Project Completion, the Lessee shall make no structural additions, modifications and improvements to the Facility without the prior written consent of the Agency, which may be conditioned upon, among other things, an increase in any administrative fee charged by the Agency in connection with the Project and an increase in payments to be made under the PILOT Agreement in an amount equal to the Real Estate Taxes which would be payable by the Lessee on account of such additions, modifications and improvements if the Facility were owned by the Lessee. Any of the foregoing notwithstanding, no consent shall be required under this paragraph (2) for the repair, replacement, rebuilding or restoration of the Facility after damage, destruction or condemnation pursuant to Section 5.1 of this Lease Agreement (except as required thereunder or pursuant to any other Security Document ) or in connection with minor modifications or alterations to the Facility which do not affect the value of the Facility, except as may be required under any other Security Document. Any additions, modifications, improvements or alterations performed by Lessee in accordance with this paragraph (2) shall be made at the sole expense of the Lessee, shall become a part of the Facility and shall be subject to Paragraph (4) of this Section. Further, the provisions of Section 2.5(7) of this Lease Agreement shall apply to any additions, modifications or improvements to the Facility, made in accordance with this paragraph (2) or otherwise. (3) Subject to Paragraph (4) of this section, the Lessee may (a) install, at the site of the Project, equipment or other personal property in addition to the Facility Equipment, without conveying title to the Agency, and (b) thereafter remove such equipment or property, without the consent of the Agency or the Bondholder; provided, however, that the Lessee shall pay for the cost of the repair of any damage to the Facility as the result of such removal. After Project Completion, no equipment shall be added to Appendix B (Description of Facility Equipment). If the Agency shall consent to any addition of equipment to Appendix B. such consent may be conditioned upon, among other things, an increase in any administrative fee charged by the Agency in connection with the Project. 15 (4) Except as otherwise provided in this Paragraph (4), any action taken by the Lessee under this section shall be subject to the following: (a) With the exception of the removal of the additional property mentioned in Paragraph (3) of this section, the Lessee may not remove any part of the Facility without the prior written consent of the Agency and the Bondholder, and subject to the furnishing of such security as the Agency and Bondholder may reasonably require in order to protect their interests. (b) The Lessee shall not take any action or fail to take any action which would cause the Project not to constitute a qualified "project" under the Act. (c) The Lessee shall not take any action which would impair the usefulness, structural integrity or operating efficiency of the Facility. (d) The Lessee shall not permit the creation of any Lien on the Facility other than Permitted Encumbrances. (5) The Lessee shall operate the Facility in compliance with local zoning and planning regulations. Section 4.2. Taxes. Assessments and Charges. ------------------------------- (1) The Lessee shall pay, as they may respectively become due: (a) all taxes, special assessments and governmental charges of any kind which may at any time be lawfully assessed or levied against or with respect to the Facility or rentals of the Facility, including, without limitation, any sales or use taxes imposed with respect to the Project or any part thereof, or the rental of the Facility, and any taxes levied upon or with respect to the income or revenues of the Agency from the Project; (b) all utility and other charges incurred or imposed with respect to the Project or any aspect thereof; and (c) all assessments and charges of any kind lawfully imposed lay any governmental body. (2) After giving written notice to the Agency and the Bondholder, the Lessee may in good faith contest any such taxes, assessments and other charges or any denial of an exemption from Real Estate Taxes (as provided for in Paragraph (3) below), so long as (a) the overall operating efficiency of the Project is not impaired; (b) neither the Facility nor any part of or interest in it would be in any danger of being 16 sold, forfeited or lost; (c) neither the Lessee, the Agency nor the Bondholder would be in any danger of any civil or criminal liability, other than normal accrual of interest, for failure to pay such taxes, assessments or charges; and (d) the lien of the Mortgage Agreement is not impaired in any way. In the event of any such contest, the Lessee may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom. (3) The foregoing notwithstanding, subject to the completion and filing of the Application for Tax Exemption by the Taxable Status Date and the approval of the Application for Tax Exemption by the Assessor, the Project shall be exempt from Real Estate Taxes commencing with the 1995-96 tax fiscal year of the City. The Lessee shall provide the Agency with all information required to complete the Application for Tax Exemption and shall provide such additional information and take such actions as are required by the Assessor in order to process and approve the Application for Tax Exemption. Upon the granting of the exemption, the Lessee shall make payments in lieu of real property taxes in accordance with the PILOT Agreement. In the event the Application for Tax Exemption is denied for any reason, the Lessee shall pay all Real Estate Taxes levied upon the Project as they become due. The Lessee waives any claim or cause of action against the Agency, and releases the Agency from any liability to the Lessee, arising from the denial of an exemption from Real Estate Taxes except to the extent that such denial results solely from the failure of the Agency to file the Application for Tax Exemption with the Assessor by the Taxable Status Date. Section 4.3. Insurance. --------- (1) At all times throughout the term of this Lease Agreement, the Lessee shall maintain and comply with the terms of insurance, with insurers licensed to do business in the State and acceptable to the Agency and the Bondholder and generally recognized as being responsible, against such risks, loss, damage and liability and for such amounts as are customarily insured against by other enterprises of lilts size and type as that of the Lessee or any Sublessee, including, without limitation: (a) Extended coverage casualty insurance, with endorsements containing New York standard mortgagee and loss payee clauses, in an amount not less than the greater of (i) 80% of the actual replacement cost of the Facility, or (ii) the principal amount of the Bond. The actual replacement cost shall be determined by a qualified insurance appraiser selected by the Lessee and approved by the Agency and the Bondholder, at the Lessee's expense. 17 (b) During any period of construction or reconstruction of the Facility, such casualty coverage shall be in the form of a Builders' All Risk Insurance policy written on "100% builders' risk completed value, non-reporting form" including coverage for "completion and/or premises occupancy," and property damage insurance. Such insurance shall include coverage for removal of debris, insuring the Facility against loss or damage by fire, lightning, vandalism, malicious mischief and other casualties, with extended coverage endorsements covering perils of windstorm, hail, explosion, aircraft, vehicles and smoke. Such insurance shall be in an amount sufficient to prevent the Lessee, the Agency or the Bondholder from becoming a co-insurer of any loss under the insurance policies, but in any event in amounts equal to not less than the greater of (i) the actual replacement cost of the Facility as determined by a qualified insurance appraiser selected by the Lessee and approved by the Agency and the Bondholder, at the Lessee's expense; and (ii) the principal amount of the Bond. (c) To the extent not covered by the public liability insurance referred to in subparagraph (1)(d) of this Section, Owners and Contractors Protective Liability Insurance for the benefit of the Lessee, the Agency and the Bondholder in a minimum amount of S5,000,000.00 aggregate coverage for personal injury and property damage. (d) Public liability insurance protecting the Lessee, the Agency and the Bondholder against losses from liabilities imposed by law or assumed in any written contract (including the contractual liability assumed by the Lessee under Section 4.4) and arising from injury or death of a person or persons or damage to the property of others, naming the Agency and the Bondholder as additional insured parties. Such insurance shall be in a minimum amount of $5,000,000.00 aggregate coverage, and may be effected under overall blanket or excess coverage policies of the Lessee; provided, however, that at least $1,000,000.00 is effected by a comprehensive liability insurance policy. Such policies shall not contain any provisions for a deductible amount. (e) Boiler and machine property damage insurance in respect of any steam and pressure boilers and similar apparatus located on the Facility Realty from risks normally insured against under boiler and machinery policies and in amounts and with deductibles customarily obtained for similar business enterprises and in each case approved by the Agency and the Bondholder. (f) Workers' compensation insurance and other employee benefits insurance which the Lessee or the Agency is required by law to provide. 18 (g) Flood insurance, if the Facility is located in an area identified as a flood hazard area by the Federal Emergency Management Agency, naming the Agency and the Bondholder as additional insured parties. If the Facility is not located in such an area, the Lessee shall deliver to the Bondholder on the date hereof a letter from the appropriate municipalities so certifying. (h) Business interruption insurance or loss of rental insurance. (i) Such other or additional insurance in such amounts and against such other insurable hazards as the Agency or the Bondholder from time to time may require. (2) All policies evidencing the insurance required by this section shall provide that: (a) the Lessee, the Sublessee, the Agency and the Bondholder be designated as insureds or additional insureds as their respective interests may appear, except with respect to workers' compensation insurance and business interruption/loss of rental insurance; (b) all insurance proceeds with respect to loss or damage to the Facility be made payable to the Bondholder, (c) at least thirty (30) days' written notice be given to the Lessee, the Agency and the Bondholder of the proposed nonrenewal, cancellation, lapse, reduction of benefits or material change in coverage thereof; (d) in relation to the respective interests of the Agency and the Bondholder, the insurance shall not be invalidated by any action or inaction of the Lessee, the Sublessee or any other Person; (e) the insurance shall be primary insurance without any right of contribution from any other insurance carried by the Agency or the Bondholder; (f) the insurer waives any right of subrogation against any Person insured under such policy, and waives any right to any setoff or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any Person insured under the policy, and 19 (g) contain such other provisions, including amounts of insurance coverage, as any owner or operator, in the prudent management of similar facilities, would require in its insurance policies, or as may be reasonably requested by the Agency or the Bondholder. (3) At the time of execution and delivery of this Lease Agreement, the Lessee shall deliver to the Agency and the Bondholder duplicate originals of insurance certificates containing evidence of compliance with the requirements of this section. For the same purpose, if requested by the Agency or the Bondholder, the Lessee shall deliver to the Agency or Bondholder duplicates of the insurance policies at the time of such execution and delivery or within such different times as may be requested. Prior to the expiration of any policy of insurance required by this section, the Lessee shall furnish to the Agency and the Bondholder evidence that the policy has been renewed or replaced or is no longer required by this Lease Agreement, and shall deliver to the Agency or the Bondholder duplicates of such renewal or replacement policies as either may request. (4) The Net Proceeds of the insurance required by Paragraph (1) of this section shall be paid to the Bondholder and applied toward extinguishment or satisfaction of the liability with respect to which such insurance is written, and applied in accordance with Section 5.1 of this Lease Agreement. (5) The Lessee shall, at its own expense, make all proofs of loss and take all other steps necessary or reasonably requested by the Agency or the Bondholder to collect from insurers for any loss covered by any insurance required to be obtained by this section. The Lessee shall not do any act, or suffer or permit any act to be done, whereby any insurance required by this section would or might be suspended or impaired. (6) THE AGENCY AND THE BONDHOLDER DO NOT IN ANY WAY REPRESENT THAT THE INSURANCE SPECIFIED HEREIN, WHETHER IN SCOPE OF COVERAGE OR LIMITS OF COVERAGE, IS ADEQUATE OR SUFFICIENT TO PROTECT THE BUSINESS OR INTERESTS OF THE LESSEE OR ANY SUBLESSEE. Section 4.4. Indemnity. --------- (1) The Lessee shall at all times protect and hold the Agency and Bondholder harmless of, from and against any claims (whether in tort, contract or 20 otherwise), demands, expenses and liabilities for losses, damage, injury and liability of every nature and however caused, and taxes (of any kind and by whomsoever imposed), other than, with respect to the Agency, losses arising from the gross negligence or willful misconduct of the Agency, or, with respect to the Bondholder, the gross negligence or willful misconduct of the Bondholder, arising during the term of this Lease Agreement upon or about the Facility or resulting from, arising out of, or in any way connected with (a) the financing of the costs of the Project and the marketing, issuance and sale of the Bond for such purpose; (b) the planning, design, acquisition, site preparation, construction, renovation, equipping, installation or completion of the Facility or any part thereof or the effecting of any work done in or about the Facility including, but not limited to any failure or alleged failure by the Lessee to comply with the provisions of Section 2.5(7) of this Lease Agreement; (c) any defects (whether latent or patent) in the Facility, including any defects in the Agency's title thereto and environmental conditions, whether or not caused by hazardous wastes on or about the site of the Facility, (d) the maintenance, repair, replacement, restoration, rebuilding, use, occupancy, ownership, leasing, subletting or operation of the Facility or any portion thereof; or (e) this Lease Agreement, the Mortgage Agreement or any other document or instrument delivered in connection therewith or the enforcement of any of the provisions thereof or the transactions contemplated thereby. (2) The Agency and the Bondholder shall not be liable for any damage or injury to the person or property of the Lessee or any Sublessee or to their respective (if applicable) directors, officers, employees, agents or servants or persons under the control or supervision of the Lessee, any Sublessee or to any other Person who may be about the Facility, due to any act or negligence of any Person other than, with respect to the Agency, the gross negligence or willful misconduct of the Agency, or, with respect to the Bondholder, the gross negligence or willful misconduct of the Bondholder. (3) The Lessee releases the Agency and the Bondholder from, and agrees that the Agency and the Bondholder shall not be liable for, and shall indemnify and hold the Agency and the Bondholder harmless against any expense, loss, damage, injury or liability incurred because of any lawsuit commenced as a result of action taken by the Agency or by the Bondholder with respect to any of the matters set forth in Paragraphs (1) and (2) of this section or taken by either at the direction of the Lessee and in good faith with respect to any of such makers. (4) The Agency shall promptly notify the Lessee and the Bondholder 21 in writing of any claim or action brought against the Agency, in which indemnity may be sought against the Lessee pursuant to Paragraph (1) of this section. Such notice shall be given in sufficient time to allow the Lessee to defend or participate in such claim or action but the failure to give such notice in sufficient time shall not constitute a defense in any action by the Agency or Bondholder to enforce the indemnity provisions of this section, nor in any way impair the obligations of the Lessee under this section. (5) The indemnifications and protections set forth in this section shall be extended, with respect to the Agency, to its members, directors, officers, employees, agents and servants and persons under the Agency's control or supervision, and with respect to the Bondholder, to any of its directors, officers, employees, agents and servants and persons under the Bondholder's control or supervision. (6) To effectuate the purposes of this section, the Lessee will provide for and insure, in the public liability policies required in Section 4.3, not only its own liability in respect of the matters mentioned in Section 4.3 but also the liability pursuant to this section. (7) Anything to the contrary in this Lease Agreement notwithstanding, the covenants of the Lessee in this section shall remain in full force and effect after the termination of this Lease Agreement until the later of (a) the expiration of the period stated in the applicable statute of limitations during which a claim or cause of action may be brought or (b) payment in full or the satisfaction of such claim or cause of action and of all expenses and charges incurred by the Agency or the Bondholder relating to the enforcement of the provisions herein specified. (8) For the purposes of this section, neither the Lessee nor any Sublessee shall be deemed an employee, agent or servant of the Agency or a person under the Agency's control or supervision. Section 4.5. Advances by Agency or Bondholder. In the event the -------------------------------- Lessee fails to make any payment or observe any obligation under this Lease Agreement, the Agency or the Bondholder, after first notifying the Lessee of any such failure, may, without waiving any of its rights under this Lease Agreement, make such payment or otherwise cure such failure. The Lessee shall reimburse the Agency or the Bondholder, as the case may be, for any amount paid under this section, together with interest thereon from the date of payment at a per annum rate that shall on each day be equal to the higher of (a) the rate in effect such day as set forth in the Bond; and (b) 22 two percent (2%) in excess of the rate in effect such day as the rate announced by the Bondholder as its prime rate, or such lesser rate as shall be the maximum allowed by law. Any remedy available to the Agency or the Bondholder under this Lease Agreement to collect rentals or other payments shall also be available to collect amounts advanced under this section. ARTICLE V DAMAGE TO AND CONDEMNATION OF THE --------------------------------- FACILITY AND STATUS OF THE PROJECT ---------------------------------- Section 5.1. Damage, Destruction and Condemnation. ------------------------------------ (1) The Lessee shall continue to pay the rent and any other sums it is required to pay under this Lease Agreement if (a) the Facility shall have been destroyed or damaged by fire or other casualty, in whole or in part; or (b) title to, or the temporary use of, the Facility or any part thereof shall have been taken under the exercise of the power of eminent domain by a Person acting under governmental authority. (2) Within twenty (20) days after such damage, destruction or condemnation the Lessee shall give written notice to the Agency and the Bondholder of such occurrence, and whether or not Lessee intends to replace, rebuild, repair or restore the Facility. Notwithstanding anything contained herein to the contrary, the Agency shall be under no obligation to rebuild, repair, replace or restore the Facility. (3) Promptly after such occurrence the Lessee shall either (a) commence rebuilding, repairing, replacing or restoring the Facility to a condition substantially equal to that existing prior to such damage, destruction or condemnation, with such modifications and improvements as may be deemed necessary or desirable by the Lessee, subject to any approvals or restrictions contained in the Mortgage Agreement and complete such rebuilding, repairing, restoring and replacing within a reasonable time thereafter, or (b) cause the Agency to redeem the Bond Outstanding in whole and purchase the Facility pursuant to Article VIII of this Lease Agreement. (4) The Net Proceeds derived from any such occurrence shall be payable to, deposited with and disbursed by the Bondholder in accordance with provisions of the Mortgage Agreement, except as otherwise provided in Paragraph (5) of this section. Any rebuilding, repair, replacement or restoration of the Facility by 23 the Lessee shall be solely at its own expense (except to the extent paid from the Net Proceeds pursuant to the Mortgage Agreement), and regardless of whether the Net Proceeds derived from the occurrence shall be sufficient to pay the cost thereof. All such rebuilding, repairs, replacements or restorations shall: (a) automatically be deemed a part of the Facility and owned by the Agency and be subject to this Lease Agreement and the lien and security interest of the Mortgage Agreement; (b) be in accordance with plans and specifications and cost estimates approved in writing by the Bondholder (which approvals shall not be unreasonably withheld); (c) not change the nature of the Facility as a qualified "project" as defined in and as contemplated by the Act; and (d) be effected with due diligence in a good and workmanlike manner, in compliance with all applicable legal requirements and be promptly and fully paid for by the Lessee in accordance with the terms of the applicable contract(s) therefor. Further, the provisions of Section 2.5(7) of this Lease Agreement shall apply to any such rebuilding, repair, replacement or restoration of the Facility. (5) The Lessee is not required to rebuild, repair, replace or restore the Facility, and the Net Proceeds of the insurance and condemnation award shall not be so applied if: (a) the Lessee causes the Agency to redeem the Bond Outstanding in whole and purchases the Facility pursuant to Article VIII of this Lease Agreement; or (b) an Event of Default shall have occurred and be continuing. In either case the total amount of Net Proceeds shall be paid to the Bondholder, which shall apply the Net Proceeds to redemption of the Bond Outstanding in whole if the Lessee so elects, or apply the Net Proceeds in accordance with Section 7.2 of this Lease Agreement in respect of the Event of Default. (6) If the Lessee elects to rebuild, repair, replace or restore the Facility, and if on completion of the work there shall be excess Net Proceeds, such excess shall be deposited with the Bondholder and applied as provided in the Mortgage Agreement. (7) If the principal of and interest on the Bond and all fees and expenses of the Agency and the Bondholder shall have been paid in full, all such Net 24 Proceeds shall be paid to the Lessee. (8) The Agency, the Bondholder and the Lessee shall cooperate and consult with each other in all matters pertaining to the settlement, compromising, arbitration or adjustment of any claim or demand on account of any event described in Paragraph (1) of this section, and the settlement, compromising, arbitration or adjustment of any such claim or demand shall be subject: (a) in the case of all such settlements, compromises, arbitrations or adjustments of less than S50,000.00 to the approval of the Lessee (such approval not to be unreasonably withheld), and (b) in the case of all such settlements, compromises, arbitrations or adjustments of S50,000.00 or more, to the approval of the Lessee and the Bondholder (such approvals not to be unreasonably withheld). (9) If all or substantially all of the Facility shall be taken or condemned, or if the taking or condemnation renders the Facility unsuitable for use by the Lessee and any Sublessee as contemplated hereby, and the Lessee does not exercise its option to purchase the Facility pursuant to Article VIII hereof, the amount of the Net Proceeds so recovered shall be applied and treated as though the Lessee had exercised such option to purchase and shall be transferred from the Renewal Fund and paid over to the Bondholder for redemption of the Bond in accordance with the Mortgage Agreement, and the Lessee shall thereupon pay to the Bondholder the Principal Amount of the Bond and interest accruing thereon, and pay the expenses of redemption, the fees and expenses of the Agency and the Bondholder, together with all other amounts due under the Mortgage Agreement and under this Lease Agreement. Thereupon, this Lease of the Facility shall be terminated (subject to the survival of those obligations of the Lessee referred to in Section 8.4 hereof). (10) The Lessee hereby waives the provisions of Section 227 of the New York Real Property Law or any law of like import now or hereafter in effect. Section 5.2. NO WARRANTY OF CONDITION OR SUITABILITY. THE AGENCY HAS --------------------------------------- MADE AND MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY, CONDITION, FITNESS, DESIGN, OPERATION OR WORKMANSHIP OF ANY PART OF THE FACILITY, ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE QUALITY OR CAPACITY 25 OF THE MATERIALS IN THE FACILITY, OR THE SUITABILITY OF THE FACILITY FOR THE PURPOSES OR NEEDS OF THE LESSEE OR ANY SUBLESSEE OR THE EXTENT TO WHICH PROCEEDS DERIVED FROM THE SALE OF THE BOND WILL BE SUFFICIENT TO PAY THE COST OF COMPLETION OF THE PROJECT. THE LESSEE ACKNOWLEDGES THAT THE AGENCY IS NOT THE MANUFACTURER OF THE FACILITY EQUIPMENT NOR THE MANUFACTURER'S AGENT NOR A DEALER THEREIN. THE LESSEE IS SATISFIED THAT THE FACILITY IS SUITABLE AND FIT FOR ITS PURPOSES OR THE PURPOSES OF ANY SUBLESSEE. THE AGENCY SHALL NOT BE LIABLE IN ANY MANNER WHATSOEVER TO THE LESSEE OR ANY OTHER PERSON FOR ANY LOSS, DAMAGE OR EXPENSE OF ANY KIND OR NATURE CAUSED, DIRECTLY OR INDIRECTLY, BY THE PROPERTY OF THE FACILITY OR THE USE OR MAINTENANCE THEREOF OR THE FAILURE OF OPERATION THEREOF, OR THE REPAIR, SERVICE OR ADJUSTMENT THEREOF, OR BY ANY DELAY OR FAILURE TO PROVIDE ANY SUCH MAINTENANCE, REPAIRS, SERVICE OR ADJUSTMENT, OR BY ANY INTERRUPTION OF SERVICE OR LOSS OF USE THEREOF OR FOR ANY LOSS OF BUSINESS HOWSOEVER CAUSED. Section 5.3. Depreciation. As between the parties to this Lease ------------ Agreement, the Lessee shall be entitled to all depreciation or recovery deductions with respect to any depreciable property in the Facility pursuant to applicable tax laws. The Agency makes no warranty to the Lessee as to such entitlement. Section 5.4. Assignment and Sublease. ----------------------- (1) The Lessee shall not sublet all or any portion of the Facility or assign this Lease Agreement in whole or in part without the prior written consent of the Bondholder and the Agency, which consents may be withheld by the Bondholder or the Agency in their absolute discretion. The Agency and the Bondholder hereby consent to the sublease of the Facility to Coyne International Enterprises Corp. pursuant to a Sublease Agreement dated of even date herewith. Any consent by the Agency to any such assignment or subletting may be conditioned upon, among other things, the payment of a fee in accordance with the then existing Agency procedures or policies. Any attempted subletting or assignment without such written consent shall be null and void. Any permitted sublease or assignment, copies of which shall be delivered by the Lessee to the Agency and the Bondholder, shall meet the following requirements: 26 (a) No sublease or assignment shall relieve the Lessee from primary liability for any of its obligations under this Lease Agreement. (b) The assignee shall assume to the satisfaction of the Bondholder and the Agency, the obligations of the Lessee to the extent assigned. The sublease or assignment shall not impair such obligations, and shall not confer on the sublessee or assignee any rights against the Agency or Bondholder other than those conferred on the Lessee by this Lease Agreement. (c) The Project shall continue to constitute a "project" as such term is defined in the Act. (d) Any Sublease shall be subordinate to this Lease Agreement and the Mortgage Agreement. (2) Notwithstanding the provisions of Paragraph (1) of this section, the Agency or the Bondholder may, in writing, waive with respect to it the requirement of prior consent to, and delivery of copies of, any Sublease or category of Subleases. (3) As of the purported effective date of any sublease or assignment, the Lessee at its own expense shall furnish the Bondholder with an Opinion of Counsel to the effect that the anticipated use of the Facility will continue to qualify the Project as a "project" as such term is defined in the Act. (4) Any consent by the Agency or the Bondholder as applicable to any act of assignment, transfer or sublease shall be held to apply only to the specific transaction thereby authorized. Such consent shall not be construed as a waiver of the duty of the Lessee, or the successors or assigns of the Lessee, to obtain from the Agency and the Bondholder, as applicable, consent to any other or subsequent assignment, transfer or sublease, or as modifying or limiting the rights of the Agency or the Bondholder as applicable under the foregoing covenant by the Lessee. (5) If this Lease Agreement be assigned, the Agency may, and is hereby empowered to, collect rent from the assignee. If the Project or any part thereof be sublet or occupied by any person or corporation other than the Lessee, the Agency, in the event of the Lessee's default in the payment of rent may, and is hereby empowered to, collect rent from the under tenant or occupant during the continuance of such default. In either of such events, the Agency may apply the net amount 27 received by it to the rent herein provided, and no such collection shall be deemed a waiver of the covenant herein against assignment, transfer or sublease of this Lease Agreement, or constitute the acceptance of the under-tenant or occupant as tenant, or a release of the Lessee from the further performance of the covenants herein contained on the part of the Lessee. Section 5.5. Maintain Existence. During the term of this Lease ------------------ Agreement, the Lessee shall maintain its existence, shall not dissolve or otherwise dispose of all or substantially all of its assets, and shall not consolidate with or merge into another entity or permit one or more other entities to consolidate with or merge into it, except as follows: The Lessee may, without violating the covenants in this Section, consolidate with or merge into another entity, permit one or more other entities to consolidate with or merge into it, or sell or otherwise transfer to another entity all or substantially all of its assets as an entirety and thereafter dissolve, provided that the surviving, resulting or transferee entity, as the case may be, (a) assumes in writing all the obligations of the Lessee under this Lease Agreement; (b) is, and continues to be, organized in or qualified to do business in the State; (c) has a net worth immediately after such transaction at least equal to that of the Lessee immediately prior thereto; (d) pays to the Agency a fee in accordance with the then existing Agency procedures and policies; and (e) certifies to the Agency and the Bondholder that the status of the Project, as a "project" under the Act, will not be adversely affected. ARTICLE VI MISCELLANEOUS COVENANTS ----------------------- Section 6.1. Payment of Bondholder's Compensation and Expenses. The ------------------------------------------------- Lessee shall pay all reasonable actual out-of-pocket expenses (including counsel fees) reasonably incurred by the Bondholder in the performance of its duties or enforcement of its rights under this Lease Agreement, the Mortgage Agreement and any other document relating to the Bond. Section 6.2. Financial Statements. The Lessee shall prepare and -------------------- deliver to the Bondholder and, upon request, to the Agency, financial statements as required by the Lessee Guaranty. Section 6.3. Certificate of Compliance. The Lessee shall deliver to ------------------------- the Agency and to the Bondholder with each delivery required by Section 6.2 hereof, a 28 certificate of an Authorized Representative of the Lessee as to whether, as of the end of the preceding Fiscal Year of the Lessee, and at all times during such Fiscal Year, the Lessee was in compliance with all the provisions in this Lease Agreement or in any other Security Document to which it is a party, and if such Authorized Representative has obtained knowledge of any such noncompliance, he shall disclose in such certificate such noncompliance and any action taken or proposed to be taken by the Lessee with respect thereto. Section 6.4. Furnishing of Information. The Lessee shall furnish ------------------------- promptly to the Agency such information, in such form and supported by such certifications, as the Agency or the Bondholder shall reasonably request, relating to the Lessee, any Sublessee (including but not limited to, a schedule listing any existing Sublease and Sublessee, along with such information regarding such Subleases and Sublessees as the Agency or the Bondholder may request), the Project, the Facility, the finances of the Lessee, and employment by the Lessee and any Sublessee (past, present and future). Section 6.5. Right to Cure Agent Defaults. If as special agent of ---------------------------- the Agency, the Lessee receives any notice of non-performance by the Agency of any of the Agency obligations under this Lease Agreement or the Mortgage Agreement, the Lessee may perform the obligation, with full power of substitution. Section 6.6. Retention of Title to the Facility; Grant of Easements; ------------------------------------------------------- or Other Interest. - ----------------- (1) Except as otherwise provided in Sections 3.5 or 7.2 or in this Section, the Agency shall not assign, encumber (other than Permitted Encumbrances), convey or otherwise dispose of all or any part of the Facility during the term of this Lease Agreement without the prior written consent of the Lessee and the Bondholder. (2) So long as no Event of Default exists, and if the use or operation of the Facility or the status of the Project as a "project" under the Act would not be adversely affected, at the written request of the Lessee, and with the prior written consent of the Bondholder, which consent may be withheld by the Bondholder in its sole discretion, the Agency shall grant to the Lessee or any Person designated by it any of the following interests in or parts of the Facility Realty: (a) Such leases, rights-of-way, easements, party wall agreements, permits or licenses as shall be necessary or convenient for the use of the 29 Facility. (b) Any of the Agency's right, title and interest in and to any unimproved part of the Facility Realty. (c) Any areas improved for use for parking, loading or access ways, subject to the following conditions: The Lessee shall substitute facilities substantially equivalent in function, value and location to the facilities granted, and cause the substitute facilities to be added to the Facility Realty subject to the terms of this Lease Agreement and the Mortgage Agreement. However, the Bondholder may waive these conditions if it is satisfied that the facilities are surplus and not required for the operation of the Facility. (3) Upon the granting of a request under Paragraph (2) of this section, the Agency shall, at the sole expense of the Lessee, prepare, execute and deliver any instruments necessary to release the interest or area from the leasehold estate created by this Lease Agreement; and request the Bondholder to execute and deliver, at the sole expense of the Lessee, any instruments necessary or appropriate to release such interest from the lien of the Mortgage Agreement. If the grant requires the conveyance of title in fee simple, it shall be subject to any liens, easements, encumbrances and reservations (a) to which the title was subject at the time of recording of this Lease Agreement, (b) created at the request of, by the act of, or consented to by the Lessee, (c) resulting from the failure of the Lessee to observe any provisions of this Lease Agreement, (d) Permitted Encumbrances (other than the lien of this Lease Agreement and the Mortgage Agreement), and (e) for taxes, assessments or other governmental charges not then delinquent. (4) No release referred to in this Section 6.6 shall be effected unless the following is deposited with the Bondholder: (a) With respect to any grant made under Paragraph (2) of this section, such certification as the Bondholder may require that the portion of the Facility Realty is not needed for the operation of the Facility, will not adversely affect its use or operation, or the status of the Project as a "project" under the Act, and will not destroy the means of ingress thereto or egress therefrom. (b) Any consideration received from the grant of an interest under subparagraph (a) of Paragraph (2) of this section. 30 (c) With respect to any interest granted under subparagraphs (b) or (c) of Paragraph (2) of this section, an amount of cash equal to the greatest of (i) the original cost of the portion released, (ii) the fair market value of such portion, or (iii) if such portion is sold, the amount received by the Lessee upon the sale. Such costs and values shall be determined by qualified appraisers satisfactory to the Agency and the Bondholder. (5) No conveyance or release effected under this section shall entitle the Lessee to any abatement or diminution of rents or other payments the Lessee is required to make under this Lease Agreement. Section 6.7. Discharge of Liens. If any Lien other than Permitted ------------------ Encumbrances is asserted against the Facility or the interest of the Agency, the Lessee or any Sublessee therein, or against any of the rentals or other amounts paid under this Lease Agreement, the Lessee will promptly give written notice thereof to the Agency and the Bondholder and cause such Lien to be fully discharged and released within thirty (30) days after its assertion. However, the Lessee may contest any such Lien in good faith, provided that in the course of any proceedings for that purpose the Lessee shall take measures necessary to protect the interests of the Agency and Bondholder. Such measures shall include the furnishing of such security as the Bondholder may reasonably request, and any other measures that may be reasonably requested by the Agency or the Bondholder. In that event, the Lessee may permit the items so contested to remain undischarged and unsatisfied during the period of contest and any appeal. If any such Lien shall be reduced to final judgment, and such judgment or other process issued for the enforcement thereof is not promptly stayed, or if so stayed and the stay thereafter expires, the Lessee shall forthwith pay and discharge the judgment. Section 6.8. Further Assurances. ------------------ (1) The Lessee shall cooperate with the Agency and Bondholder for the purpose of protecting their respective interests in the Facility, this Lease Agreement and the rentals and other sums due under this Lease Agreement, including without limitation the execution of all Uniform Commercial Code financing statements requested by the Agency or the Bondholder. (2) The Agency and the Bondholder are authorized if permitted by applicable law to file one or more Uniform Commercial Code financing statements 31 disclosing any security interest in the Facility, this Lease Agreement and any Sublease and the rentals and other sums due under this Lease Agreement and any Sublease, without the signature of the Lessee or signed by the Agency or the Bondholder as attorney-in-fact for the Lessee. (3) The Lessee shall pay all costs of filing any financing, continuation or termination statements with respect to the Facility and this Lease Agreement. (4) The Lessee shall execute and deliver to the Agency or the Bondholder upon written request such other instruments, conveyances, transfers and assurances as the Agency or the Bondholder deems reasonably necessary or advisable for the implementation, correction, confirmation or perfection of this Lease Agreement, and any rights of the Agency or the Bondholder under this Lease Agreement, any Sublease or the Mortgage Agreement. (5) The Lessee shall comply with the provisions of the Mortgage Agreement that affects the Lessee and agrees that the Bondholder shall have the power, authority, rights and protections provided it in the Mortgage Agreement. Section 6.9. Recording and Filing. -------------------- (1) The Lessee shall cause this Lease Agreement as originally executed or a memorandum thereof as the Bondholder shall determine, to be recorded subsequent to the recordation of the Mortgage Agreement by the Title Company, in such office as may be provided by applicable law. (2) The Lessee shall cause the security interest of the Agency created by this Lease Agreement and the assignment of such security interest to the Bondholder to be perfected by the filing by the Title Company of financing statements which fully comply with the New York State Uniform Commercial Code - Secured Transactions in the Office of the Secretary of State of the State in the City of Albany, New York, and in the appropriate office of the Clerk of the County in the City of Buffalo, New York. (3) The Lessee shall file or cause to be filed all necessary continuation statements (and additional financing statements) within the time prescribed by the New York State Uniform Commercial Code- Secured Transactions 32 in order to continue (or attach or perfect) the security interest created by this Lease Agreement, to the end that the rights of the Agency and the Bondholder in the Facility shall be fully preserved as against creditors or purchasers for value from the Agency or the Lessee. (4) Upon request of the Bondholder or Agency, the Lessee shall furnish the Agency and the Bondholder with an Opinion of Counsel, addressed to the Agency and the Bondholder, as required in the provisions of the Mortgage Agreement relating to recording and filing; and shall perform all other acts (including the payment of all costs) necessary to enable the Agency and Bondholder to comply with such recording and filing provisions. Section 6.10. Notice of Default Under Sublease. The Lessee shall -------------------------------- promptly deliver to the Agency and the Bondholder copies of any notices of default given by the Lessee to the Sublessee or received by the Lessee from the Sublessee under any Sublease. Section 6.11. Equal Employment Opportunities. ------------------------------- (1) The Lessee shall insure that all employees and applicants for employment with regard to the Project are afforded equal employment opportunities without discrimination. (2) Except as is otherwise provided by collective bargaining contracts or agreements, new employment opportunities created as a result of the Project (whether by the Lessee, the Sublessee or any other occupant of the Facility) shall be listed by the Lessee, any Sublessee (or, if applicable, by such other occupant) with the New York State Department of Labor Community Services Division, and with the administrative entity of the service delivery area created by the Federal Job Training Partnership Act (P.L No. 97300) in which the Project is located. Except as is otherwise provided by collective bargaining contracts or agreements, the Lessee agrees, and shall cause the Sublessee and any other occupant of the Facility to agree, where practicable, to first consider persons eligible to participate in the Federal Job Training Partnership (P.L. No. 97-300) programs who shall be referred by administrative entities of service delivery areas created pursuant to such act or by the Community Services Division of the New York State Department of Labor for such new employment opportunities. 33 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES ------------------------------ Section 7.1. Events of Default. Any one or more of the following ----------------- events shall constitute an "Event of Default" under this Lease Agreement: (1) The Lessee: (a) fails to pay any rent sufficient for payment of any installment of principal, Redemption Price or interest on the Bond when due, and such failure continues for ten (10) calendar days from the due date thereof, (b) fails to pay any amount sufficient to pay any rent under Section 3.3 of this Lease Agreement (other than principal, Redemption Price or interest on the Bond as provided in subparagraph (a) of this Paragraph) that has become due and payable and the continuance of such failure for ten (10) calendar days from the due date thereof, (c) fails to pay any amount owing to the Agency under the terms of this Lease Agreement or otherwise, and such failure shall continue for ten (10) days following written demand therefor by the Agency, (d) causes or permits the nonrenewal, cancellation, reduction of benefits or material change in coverage of insurance policies without simultaneously, in the case of nonrenewal or cancellation, substituting insurance policies that comply with Section 4.3 of this Lease Agreement, or (e) fails to continuously operate the Facility, or cause the Facility to be operated, in accordance with Section 3.2(2) of this Lease Agreement. (2) Other than as provided in Paragraph (1) of this section or in Section 9.1, the default of the Lessee in observing any provision of this Lease Agreement and failure to cure such default within thirty (30) days from the time the Lessee receives written notice from the Agency or the Bondholder specifying the nature of such default, or (a) if by reason of its nature the failure or default can be remedied, but not within such thirty (30) day period, the Lessee fails to proceed with reasonable diligence after receipt of such notice to cure the default, or (b) if the Lessee fails to continue with reasonable diligence its efforts to cure the default; provided, however, that in no event shall the Lessee have more than one (1) additional thirty (30) day period to cure such default. (3) The Lessee, the Sublessee or the Individual Guarantor (a) applies for or consents to the appointment of or the taking of possession by a receiver, custodian, trustee or liquidator of itself or of any of its assets, (b) admits in writing its inability, or is generally unable, to pay its debts as such debts become due, (c) makes 34 a general assignment for the benefit of its creditors, (d) commences a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (e) files a petition or other request seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, or (f) takes any action for the purpose of effecting any of the foregoing. (4) A proceeding or case is commenced without the application or consent of the Lessee, the Sublessee or the Individual Guarantor in any court of competent jurisdiction, seeking (a) liquidation, reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, dissolution, winding-up, or relief as a debtor, (b) the appointment of a trustee, receiver, custodian, liquidator or the like of the Lessee, the Sublessee or the Individual Guarantor or of any of its assets, or (c) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or case continues undismissed, or an order, judgment or decree approving or ordering any of the foregoing is entered and continues unstayed and in effect, for a period of thirty (30) days. (5) If any certificate, statement, representation, warranty or financial statement furnished by or on behalf of the Lessee, the Sublessee or the Individual Guarantor proves to have been false or misleading in any material respect at the time as of which the facts therein set forth were made, or to have omitted any substantial or unliquidated liability or claim against the Lessee, the Sublessee or the Individual Guarantor. (6) There is a default in respect of any evidence of indebtedness for money borrowed from the Bondholder by the Lessee, the Individual Guarantor or any Sublessee (or with respect to the performance of any obligations incurred in connection with any such indebtedness for money borrowed) where the effect of such default is to accelerate the maturity of such indebtedness or to permit the holders thereof (or a trustee on behalf of such holders) to cause such indebtedness to become due prior to its stated maturity, or any such indebtedness is not paid as and when due and payable. (7) Final judgment of money in excess of an aggregate uninsured liabilities of $100,000.00 shall be rendered against the Lessee, the Individual Guarantor or any Sublessee and the judgment shall remain undischarged for a period of thirty (30) consecutive days during which execution is not effectively stayed. 35 (8) The occurrence of an "Event of Default" under the Mortgage Agreement, the Guaranty, the PILOT Agreement or any other Security Document. (9) If any party to the Agency Compliance Agreement shall fail to satisfy any of his, its or their respective obligations thereunder. Section 7.2. Remedies on Default. ------------------- (1) Upon the occurrence and during the continuation of an Event of Default specified in Paragraphs (3) or (4) of Section 7.1, the total unpaid amount of the rent required to be paid pursuant to Section 3.3 shall be immediately due and payable without any notice or demand of any kind. (2) Upon the occurrence and during the continuation of an Event of Default, the Bondholder, or the Agency with the prior written consent of the Bondholder, may: (a) declare the total unpaid principal amount of the rent required to be paid under Section 3.3 during the remainder of the term of this Lease Agreement to be immediately due and payable; and (b) (i) re-enter and take possession of the Facility without terminating this Lease Agreement, or (ii) terminate the lease term and all rights of the Lessee under this Lease Agreement, and exclude the Lessee from possession of the Facility, holding the Lessee liable for the amount, if any, by which the aggregate of the rents and other amounts payable by the Lessee under this Lease Agreement exceeds the aggregate of the rents and other amounts received under the new lease. (3) Upon the exercise of its rights under subparagraph (2)(b) of this section, the Agency or the Bondholder may sublet the Facility or any part of it, for the account of the Lessee, for such rental terms, to such Persons and for such period or periods as it may determine. The Agency and the Bondholder shall not be required to do any act or exercise any diligence to mitigate the damages to the Lessee. The Lessee shall be liable for the amount by which the aggregate of the rents payable by the Lessee under Section 3.3, together with the expenses of subleasing and collection, exceed the aggregate of the rents and other amounts received from such subletting. Any excess rentals from such subletting shall be credited to any rental due or to become due by the Lessee. 36 (4) Upon the occurrence of and during the continuation of any Event of Default, the Bondholder may: (a) exercise all or any of the rights and remedies of a secured party under the New York Uniform Commercial Code; (b) take any action permitted under the Mortgage Agreement with respect to any Event of Default under the Mortgage Agreement; and (c) take whatever action at law or in equity as may appear necessary or desirable to collect the rent then due and thereafter to become due, or to enforce performance or observance of any obligations of the Lessee under this Lease Agreement. (5) In addition to any other rights or remedies granted by this section to the Agency, the Agency may enforce any of the Agency's Reserved Rights without the consent of the Bondholder. The Agency may enforce any such rights, without the consent of the Bondholder, by an action for damages, injunction or specific performance, or by exercising a right of re-entry or termination of the Lease Agreement as provided in Paragraphs (2)(b) and (3) of this section, or a right of reconveyance under Paragraph (6) of this section, or by any other appropriate remedies accorded lessors generally by law. (6) The Agency, upon declaring an Event of Default under the Agency's Reserved Rights and upon five (5) Business Days prior written notice to the Bondholder, may convey the Facility to the Lessee, subject to the lien of the Mortgage Agreement, and the Lessee hereby unconditionally agrees to accept such conveyance as follows: (a) Such conveyance shall be by quit-claim deed and/or bill of sale (with no express or implied warranties by the Agency) and shall not constitute a merger of the fee and leasehold interests. (b) The Lessee hereby designates the Agency as its attorney-in- fact for the purpose of causing a deed of such conveyance, together with any other documents in connection therewith, to be recorded, and to take such other and further actions reasonably necessary to complete the conveyance of the Facility to the Lessee. 37 (7) Any sums payable to the Agency or the Bondholder as a consequence of any action taken pursuant to this Section shall be paid to the Agency or to the Bondholder and applied as provided in the Mortgage Agreement or this Lease Agreement, or both, with respect to the particular right being enforced. (8) No action taken under this Section 7.2 shall, except as expressly provided herein, relieve the Lessee from its obligations under this Lease Agreement, all of which shall survive such action. Section 7.3. Waivers. -------- (1) The rights and remedies of the Agency or the Bondholder under this Lease Agreement shall be cumulative and shall not exclude any other rights and remedies of the Agency or the Bondholder allowed by law or equity with respect to any default under this Lease Agreement. Failure by the Agency or the Bondholder to insist upon the strict performance of any of the Lessee's obligations or to exercise any rights or remedies upon default by the Lessee shall not be considered a waiver or relinquishment for the future of (a) the right to insist upon and to enforce by any appropriate legal or equitable remedy the Lessee's strict compliance with its obligations, or (b) the right to exercise any such rights or remedies, including the right to recover possession of the Facility, if such Lessee default be continued or repeated. (2) In the event any covenant or provision of this Lease Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach of this Lease Agreement. (3) No waiver shall be binding unless it is in writing and signed by the party making the waiver. (4) To the extent permitted by applicable law, the Lessee hereby waives the benefit and advantage of any valuation, inquisition, stay, appraisement, extension or redemption laws now existing or which may hereafter exist which, but for this provision, might be applicable to any sale or reletting made under the judgment, order or decree of any court or under the powers of sale and reletting conferred by this Lease Agreement or otherwise. 38 Section 7.4. Effect on Discontinuance of Proceedings. In case any --------------------------------------- proceeding taken by the Agency or the Bondholder on account of any Event of Default under this Lease Agreement or under the Mortgage Agreement shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Agency or the Bondholder, then, and in every such case, the Agency and the Bondholder shall be restored, respectively, to their former positions and rights thereunder, and all rights, remedies, powers and duties of the Agency or the Bondholder continue as in effect prior to the commencement of such proceedings. Section 7.5. Agreement to Pay Attorneys' Fees and Expenses. If the --------------------------------------------- Agency or Bondholder employs attorneys or incurs other expenses for the collection of rentals or other sums payable under this Lease Agreement, or for the enforcement of performance or observance of any obligation or agreement of the Lessee, the Lessee, on demand therefor, pay to the Agency and the Bondholder the reasonable fees and expenses of such attorneys and such other expenses so incurred. ARTICLE VIII REDEMPTION OF BOND: ------------------- OBLIGATION TO PURCHASE UPON --------------------------- TERMINATION OF THE LEASE ------------------------ Section 8.1. Redemption of the Bond in Whole. The Lessee may cause ------------------------------- the Agency to redeem the Bond Outstanding in whole, and if provided in the Bond, in part, upon such terms as are provided in the Bond, Section 4.02 of the Mortgage Agreement and in Section 8.2 hereof. Section 8.2. Payments Required for Redemption in Whole. In the event ----------------------------------------- of the Redemption of the Bond in whole, the Lessee shall make the following payments: (1) To the Bondholder, an amount certified by the Bondholder which, when added to the total amount held by the Bondholder for the account of the Agency and available for such purpose, is sufficient to pay in full the Redemption Price. (2) To the Agency, an amount certified by the Agency to be sufficient to pay all unpaid fees and expenses of the Agency incurred under this Lease Agreement and the Mortgage Agreement. 39 (3) To the Bondholder, an amount certified by the Bondholder to be sufficient to pay all unpaid fees and expenses of the Bondholder incurred under this Lease Agreement, the Mortgage Agreement and any other Security Document. Section 8.3. Obligation to Purchase the Facility. ----------------------------------- (1) Except as otherwise provided in Paragraph (2) of this section, upon termination or expiration of the lease term, the Lessee shall purchase the Facility from the Agency for the purchase price of One ($1.00) Dollar, together with all fees, charges, expenses and other amounts required to be paid under this Lease Agreement. The Lessee shall purchase the Facility by giving written notice to the Agency and to the Bondholder fixing the date of closing for such purchase, which shall be on or about the date on which the lease is to be terminated. This Lease Agreement and the lease shall thereupon terminate, with the exception of the provisions of Sections 4.4, 7.2 and 9.9, which shall survive any termination thereof. (2) The obligation of the Lessee in Paragraph (1) of this section to purchase the Facility shall either be deferred or shall not apply if the Agency and the Lessee agree to extend or renew the lease granted by this Lease Agreement, or enter into a new lease with the Lessee or any other lessee, for purposes of the Agency under the Act. Section 8.4. Conveyance on Purchase. At the closing of the purchase ---------------------- of the Facility pursuant to this Article, the Agency shall, upon receipt of the purchase price, deliver all necessary documents for the following purposes: (1) To convey to the Lessee (by quit-claim deed and/or bill of sale, with no express or implied warranties by the Agency) title to the Facility being purchased, as the Facility exists, subject only to the following: (i) any Liens to which title was subject when conveyed to the Agency; (ii) any Liens created at the request of the Lessee, to the creation of which the Lessee consented or in the creation of which the Lessee acquiesced; (iii) any Permitted Encumbrances; and (iv) any Liens resulting from the failure of the Lessee to observe any of its agreements contained in this Lease Agreement or arising out of an Event of Default; (2) To release and convey to the Lessee all the Agency's rights and interest in and to any rights of action (other than under Sections 3.3, 4.4, 7.5, 8.2 and 9.9, and under the PILOT Agreement) or any Net Proceeds of insurance or 40 condemnation awards with respect to the Facility; and (3) To deliver to the Bondholder such instruments as the Bondholder may require for the discharge and release of any security interest or Lien of any nature held by the Bondholder. Section 8.5. Amounts Remaining on Deposit with the Bondholder upon ----------------------------------------------------- Payment of the Bond. After payment in full of the Bond and the interest thereon - ------------------- and of all fees, charges, expenses and other amounts required to be paid under this Lease Agreement and the PILOT Agreement, any amounts on deposit with the Bondholder for the account of the Agency and the Lessee under this Lease Agreement shall belong to and be paid to the Lessee by the Bondholder as an overpayment of rent. ARTICLE IX MISCELLANEOUS ------------- Section 9.1. Enforce Majeure. --------------- (1) Subject to the provisions of Paragraphs (2), (3) and (4) of this section, and except as otherwise expressly provided in this Lease Agreement if by reason of force majeure the Lessee or the Agency, as the case may be (herein referred to as the "defaulting party"), is unable in whole or in part to carry out its obligations under this Lease Agreement, the defaulting party shall not be deemed in default during the continuance of such inability. The term "force majeure" as used herein shall mean any of the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders of any kind of the government of the United States or of the State or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; epidemics; landslides; lightning; earthquake; fire; tornadoes; storms; floods, washouts; drought; restraint of government; civil disturbances; explosions; partial or entire failure of utilities or other suppliers of energy, or any other similar cause or event not reasonably within the control of the defaulting party. (2) Promptly after the occurrence of the event of force majeure, the defaulting party shall give written notice of the event to the other party and to the Bondholder, containing full particulars of the event. 41 (3) The obligations referred to in Paragraph (1) of this section shall not include the Lessee's obligations to pay rents and make other required payments and to comply with the provisions of Sections 4.3 and 4.4. (4) The defaulting party shall take such steps, within a reasonable time, as may be within its reasonable control, to mitigate the cause or causes preventing it from carrying out its obligations under this Lease Agreement, and to remove the effects of the event of force majeure; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the defaulting party, which shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the judgment of the defaulting party unfavorable to it. Section 9.2. Notices. ------- (1) All notices, certificates and other communications under this Lease Agreement shall be in writing and shall be sufficiently given and deemed given (a) if delivered by mail, on the second day following the day on which mailed by certified mail, postage prepaid and return receipt requested, and if delivered in any other manner, when delivered, (b) and addressed as follows: To the Agency, at the Agency's Notification Address; To the Lessee, at the Lessee's Notification Address; To the Sublessee, at the Sublessee's Notification Address; To the Bondholder, at the Bondholder's Notification Address. (2) A duplicate of each such notice, certificate or other written communication given by any of the above Persons shall be given to each of the others. Any such Person to whom notice may be given may, by notice given in the manner here provided, designate any further or different addresses to which subsequent notices, certificates and other communications shall be sent. Section 9.3. Binding Effect. This Lease Agreement shall inure to the -------------- benefit of and shall be binding upon the parties and their successors and assigns, 42 subject however, to the provisions of Section 5.5. Section 9.4. Severability. In the event any provision of this Lease ------------ Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 9.5. Amendments. This Lease Agreement may be amended only ---------- with the concurring written consent of the Agency, the Lessee and the Bondholder. Section 9.6. Execution of Counterparts. This Lease Agreement may be ------------------------- executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Counterpart No. 1 shall be marked to designate it as the original and shall be retained by the Bondholder. Section 9.7. Net Lease. It is the intent of the parties that the --------- lease be a "net lease" and that all the rent be available for debt service on the Bond, and this Lease Agreement shall be construed to effect such intent. Section 9.8. Applicable Law. This Lease Agreement shall be governed -------------- by, and construed in accordance with, the applicable laws of the State. Section 9.9. WAIVER OF TRIAL BY JURY. THE PARTIES HEREBY EXPRESSLY ----------------------- WAIVE ALL RIGHTS TO TRIAL BY JURY ON ANY CAUSE OF ACTION DIRECTLY OR INDIRECTLY INVOLVING THE TERMS, COVENANTS OR CONDITIONS OF THIS AGREEMENT OR THE FACILITY, OR ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT. Section 9.10. Priority of Rights of Bondholder. The rights and -------------------------------- privileges of the Lessee set forth in this Lease Agreement are specifically made subject and subordinate to the Mortgage Agreement and to the rights and privileges of the Bondholder under the Mortgage Agreement. So long as not otherwise provided in the Mortgage Agreement, the Agency shall be suffered and permitted to possess, use and enjoy the Facility and appurtenances in order to carry out its obligations under this Lease Agreement. 43 IN WITNESS WHEREOF, the Agency and the Lessee have caused this Lease Agreement to be executed by their authorized representatives, all as of the date first above written. ERIE COUNTY INDUSTRIAL DEVELOPMENT AGENCY By /s/ David W. Kerchoff -------------------------------------- David W. Kerchoff, Assistant Treasurer MIDWAY-CTS BUFFALO, LTD. By /s/ Raymond T. Ryan -------------------------------------- Raymond T. Ryan, Vice-President 44 STATE OF NEW YORK ) ) SS.: COUNTY OF ERIE ) On the 14 day of December 1994, before me personally came DAVID W. KERCHOFF, to me known, who being by me duly sworn, did depose and say that he is an Assistant Treasurer of the ERIE COUNTY INDUSTRIAL DEVELOPMENT AGENCY, the agency described in and which executed the above instrument; and that he signed his name thereto by authority of the Board of Directors of said agency. /s/ John C. Garas ----------------------------- John C. Garas Notary Public, State of New York Qualified in Erie County My Commission Expires 7/14/96 STATE OF NEW YORK ) ) SS.: COUNTY OF ERIE ) On the 14 day of December, 1994, before me personally appeared RAYMOND T. RYAN, to me known and being by me duly sworn did depose and say that he resides at 5516 West Lake Road, Manlius, New York; that he is the Vice- President of MIDWAY-CTS BUFFALO, LTD., a New York corporation; the Corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the Board of Directors of said Corporation. /s/ John C. Garas ----------------------------- John C. Garas Notary Public, State of New York Qualified in Erie County My Commission Expires 7/14/96 45 A-1 APPENDIX A DEFINITIONS Acquisition means the acquisition and construction of the Facility. ----------- Act means, collectively, the New York State Industrial Development --- Agency Act (Title 1 of Article 18-A of the General Municipal Law), as amended, and Chapter 293 of the 1970 Laws of New York, as amended. Affiliate means, with respect to any Person, any other Person directly --------- or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. Agency means the Erie County Industrial Development Agency, a ------ corporate governmental agency constituting a body corporate and politic and a public benefit corporation of the State, duly organized and existing under the laws of the State, and any body, board, authority, agency or other governmental agency or instrumentality which shall hereafter succeed to the powers, duties, obligations and functions thereof. Agency Compliance Agreement shall mean the Environmental Compliance --------------------------- and Indemnification Agreement dated as of December 1, 1994 from the Lessee and the Individual Guarantors to the Agency, as amended or supplemented. Agency's Notification Address shall mean Suite 300, Liberty Building, ----------------------------- 424 Main Street, Buffalo, New York 14202; Attention: Executive Director. Agency's Reserved Rights means: ------------------------ (1) the right of the Agency in its own behalf to receive all opinions of counsel, reports, financial statements, certificates, insurance policies or insurance binders or certificates, or other notices or communications required to be delivered to the Agency under the Lease Agreement; A-2 (2) the right of the Agency to grant or withhold any consents or approvals required of the Agency under the Lease Agreement; (3) the right of the Agency to enforce in its own behalf the obligation of the Lessee to complete the Project; (4) the right of the Agency to exercise in its own behalf its rights under Section 2.3 of the Lease Agreement with respect to the proceeds of fee title insurance; (5) the right of the Agency to enforce or otherwise exercise in its own behalf all agreements of the Lessee with respect to ensuring that the Facility shall always constitute a qualified "project" as defined in and as contemplated by the Act; (6) the right of the Agency to amend with the Lessee the provisions of the PILOT Agreement, and the right of the Agency to enforce its remedies thereunder; (7) the right of the Agency in its own behalf (or on behalf of the appropriate taxing authorities) to enforce, receive amounts payable under or otherwise exercise its rights under Sections 1.12, 2.5(3), (4), (5) and (7), 2.7, 2.8, 2.9, 3.2(2), (3) and (5), 3.7, 4.1(2), (4)(a) and (5), 4.2, 4.3, 4.4, 4.5, 5.1(4), 5.4, 5.5, 6.3, 6.4, 6.7, 6.11, 7.2(2), (3), (5), (6) and (7), 7.4, 7.5, 9.5 and 9.9 of the Lease Agreement; (8) the right of the Agency in its own behalf to declare an Event of Default under Section 7.1 of the Lease Agreement, or with respect to any of the Agency's Reserved Rights; and (9) the right of the Agency as to any of the above, exercisable with respect to any Sublessee. Application for Tax Exemption shall mean the Industrial Development ----------------------------- Agencies Application for Real Property Tax Exemption required under Section 412- a of the New York Real Property Tax Law. Approved Facility means a commercial facility under the Act. ----------------- Architect means William Scott Architect, P.C. --------- A-3 Architect's Agreement means the Agreement between the Lessee and the --------------------- Architect with respect to the provision of architectural services for the Facility, as amended or supplemented. Assessor shall mean the assessor for the City. -------- Authorized Representative means (1) in the case of the Agency, its ------------------------- Chairman, Vice Chairman, Treasurer, Secretary, Assistant Secretary, Assistant Treasurer or Executive Director; (2) in the case of the Lessee or the Sublessee, its President, its Chairman of the Board of Directors, any Vice President, Treasurer, Secretary, Assistant Treasurer or Assistant Secretary; and (3) in the case of the Agency, the Lessee or any Sublessee, any officer or employee authorized by it to perform specific acts or to discharge specific duties or to execute and deliver a certain document. Bond means the Erie County Industrial Development Agency Industrial ---- Development Revenue Bond (1994 Midway-CTS Buffalo Project). Bondholder means Key Bank of New York and any other holder or holders ---------- of the Bond. Bondholder's Notification Address means Key Center, 50 Fountain Plaza, --------------------------------- Buffalo, New York 14202-2299. Bond Principal Amount means $2,600,000.00 or so much thereof as shall --------------------- be advanced pursuant to the Building Loan Contract. Bond Resolution means the resolution of the Agency adopted on October --------------- 12, 1994 authorizing, among other things, the issuance of the Bond. Building Loan Contract means the Building Loan Contract dated as of ---------------------- December 1, 1994, between the Bondholder and the Lessee, as amended or supplemented. Business Day means any day other than a Saturday, Sunday or other day ------------ on which banks located in Buffalo, New York are authorized or required to be closed. City shall mean City of Buffalo, New York. ---- A-4 Closing Date means the date of issuance and delivery of the Bond. ------------ Collateral Lease Assignment means the Collateral Lease Assignment --------------------------- dated as of December 1, 1994, between the Lessee and the Bondholder, as amended or supplemented. Conditional Assignment means the Assignment of Construction Contract ---------------------- dated as of December 1, 1994, from the Lessee to the Bondholder, as amended or supplemented. Construction Contract means the agreement between the Lessee and the --------------------- General Contractor with respect to the construction of the Facility, as amended or supplemented. Construction Cost means the total amount to be paid by the Lessee to ----------------- the General Contractor under the Construction Contract for all work, labor or services to be performed and all materials, supplies or fixtures to be furnished in connection with the construction of the Facility. Construction Period means the period beginning on the earlier of (a) ------------------- the date of the commencement of the construction and the equipping of the Facility or (b) the Closing Date, and ending on the Project Completion Date. County means the County of Erie, New York. ------ Designated Representative means any person designated by the Lessee in ------------------------- writing. Event of Default has the meaning specified in Section 7.1 of the Lease ---------------- Agreement, Section 8.01 of the Mortgage Agreement and Section 9 of the Building Loan Contract. Exempt Property shall mean only tangible personal property conveyed to --------------- or acquired by the Agency in accordance with Section 2.2 of the Lease Agreement which is acquired on or before the Project Completion Date for incorporation in the Facility or for use in connection with the Facility. Facility means, collectively, the Facility Realty and Facility -------- Equipment. A-5 Facility Address means the 4.74+/- acre parcel located at 175 James E. ---------------- Casey Drive, New Buffalo Industrial Park, Buffalo, New York, all as more particularly described in Appendix C attached hereto and made a part hereof. Facility Equipment means: ------------------ (1) the machinery, equipment and other tangible personal property, if any, acquired in whole or in part with the proceeds of the Bonds, or otherwise acquired and transferred to the Agency for incorporation in the Facility, which property is more particularly described in Appendix B attached to the Lease Agreement and the Mortgage Agreement; provided that items having the legal effect of "fixtures" shall not be included in the Facility Equipment but shall be included in Facility Realty to the extent noted below in the definition of Facility Realty; (2) all repairs, replacements, renewals, additions and proceeds of or for such property, and all other tangible personal property acquired pursuant to Section 2.2 of the Lease Agreement. Facility Realty means. --------------- (1) the land described in the Description of Facility Realty in Appendix C attached to the Lease Agreement and the Mortgage Agreement; (2) all interests in such land regarded as real property interests, and all other rights in such land; (3) all structures (including but not limited to buildings and foundations), and related facilities other than items included in Facility Equipment; (4) fixtures (other than trade fixtures); (5) other improvements now Gr at any time made or situated on such land; and (6) all repairs, replacements or additions to such property. Facility Realty shall not include any interest in real property released under Section 6.6 of the Lease Agreement. A-6 Facility Supervisor means The Midway Construction Co., Ltd. or any ------------------- other designated representative of the Lessee acceptable to the Bondholder. Final Approvals means issuance of the Certificate of Substantial --------------- Completion by the Architect and a permanent and unconditional certificate (or certificates) of the occupancy for the completed Facility by the Governmental Authorities or such other certificates or evidence of completion issued by the Governmental Authorities and acceptable to the Bondholder. Final Lien Waivers means final Lien waivers from the General ------------------ Contractor and any Subcontractor. Financial Statements means the financial statements required to be -------------------- delivered by the Lessee as set forth in the Lessee Guaranty Agreement. Fiscal Year means, with respect to the Lessee, the period ending ----------- October 31. General Contractor means The Midway Construction Co., Ltd., a ------------------ corporation organized and existing under the laws of the State, with offices at 5200 San Felipe, Houston, Texas 77056. Governmental Authority or Governmental Authorities means any ---------------------- ------------------------ governmental authority or other person having jurisdiction over the acquisition, construction, equipping, ownership, leasing, operation and/or maintenance of the Facility, including, but not limited to, the County and the City. Governmental Obligations means direct obligations of or guaranteed by ------------------------ the United States of America. Guaranty means collectively, the Lessee Guaranty and the Individual -------- Guaranty. Hazardous Substances Indemnity Agreement means the Hazardous ---------------------------------------- Substances Indemnity Agreement dated as of December 1, 1994 from the Lessee and others to the Bondholder, as amended or supplemented. Independent Engineer means a Person (not an employee of the Agency, -------------------- A-7 the Lessee or any Affiliate thereof) registered and qualified to practice engineering or architecture under the Laws of the State and selected by the Bondholder but compensated by the Lessee. Individual Guarantor means J. Stanley Coyne and Thomas M. Coyne. -------------------- Individual Guarantor's Notification Address means 140 Cortland Avenue, ------------------------------------------- Syracuse, New York 13221. Individual Guaranty means the Individual Guaranty Agreement, dated ------------------- as of December 1, 1994, from the Individual Guarantor to the Bondholder, as amended or supplemented. Inducement Resolution means the resolution of the Agency adopted on --------------------- September 15, 1993, authorizing the Acquisition of the Facility and undertaking to permit the issuance of its industrial development revenue bond to finance such Acquisition and thereupon to lease the Facility to the Lessee for sublease to the Sublessee. Institutional Investor means a commercial bank, savings bank, savings ---------------------- and loan association, trust company, insurance company or municipal bond fund or unit trust. Issue Date means, with respect to the Bond, the date of the initial ---------- delivery of the Bond, as stated by the Agency thereon to be the Issue Date. Lease Agreement means the Lease Agreement, dated as of December 1, --------------- 1994, between the Agency and the Lessee, as amended or supplemented. Lease Expiration Date means December 31, 2010, or such earlier date as --------------------- this Lease Agreement may be terminated. Lessee means Midway-CTS Buffalo, Ltd., a New York Corporation. ------ Lessee Guaranty means the Lessee Guarantee Agreement dated as of --------------- December 1, 1994, from the Lessee to the Bondholder as amended or supplemented. Lessee's Notification Address means 140 Cortland Avenue, Syracuse, ----------------------------- A-8 New York 13221, Attn: President. Lien means any interest in personal or real property securing an ---- obligation owed to a Person whether such interest is based on the common law, statute or contract. The term "Lien" includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other similar title exceptions and encumbrances affecting real property. Lien Law means the Lien Law of the State. -------- Mechanic's Lien means any Lien filed pursuant to the provisions of the --------------- Lien Law against the Facility or against monies on deposit in the Renewal Fund by reason of nonpayment or alleged nonpayment, in whole or in part, of the cost of any work, labor or services performed or any materials, supplies or equipment furnished in connection with the construction, the renovation or the equipping of the Facility. Mortgage Agreement means the Mortgage Agreement dated as of November ------------------ 1, 1994, between the Agency and the Bondholder, as amended or supplemented. Net Proceeds means so much of the gross proceeds with respect to which ------------ that term is used as remain after payment of all expenses, costs and taxes (including attorneys' fees) incurred in obtaining such gross proceeds. Obligor means, collectively, the Agency under the Mortgage Agreement, ------- the Lessee or the Agency under the Lease Agreement, the Lessee under the Lessee Guaranty, the Sublessee under the Sublease Agreement and the Individual Guarantor under the Individual Guaranty. Opinion of Counsel means a written opinion of counsel who may (except ------------------ as otherwise expressly provided in the Lease Agreement or the Mortgage Agreement) be counsel for the Lessee, the Agency or the Bondholder, as the context may indicate, and who shall be acceptable to the party entitled to receive such opinion. Outstanding means, when used with reference to a Bond or Bonds, as of ----------- any particular date, all Bonds authenticated and delivered under the Mortgage Agreement, except: A-9 (1) a Bond canceled because of payment or redemption prior to maturity or surrendered for cancellation; or (2) a Bond in exchange for or in lieu of which another Bond shall have been delivered under the Mortgage Agreement; or (3) any portion of a Bond for the payment or redemption of which monies or other assets have been held by the Bondholder. Permitted Encumbrances means, as of any particular tine: ---------------------- (1) the Lease Agreement, any Sublease and the Mortgage Agreement, and any mortgage lien, security interest or other encumbrance in favor of the Bondholder; (2) liens for real estate taxes, assessments, levies and other governmental charges, the payment of which is not in default; (3) user rights of others in, and restrictions on the Lessee's use of, the Facility, and other encumbrances or irregularities (including agreements with any railroad to service a railroad siding), (a) as normally exist with respect to property similar in character to the Facility, and (b) as included in the title insurance policies provided in Section 2.3 of the Lease Agreement; (4) any mechanic's, workmen's, repairmen's, materialmen's, contractor's; warehousemen's, carriers', suppliers' or vendors' lien, if payment is not yet due, to the extent permitted by Section 6.7 of the Lease Agreement; and (5) such minor defects, irregularities, encumbrances, easements, rights-of-way and clouds on title as normally exist with respect to property similar in character to the Facility and as do not, in the Opinion of Counsel, either singly or in the aggregate, materially impair the property affected thereby for the purpose for which it was acquired and held by the Agency under the Lease Agreement. Person means any individual, corporation, partnership, joint venture, ------ association, joint stock company, trust, unincorporated organization, government or government agency. A-10 PILOT Agreement means the Agreement for Payment in Lieu of Real Estate --------------- Taxes, dated as of December 1, 1994, between the Agency and the Lessee, as amended or supplemented. Plans and Specifications means the plans and specifications prepared ------------------------ for the Project by or on behalf of the Lessee, as amended from time to time by or on behalf of the Lessee to reflect any remodeling of the Facility or substitutions, additions, modifications and improvements to the Facility made by the Lessee in compliance with the Lease Agreement, said plans and specifications being duly certified by an Authorized Representative of the Lessee and filed in the principal office of the Bondholder, available to the Agency and approved by each of the Lessee, the Bondholder and any Sublessee. Project means the acquisition, construction, renovation, installation, ------- equipping or operation of the Facility more particularly described in the Description of Project in the Appendices attached to the Lease Agreement. Project Completion means the date that the last of the following ------------------ events shall occur: (i) the satisfactory completion of the Project in accordance with the terms of the Plans and Specifications, as determined by the Bondholder and the Independent Engineer; and (ii) issuance of the Final Approvals. Project Completion Date means not later than April 20, 1995. ----------------------- Project Costs means: ------------- (1) all costs of engineering and architectural services with respect to the Facility, including the cost of test borings, surveys, estimates, plans and specifications and for supervising construction, as well as for the performance of all other duties required by or consequent upon the proper construction of, and the making of alterations, renovations, additions and improvements in connection with, the completion of the Facility; (2) all costs paid or incurred for labor, materials, services, supplies, A-11 machinery, fixtures and other expenses and to contractors, suppliers, builders and materialmen in connection with the completion of the Facility; (3) all costs of contract bonds and of insurance that may be required or necessary during the period of Facility construction; (4) all costs of title insurance as provided in Section 2.3 of the Lease Agreement; (5) all costs in connection with the acquisition of the Facility Realty; (6) the payment of legal and financial fees and expenses, and all other costs and expenses incurred by or for the account of the Agency in connection with the preparation, authorization, sale and issuance of the Bond, and the preparation and execution of the Lease Agreement, the Mortgage Agreement and all other documents in connection therewith; (7) the interest due and payable on the Bond from the date of issuance to the date of completion of the Facility; (8) all costs which the Lessee shall be required to pay, under the terms of any contract or contracts, for the completion of the Facility, including any amounts required to reimburse the Lessee for advances made for any item otherwise constituting a Project Cost or for any other costs incurred and for work done which are properly chargeable to the Facility; and (9) all other costs and expenses relating to the completion of the Facility. Public Purpose means the inducement of the Lessee to proceed with the -------------- Facility and to expand its operations in the County for the purposes set forth in Section 1.4 of the Lease Agreement. Qualified Investments means: --------------------- (i) Government obligations; (ii) Negotiable certificates of deposit issued by any bank, trust A-12 company or national banking association which is a member of the Federal Reserve System; (iii) Commercial or Finance Paper of any Person rated at least P-1 or A-1 by Moody's Investors Services, Inc. or Standard & Poor's Corporation; (iv) Money market instruments; or (v) any other investment mutually agreeable to the Lessee, the Bondholder or the corporate trustee, if any. Real Estate Taxes shall mean all general levy real estate taxes levied ----------------- against the Project by the City, County and School District. Redemption Price means, with respect to any Bond, the principal amount ---------------- plus the applicable premium, if any, payable upon the redemption of the Bond. Renewal Fund means the Fund established by Section 5.02 of the ------------ Mortgage Agreement. Required Approvals means all site plan, zoning, land use, subdivision, ------------------ environmental, building, sewer hook up, curb cut and other permits, approvals, consents or variances that are required by Governmental Authorities in connection with the construction, the renovation and the equipping of the Facility. Sales Taxes shall mean any tax(es)imposed by Article 28 of the New ----------- York Tax Law, as the same may be amended from time to time. School District shall mean City of Buffalo Public School District. --------------- Security Documents means, collectively and severally, the Lease ------------------ Agreement, the Mortgage Agreement, the Building Loan Contract, any Sublease, the Collateral Lease Assignment, the Conditional Assignment, the Compliance Agreement and the Guaranty. SEORA Act means the Environmental Quality Review Act of the State and --------- the regulations thereunder. A-13 State means the State of New York. ----- Subcontract means any contract, subcontract or purchase order or ----------- materials contract, in form and substance satisfactory to the Bondholder, between the General Contractor and any Subcontractor for the performance of certain work, labor or services or for the furnishing of certain materials, supplies or equipment in connection with the Project. Subcontractor means any person who has agreed to perform certain work, ------------- labor or services or to furnish certain materials, supplies or equipment in connection with the construction, the renovation or the equipping of the Facility under a Subcontract. Sublease means the Sublessee Agreement, dated as of November 1, 1994, -------- between the Lessee and the Sublessee, as amended on supplemented. Sublessee means Coyne International Enterprises Corp. --------- Sublessee's Notification Address means 140 Cortland Avenue, Syracuse, -------------------------------- New York 13221. Surveyor means TVGA Engineering, Surveying, P.C. -------- Taxable Status Date shall mean December 1, 1995. ------------------- Title Company means Monroe Title Insurance Corp. ------------- Title Policy means, collectively, (i) the mortgagee title insurance ------------ policy issued by the Title Company to the Bondholder insuring that the Mortgage Agreement constitutes a good and valid first Lien on the Facility, free and clear of all other liens, except for Permitted Encumbrances, and (ii) the fee title insurance policy issued by the Title Company to the Agency insuring the Agency's title to the Facility Realty against loss as a result of defects in the title of the Agency, except for Permitted Encumbrances, and containing such pending disbursement provisions, affirmative insurance and reinsurance or coinsurance agreements as shall be required by the Bondholder, the Agency or their respective counsel. APPENDIX B Description of Facility Equipment --------------------------------- NONE APPENDIX C ---------- Description of Facility Realty ------------------------------ ALL THAT TRACT OR PARCEL OF LAND, situate in the City of Buffalo, County of Erie and State of New York, being part of Lots Nos. 149 and 150, Township 10, Range 7 of the Buffalo Creek Reservation and also being a part of Parcel 5 as shown on a map entitled "New Buffalo Industrial Park" filed in the Erie County Clerk's Office under Cover No. 2532, bounded and described as follows: BEGINNING at a point in the east line of James E. Casey Drive (66 feet wide) distant 815.01 feet northerly from the north line of Dingens Street (66 feet wide) as measured along said east line of James E. Casey Drive; thence northerly along the east line of said James E. Casey Drive, 362.00 feet to a point; thence easterly at an interior angle of 90 (degrees) 27 (feet) 12 (inches) and parallel with the north line of Dingens Street, 570.31 feet to a point; thence southerly and parallel with the east line of said James E. Casey Drive, 362.00 feet to a point; thence westerly on a line parallel with the north line of Dingens Street, 570.31 feet to the point or place of beginning. APPENDIX D ---------- Description of Project ---------------------- The acquisition and construction of a 69,265+/- square foot facility for manufacturing and warehousing purposes, and the acquisition of machinery and equipment for manufacturing and warehousing purposes and the lease of the Project to the Lessee for sublease to the Sublessee, such project to be located at a 4.74+/- acre parcel at 175 James E. Carey Drive, New Buffalo Industrial Park, Buffalo, New York. At no time shall any portion of the Facility be utilized for the making of retail sales to customers who personally visit the Facility, in contravention of Section 1.12 of this Lease Agreement. EX-10.6 20 INDUSTRIAL DEVELOPMENT REVENUE BOND EXHIBIT 10.6 THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER SAID ACT OR EXEMPTION THEREFROM THIS BOND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT TO AN INSTITUTIONAL INVESTOR OR TO SUCH OTHER PERSON AS MAY BE PERMITTED UPON THE TERMS AND CONDITIONS SET FORTH IN THE MORTGAGE AGREEMENT REFERRED TO IN THIS BOND ERIE COUNTY INDUSTRIAL DEVELOPMENT AGENCY INDUSTRIAL DEVELOPMENT REVENUE BOND (1994 MIDWAY-CTS BUFFALO PROJECT) No. R-1 $2,600,000.00 The Erie County Industrial Development Agency, a corporate governmental agency constituting a body corporate and politic and a public benefit corporation of the State of New York, duly organized and existing under the laws of the State of New York (the "Agency"), for value received, hereby promises to pay as hereinafter provided to Key Bank of New York (the "Bondholder") or registered assigns, solely from the lease rentals derived from or in connection with the Facility hereinafter referred to as provided in the Mortgage Agreement (the "Mortgage Agreement") dated as of December 1, 1994 between the Agency and the Bondholder the principal amount of TWO MILLION SIX HUNDRED THOUSAND AND 00/100 DOLLARS ($2,600,000.00) (or so much thereof as shall have been advanced under this Bond pursuant to the terms of the Building Loan Contract (the "Building Loan Contract") dated as of December 1, 1994 between the Bondholder and Midway-CTS Buffalo, Ltd. (the "Lessee") and the Mortgage Agreement) (the "Bond Principal Amount"), with interest on the unpaid portion of the Bond Principal Amount from the date of this Bond until the Bond Principal Amount is paid in full, in the manner following: A. Interest. -------- 1. Interest on the unpaid principal balance of this Bond shall be due and payable on January 1, 1995 and on the first day of each month thereafter until the entire principal balance of this Bond is paid in full. 2. From and including the Issue Date to and until the earlier of completion of the Facility or October 1, 1995 (the "Conversion Date") interest, calculated on the basis of a 360 day year for the actual number of days elapsed, shall accrue until receipt of payment by the Bondholder, on the unpaid principal amount of the Bond at the rate of interest designated and announced by the Bondholder from time to time as its Base Rate and used internally by the Bondholder to calculate the interest payable to it under notes or other agreements providing for interest based on its Base Rate (the "Base Rate") plus one percent (1%). The Base Rate is not necessarily the lowest rate granted by the Bondholder who may extend credit at interest rates both above and below the Base Rate. Each change in the Base Rate shall effect a simultaneous and corresponding change in the rate of interest. 3. Commencing on the Conversion Date and for five years thereafter, interest, calculated on the basis of a 360-day year consisting of twelve (12) thirty (30) days months, shall accrue on the outstanding principal amount of this Bond at a fixed rate equal to 300 basis points over the average weekly yield on United States Treasury obligations adjusted to a constant maturity of five years as published by Federal Reserve Board in Statistical Release H.15 (519) (the "Five Year Treasury Rate") as the "week ending" rate for the week nearest preceding the Conversion Date, rounded up to the next highest one quarter of one percent (.25%). If for any reason the Federal Reserve should cease publication of the preceding rate, the interest payable shall be determined by reference to the most nearly equivalent published rate as determined by the Bondholder. 4. Commencing on the five year anniversary of the Conversion Date (the "interest Adjustment Date") and for five years thereafter, interest shall accrue on the outstanding principal amount of this Bond at a fixed rate equal to 300 basis points over the Five Year Treasury Rate as the "week ending" rate of the week nearest preceding the Interest Adjustment Date rounded up to the next highest one quarter of one percent (.25%). If for any reason the Federal Reserve should cease publication of the preceding rate, the interest payable shall be determined by reference to the most nearly equivalent published rate as determined by the Bondholder. 5. At no time shall the rate of interest payable hereunder exceed the maximum rate permitted by applicable law. 2 6. After maturity, whether by acceleration or otherwise, interest shall continue to accrue and be payable as provided above until payment in full of the unpaid principal balance of the Bond. B. Principal --------- 1. Commencing on the first day of the first month following the Conversion Date and continuing on the first day of each successive month thereafter for one hundred twenty (120) months, the principal on the Bond shall be repaid in monthly installments of principal and interest each in an amount sufficient to amortize the principal balance then outstanding over a twenty (20) year term at the interest rate then in effect. 2. The Bondholder will adjust the payment schedule on the first day of the first month following the Interest Adjustment Date to an amount which would amortize the principal balance then outstanding over the residue of the twenty (20) year amortization term at the interest rate then in effect. 3. On the first day of the one hundred twentieth (120th) month following the month in which the Conversion Date shall occur, there shall be one final installment of the entire outstanding principal balance together with accrued interest and all other sums payable hereunder. Each installment payment of principal and interest shall be applied first to accrued interest and the balance to principal. Anything herein or in said Indenture to the contrary notwithstanding, the obligations of the Agency hereunder and under said Indenture shall be subject to the limitation that payments of interest or other amounts hereon shall not be required to the extent that receipt of any such payment by a holder of this Bond would be contrary to the provisions of law applicable to such holder of this Bond which would limit the maximum rate of interest which may be charged or collected by such holder of this Bond. If any payment of any sum due hereunder shall not be received by Bondholder on or before the due date thereof, the Agency shall pay to the Bondholder on demand a late payment charge in an amount equal to five percent (5%) of the overdue payment. For purposes of this paragraph, a payment will be overdue after 12:00 Noon on the day such payment is due. The Agency hereby makes, constitutes and appoints the Lessee as its true and lawful attorney-in-fact to (i) receive disbursements under the Building Loan Contract, (ii) select all interest rate options under this Bond, (iii) exercise any option to redeem this Bond in whole or in part 3 according to the terms hereof, and (iv) make, execute and deliver all instruments necessary or helpful to accomplish any of the foregoing powers. It is acknowledged that the Lessee has an interest in the subject matter of the foregoing powers and it is agreed that the Lessee is hereby irrevocably vested with the powers granted herein and the Agency does hereby forever renounce all right to revoke this power of attorney or any of the powers conferred upon the Lessee hereby or to appoint any other person to execute any of the said powers, and the Agency also renounces all right on its own part to perform any of the acts personally which the Lessee is authorized herein to perform. Anything herein or in the Mortgage Agreement to the contrary notwithstanding, the obligations of the Agency hereunder and under the Mortgage Agreement shall be subject to the limitation that payments of interest or other amounts hereon shall not be required to the extent that receipt of any such payment by a holder of this Bond would be contrary to the provisions of law applicable to such holder of this Bond which would limit the maximum rate of interest which may be charged or collected by such holder of this Bond. The principal of, redemption premium, if any, and interest on this Bond are payable in any coin or currency of the United States of America which, at the respective times of payment, is legal tender for the payment of public and private debts, at the principal office of the holder of this Bond or at such other address as may be specified by the holder in writing to the Agency and the Lessee. If any payment of principal, redemption premium, if any, or interest required to be made on this Bond becomes due and payable on a day which is not a Business Day (as defined in the Mortgage Agreement), then such payment shall be made on the next succeeding Business Day, with the same force and effect as if made on the interest payment date, the date of maturity or the date fixed for redemption, except that interest shall continue to accrue on the unpaid principal. This Bond constitutes the entire issue of bonds designated as the "Erie County Industrial Development Agency, Industrial Development Revenue Bond (1994 Midway-CTS Buffalo Project) (hereinafter called the "Bond") issued in the aggregate principal amount of $2,600,000.00 as a single, fully registered bond in the denomination of $2,600,000.00 under and pursuant to and in full compliance with the Constitution and laws of the State of New York, particularly the New York State Industrial Development Agency Act (constituting Title 1 of Article 18-A of the General Municipal Law, Chapter 24 of the Consolidated Laws of New York), as amended, and Chapter 293 of the 1970 Laws of New York, as amended (collectively, the "Act") and under and pursuant to a resolution adopted by members of the Agency on October 12, 1994 authorizing the issuance of this Bond, and under and pursuant to the Mortgage Agreement made and entered into by and between the Agency and the Bondholder, for the purpose of financing the cost of the acquisition, construction and installation of a 69,265 +/-square foot manufacturing facility to be located on a 4.74 +/- acre parcel at 175 James E. Casey Drive in the New Buffalo Industrial Park, Buffalo, New York (the "Facility") under and pursuant to a Lease Agreement dated as of December 1, 1994 (hereinafter together with any amendments thereof and any subsequent lease of the Facility called the "Lease Agreement") for sublease to Coyne International Enterprises Corp. (the "Sublessee") (hereinafter together with any amendments thereof and any subsequent sublease of the Facility called the "Sublease Agreement"). The Lease Agreement requires the payment of rentals sufficient to provide 4 for the payment of the principal of, including any applicable redemption premiums, and interest on this Bond as the same become due. Copies of the Mortgage Agreement, the Lease Agreement, the Sublease Agreement and each other Security Document (as such term is defined in the Mortgage Agreement) are on file at the office of the Agency in Buffalo, New York and reference is made to the Mortgage Agreement, the Lease Agreement, the Sublease Agreement and each other Security Document for the provisions relating, among other things, to the terms and security of this Bond, the charging and collection of rentals for the Facility, the custody and application of the proceeds of this Bond, the rights and remedies of the Bondholder, and the rights, duties and obligations of the Agency, the Lessee, and the Bondholder. This Bond is a special obligation of the Agency, payable as to principal, redemption premium, if any, and interest solely from and secured by a pledge of certain of the lease rentals derived from or in connection with the Facility, including monies received under the Lease Agreement which are required to be set apart and transferred to certain special funds, or to the "Erie County Industrial Development Agency (1994 Midway-CTS Buffalo Project) Renewal Fund" (subject to disbursements from said special funds or Renewal Fund in accordance with the provisions of the Lease Agreement and the Mortgage Agreement) established under the Lease Agreement and the Mortgage Agreement. The payment of the principal of, redemption premium, if any, and the interest on this Bond has been guaranteed by: (a) the Lessee pursuant to a Lessee Guaranty; and (b) jointly and severally by J. Stanley Coyne and Thomas M. Coyne (collectively the "Individual Guarantors") pursuant to an Individual Guaranty dated as of December 1, 1994. This Bond is further secured by a pledge and assignment of substantially all of the Agency's right, title and interest in and to the Lease Agreement other than the Agency's Reserved Rights, by the lien on and security interest in the Facility of the Mortgage Agreement and by an assignment of certain subleases with respect to the Facility pursuant to a Collateral Lease Assignment dated as of December 1, 1994 to the Bondholder. This Bond shall never constitute a debt of the State of New York nor of the County of Erie and neither the State of New York nor the County of Erie shall be liable thereon, nor shall this Bond be payable out of any funds of the Agency other than those pledged therefor. In certain events, on the conditions, in the manner and with the effect set forth in the Mortgage Agreement, the principal of this Bond may be declared and may become due and payable (or may become due and payable without declaration) before the stated maturities thereof, together with accrued interest thereon. Modifications or alterations of the Mortgage Agreement, or of any mortgage supplemental thereto, may be made only to the extent and in the circumstances permitted by the Mortgage Agreement. This Bond is transferrable, as provided in the Mortgage Agreement, only upon the registrations books of the Agency kept for such purpose in the office of the Agency as Bond Registrar, upon presentation hereof at such office by the registered owner or his duly authorized attorney in fact accompanied with a written instrument of transfer in the form appearing on this Bond and duly executed by the registered owner or his duly authorized attorney in fact and the notation 5 of such registration endorsed hereon and on such registration books by the Agency as Bond Registrar. The Agency may deem and treat the person in whose name this Bond is registered as the absolute owner hereof for the purpose of receiving payment of, or on account of, the principal of, redemption premium, if any, and the interest on this Bond, and for all other purposes. This Bond is issuable in the form of a single, fully registered bond in the denomination of $2,600,000.000 and may not be exchanged for multiple bonds. In all cases in which the privilege of transferring this Bond is exercised, the Agency may make a charge sufficient to reimburse it for any expenses and any tax, fee or other governmental charge required to be paid by the Agency in connection therewith, which expenses and charge or charges shall be paid by the person requesting such transfer. This Bond and any interest herein may be transferred only (i) to an Institutional Investor (as defined in the Mortgage Agreement) provided that the Bondholder shall have executed a written assignment of all of its right, title and interest in and to the Mortgage Agreement to the transferee of this Bond, and such transferee shall have executed and delivered to the Agency a Receipt and Affirmation of Bond Purchaser in form acceptable to the Agency and its counsel, or (ii) to a person not an Institutional Investor provided that prior to such transfer the Agency shall have entered into an indenture of mortgage and trust with a corporate trustee reasonably acceptable to the Agency and the proposed new bondholder, the Bondholder shall have executed a written assignment of all of its right, title and interest in and to the Mortgage Agreement to such corporate trustee, and the transferee shall have executed and delivered to the Agency a Receipt and Affirmation of Bond Purchaser in form acceptable to the Agency and its counsel. In either case, the Agency may require as a condition to such transfer, that this Bond be registered under the Securities Act of 1933, as amended, or the securities laws of any state, or that the indenture of mortgage and trust be qualified under the Trust Indenture Act of 1939, as amended, or that the Agency receive an Opinion of Counsel to the effect that no such registration or qualification is required. The Agency shall not be required to register any transfer of this Bond without compliance with the provisions of this paragraph. This Bond is subject to redemption prior to maturity, at the option of the Agency, at the request of the Lessee, which option shall be exercised from payments being made by the Lessee pursuant to the Lease Agreement, upon not less than thirty (30) days prior written notice, as a whole or in part, at any time, upon notice or waiver of notice as provided in the Mortgage Agreement, at the Redemption Prices (expressed as percentages of the amount prepaid) set forth below (collectively, the "Redemption Price"), in each case together with interest accrued thereon to the date of redemption:
Redemption Occurring During Redemption Price --------------------------- ---------------- Year 1 or Year 6 105% Year 2 or Year 7 104% Year 3 or Year 8 103%
6 Year 4 or Year 9 102% Year 5 or Year 10 101%
As used herein, the term "Year" shall mean a period of 365 (or 366, if applicable) days commencing on the Conversion Date. Notwithstanding the above, the Bond may be redeemed in whole or in part without penalty at any time prior to the Conversion Date; during the last sixty (60) days prior to maturity or prior to any Adjustment Date; or during any period of time when Bondholder is obligated to make advances under the Building Loan Contract. This Bond is subject to mandatory redemption prior to maturity, to the extent of (i) excess proceeds of this Bond remaining after the completion of the Facility, (ii) excess proceeds of title insurance, property insurance or condemnation awards remaining after the application thereof toward the restoration of the Facility in accordance with the terms of the Lease Agreement, or (iii) certain amounts so required to be applied pursuant to the Mortgage Agreement, as a whole or in part on any interest payment date, upon notice of waiver of notice as provided in the Mortgage Agreement, at the Redemption Price of one hundred percent (100%) of the unpaid principal amount of this Bond to be redeemed, together with interest accrued thereon to the date of redemption. If this Bond is redeemed in part, the principal amount of the Redemption Price to be redeemed shall be applied to the installments of principal due hereon in inverse order of their due dates in the manner provided in the Mortgage Agreement. In the event the maturity date of this Bond is accelerated following an Event of Default, any tender of payment of the amount necessary to satisfy the entire indebtedness made after such default shall be expressly deemed an evasion of the prepayment premium and shall be deemed a voluntary prepayment. In such a case, to the extent permitted by law, the Bondholder shall be entitled to the amount necessary to satisfy the entire indebtedness plus the applicable prepayment premium that would have been payable if the prepayment were made voluntarily. Notice of redemption of this Bond or any portion thereof shall be given by certified or registered mail, postage prepaid, not less than thirty (30) business days prior to the redemption date, to the Bondholder at the address of the Bondholder as the same shall appear on the registration books of the Agency kept for that purpose at the principal office of the Agency as Bond Registrar, all in the manner and upon the terms and conditions set forth in the Mortgage Agreement; provided, however, that any defect in such notice shall not affect the validity of any proceeding for the redemption of this Bond with respect to which proper mailing was effected. Notice of redemption need not be given if such registered owner waives notice thereof in writing. If notice of redemption shall have been given, or such waiver filed as aforesaid, the principal amount to be redeemed shall become due and payable on the redemption date. This Bond or principal portion thereof so called for redemption will cease to bear interest after the redemption date, provided that notice has been given or waived as provided herein and in the Mortgage Agreement, and further provided that funds 7 sufficient for redemption are paid to the Bondholder on the redemption date. It is hereby certified, recited and declared that all conditions, acts and things required by law and the Mortgage Agreement to exist, to have happened and to have been performed precedent to and in the issuance of this Bond, exist, have happened and have been performed, and that the issuance of this Bond and the issue of which it forms a part are within every debt and other limit prescribed by the laws of the State of New York. Neither the members, directors, officers or agents of the Agency nor any person executing this Bond shall be liable personally or be subject to any personal liability or accountability by reason of the issuance hereof. Unless the context requires otherwise, all terms used in this Bond that are defined in the Mortgage Agreement shall have the meanings set forth therein. IN WITNESS WHEREOF, the Erie County Industrial Development Agency has caused this Bond to be executed in its name by the manual signature of its Treasurer or Assistant Treasurer and its corporate seal to be affixed, impressed, imprinted or otherwise reproduced hereon, and attested by the manual or facsimile signature of its Secretary or Assistant Secretary, all as of December 1, 1994. The issue date of this Bond is December 14, 1994. ERIE COUNTY INDUSTRIAL DEVELOPMENT AGENCY (SEAL) By /s/ David W. Kerchoff ------------------------------- David W. Kerchoff, Assistant Treasurer ATTEST: /s/ John C. Garas ________________________ John C. Garas, Assistant Secretary 8 ASSIGNMENT ---------- For value received, the undersigned hereby sells, assigns and transfers unto [PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE] the within Bond, and all rights thereunder, and hereby irrevocably constitutes and appoints ______________________________________________ Attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated:_____________________ NOTICE: The signature to this assignment must correspond with the name of the registered holder as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever. REGISTRATION Date of In Whose Name Registration Registered Bond Registrar ------------ ------------- -------------- _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ ADVANCES Amount of Total Date of Advances Advance Advances to Date ---------------- ------- ---------------- _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ _______________________ _______________________ _________________________ 9 EX-10.7 21 LESSEE GUARANTY AGREEMENT EXHIBIT 10.7 LESSEE GUARANTY AGREEMENT THIS LESSEE GUARANTY AGREEMENT made and entered into as of December 1, 1994 (the "Lessee Guaranty"), from MIDWAY-CTS BUFFALO, LTD., a New York corporation (the "Lessee"), having its principal office located c/o Coyne International Enterprises Corp., 140 Cortland Avenue, Syracuse, New York 13221, to KEY BANK OF NEW YORK, a domestic corporation formed under the laws of the State of New York (together with any subsequent holder of the Bond referred to below, the "Bondholder"), having its principal office at 50 Fountain Plaza, Buffalo, New York 14202. W I T N E S S E T H: WHEREAS, the Erie County Industrial Development agency, a corporate governmental agency constituting a body corporate and politic and public benefit corporation duly organized and existing under the laws of the State of New York and established pursuant to the Act hereinafter mentioned by Chapter 293 of the 1970 Laws of New York, as amended (the "Agency"), intends to issue its Industrial Development Revenue Bond (1994 Midway-CTS Buffalo, Ltd. Project) in the aggregate principal amount not to exceed $2,600,000 (the "Bond"); and WHEREAS, the Bond are to be issued pursuant to the New York State Industrial Development Agency Act, being Title 1 of Article 18-A of the General Municipal Law of the State of New York, constituting Chapter 24 of the Consolidated Laws of the State of New York, as amended, a resolution of the Agency adopted on August 11, 1993, September 15, 1993 and October 12, 1994, and under and pursuant to a Mortgage Agreement dated as of December 1, 1994, between the Agency and the Bondholder (the "Mortgage Agreement"); and WHEREAS, the proceeds derived from the issuance of the Bond are to be advanced to the Lessee pursuant to a certain Building Loan Contract dated as of December 1, 1994 by and between the Lessee and the Bondholder (the "Building Loan Contract"), and such proceeds are to be used to finance a portion of the cost of the acquisition and construction of a commercial facility within the City of Buffalo consisting of the acquisition of a parcel of land consisting of approximately 4.7 acres and the construction of an approximately 69,265 square foot building thereon, all for sublease to tenants (the "Facility"), which Facility is to be leased to the Lessee pursuant to a Lease Agreement dated as of December 1, 1994 between the Agency and the Lessee (the "Lease Agreement"); and WHEREAS, unless otherwise defined herein, capitalized terms shall have the meaning ascribed in the Mortgage Agreement; and WHEREAS, the Lessee is desirous that the Agency issue, sell and deliver the Bond and apply the proceeds as aforesaid and enter into the Lease Agreement with the Lessee and is willing to enter into this Lessee Guaranty in order to enhance the marketability of the Bond and thereby achieve interest cost and other savings to the Lessee as an inducement to the purchase of the Bond by all who shall at any time become the Bondholder. NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration received, the Lessee does hereby represent, warrant, covenant and agree with the Bondholder as follows: ARTICLE I REPRESENTATIONS AND WARRANTIES OF THE LESSEE Section 1.1. Lessee Representations and Warranties. The Lessee represents ------------------------------------- and warrants that: (a) The Lessee (1) is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, without limitation on the duration of its existence, (2) has the corporate power and authority to own its properties and assets and to carry on its business as now being conducted, (3) is duly qualified to do business in the State of New York, and (4) has the corporate power and authority to execute, enter into, deliver and perform this Lessee Guaranty as required hereunder. (b) The Lessee has the corporate power and authority to execute, deliver and perform this Lessee Guaranty as required hereunder and to guarantee the payment of the principal of, redemption premium, if any, and interest on the Bond pursuant to the provisions hereof and this Lessee Guaranty is the legal, valid and binding obligation of the Lessee enforceable in accordance with its terms. (c) The execution, delivery and performance of this Lessee Guaranty by the Lessee, including the performance of the obligations to guarantee the payment of the Bond by the Lessee and the borrowing evidenced thereby, and all other actions contemplated by this Lessee Guaranty (1) have been duly authorized by all requisite corporate action by the Lessee, (2) will not violate (i) any provision of law, any order of any court or other agency of government or any governmental rule or regulation, the Certificate of Incorporation or By-laws of the Lessee, or (ii) any provision of any indenture, agreement or other instrument to which the Lessee or any of its properties or assets are bound, and (3) will not be in conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, will not accelerate any debt or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Lessee other than as permitted by the terms of this Lessee Guaranty, the Mortgage Agreement and the Lease Agreement. (d) The assumption by the Lessee of its obligations hereunder will result in a direct financial benefit to the Lessee. (e) No registration with or consent or approval of, or other action by, any Federal, state or other governmental authority or regulatory body in the United States is required as of the Closing Date in connection with the execution, delivery and performance of this Lessee Guaranty, 2 or if so required, such registration has been made or such consent or approval given or such other appropriate action taken and the same is in full force and effect, and notice as to the nature of such has heretofore been given to the Bondholder. (f) Since the Last Financial Statement Date there has been no material adverse change in the business, properties or financial condition of the Lessee. (g) The Lessee has good and marketable title to all of its real and personal properties and tangible assets, and the real and personal properties and tangible assets reflected on the financial statements referred to in the Lease Agreement and this Lessee Guaranty (except for such real and personal properties and tangible assets as have been disposed of since the dates of such financial statements because no longer used or useful in the conduct of its business or as have been disposed of in the ordinary course of business), and all such real and personal properties and tangible assets are free and clear of mortgage, pledges, liens, charges and other encumbrances of any nature whatsoever, except such as are not expressly prohibited by the terms hereof. (h) There are no actions, suits or proceedings (whether or not purportedly on behalf of the Lessee) at law or in equity or by or before any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, now pending or threatened against or affecting it, which involve any of the transactions herein contemplated or the possibility which, if adversely determined, would materially impair the right of the Lessee to carry on its business substantially as now conducted or would materially adversely affect the financial condition of the Lease. (i) The Lessee has filed or caused to be filed all Federal, state and local tax returns that are required to be filed and has paid or caused to be paid all taxes required in connection with such returns or pursuant to any assessment received by it, to the extent that such taxes have become due, except for any tax or assessment the validity of which is being contested in good faith by appropriate proceedings, and the Lessee has set aside on its books adequate reserves with respect to any such tax or assessment so contested. (j) The Lessee is not (i) a party to any agreement, indenture, lease or instrument, or (ii) subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation which materially adversely affects its business, properties, assets, operations or financial condition. (k) The Lessee is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party and which materially affects its business, properties or assets, operations or financial condition. (l) The Lessee enjoys peaceful and undisturbed possession in all respects under all leases as to which it is a lessee and all such leases are valid and subsisting and in full force and 3 effect on the date hereof. (m) The Lessee is in compliance in all material respects with the applicable provisions of ERISA and the regulations and published interpretations thereunder. No Reportable Event has occurred with respect to any Plan (as defined in ERISA) administered by the Lessee. (n) The financial statements furnished to the Bondholder fairly present the financial condition and the results of operations of the Lessee as of the dates and for the periods indicated therein and the balance sheets furnished to the Bondholder show all known material liabilities, direct or contingent, of the Lessee as of the respective dates thereof. Each financial statement referred to in this paragraph was prepared in accordance with generally accepted accounting principles applied on a consistent basis. (o) The Lessee agrees to furnish Bondholder within ninety (90) days from the end of each fiscal year a consolidated financial statement for Coyne International Enterprises Corp. inclusive of the Lessee, which shall include a balance sheet, statement of operations and reconciliation of surplus for each fiscal year; to furnish Bondholder within ninety (90) days from the end of each fiscal year a financial statement. All of the aforesaid shall be prepared in accordance with generally accepted accounting practices by accountants satisfactory to Bondholder. ARTICLE II AGREEMENT TO GUARANTEE Section 2.1. Obligations Guaranteed. (a) The Lessee hereby ---------------------- unconditionally guarantees to the Bondholder (1) the full and prompt payment of the principal of the Bond and the indebtedness represented thereby, and the redemption premium, if any, on the Bond when and as the same shall become due and payable, whether at the stated maturity thereof, by acceleration, call for redemption or otherwise; (2) the full and prompt payment of interest on the Bond when and as the same shall become due and payable; (3) the full and prompt payment of an amount equal to each and all of the rental payments and other sums when and as the same shall become due, required to be paid by the Lessee under the terms of the Lease Agreement; and (4) the full and prompt performance and observance by the Lessee of all of the obligations, covenants and agreements required to be performed and observed by the Lessee under the terms of the Lease Agreement, the Building Loan Contract and the other Security Documents. The Lessee hereby irrevocably and unconditionally agrees that upon any default by the Agency in the payment, when due, of any principal of, any redemption premium on, or any interest on the Bond, the Lessee will promptly pay the same. The Lessee further hereby irrevocably and unconditionally agrees that (i) upon any default by the Lessee in the rental payments and other sums, when due and payable, under the Lease Agreement the Lessee will promptly pay the same, and (ii) upon any default by the Lessee in any of the obligations, covenants and agreements required to be performed and observed by the Lessee under the Lease Agreement, the Building Loan Contract and the other Security Documents, the Lessee will effect the observance of such obligations, covenants and agreements. All payments by the Lessee shall be paid in lawful money of the United States of America. Each and every default (x) in the payment of the 4 principal of, redemption premium, if any, or interest on the Bond, (y) in the payments of the rental payments and other sums required to be paid by the Lessee under the terms of the Lease Agreement, or (z) in the prompt performance and observance by the Lessee of all of the obligations, covenants and agreements required to be performed and observed by the Lessee under the terms of the Lease Agreement, the Building Loan Contract and the other Security Documents, shall give rise to a separate cause of action hereunder, and separate suits may be brought hereunder as each cause of actions arises. (b) The Lessee further agrees that this Lessee Guaranty constitutes an absolute, unconditional, present and continuing guarantee of payment and not of collection, and waives any right to require that any resort be had by the Bondholder to (1) any security held by or for the benefit of the Bondholder for payment of the principal of, redemption premium, if any, or interest on the Bond, (2) the Bondholder's rights against any other person, or (3) any other right or remedy available to the Bondholder by contract, applicable law or otherwise. The obligations of the Lessee under this Lessee Guaranty are direct, unconditional and completely independent of the obligations of any other person of entity, and a separate cause of action or separate causes of action may be brought and prosecuted against the Lessee without the necessity of joining the Agency or any other party or previously proceeding with or exhausting any other remedy against any other person who might have become liable for the indebtedness or of realizing upon any security held by or for the benefit of the Bondholder. Section 2.2. Obligations Unconditional. The obligations of the Lessee ------------------------- under this Lessee Guaranty shall be absolute and unconditional, and shall remain in full force and effect until the entire principal of, redemption premium, if any, and interest on the Bond and all payments, obligations, covenants and agreements of the Lessee under the Lease Agreement, the Building Loan Contract and other Security Documents, shall have been paid in full or provided for, and all costs, Bondholder's fees and commissions and expenses, if any, referred to in Section 2.5 hereof shall have been paid in full, and, to the extent permitted by law, such obligations shall not be affected, modified, released, or impaired by any state of facts or the happening from time to time of any event, including without limitation, any of the following whether or not with notice to, or the consent of the Lessee: (a) the invalidity, irregularity, illegality or unenforceability of, or any defect in, any of the Security Documents, the Bond or any collateral security for any thereof; (b) any present or future law or order of any government (de jure or -- ---- de facto) or of any agency thereof purporting to reduce, amend or otherwise - -- ----- affect the Bond or any other obligation of the Agency, the Lessee, or any other obligor or to vary any terms of payment; (c) any claim of immunity on behalf of the Agency, the Lessee or any other obligor or with respect to any property of the Agency or the Lessee or any other obligor; (d) the compromise, settlement, release, extension, indulgence, change, modification or termination of any or all of the obligations, covenants or agreements of any obligor 5 under any of the Security Documents; (e) the failure to give notice to any obligor under any of the Security Documents of the occurrence of any default or Event of Default under the terms and provisions of any of the Security Documents (except as may be specifically provided in any such Security Document); (f) the actual or purported assignment, subleasing or mortgaging of all or any part of the interest of the Agency in the Lease Agreement or the Facility or any failure of title with respect to the Agency's interest in the Facility; (g) the actual or purported assignment, subleasing or mortgaging of all or any part of the interest of any obligor under any of the Security Documents; (h) the actual or purported assignment, subleasing or mortgaging of all or any of the obligations, covenants and agreement contained in this Lessee Guaranty or in any other Security Document; (i) the waiver of the payment, performance or observance by any obligor under any of the Security Documents of any of the obligations, conditions, covenants or agreements of any or all of them contained in any such Security Document; (j) the receipt and acceptance by the Bondholder or the Agency of notes, checks or other instruments for the payment of money made by any obligor under any of the Security Documents and any extensions and renewals thereof; (k) the extension of the time for payment of the principal of, redemption premium, if any, or interest on the Bond or any other amounts that are due or may become due under any of the Security Documents or of the time for performance of any other obligations, covenants or agreements under or arising out of the Bond or any of the Security Documents or any extension or renewal thereof; (l) the modification or amendment (whether material or otherwise) of any duty, obligation, covenant or agreement set forth in the Bond or in any of the Security Documents; (m) the taking of or the omission to take any action referred to in the Bond or in any of the Security Documents; (n) any failure, omission, delay or lack on the part of the Agency, the Bondholder or any other person to enforce, assert or exercise any right, power or remedy conferred on the Agency, the Bondholder or such other person in this Lessee Guaranty or in any of the Security Documents or any other act or acts on the part of the Agency or the Bondholder; (o) the voluntary or involuntary liquidation, dissolution, merger, consolidation, 6 sale or other disposition of all or substantially all the assets, marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with creditors or readjustment of, or other similar proceedings affecting the Lessee, the Agency, or any other obligor under any of the Security Documents or any or all of the assets of any of them, or any allegation or contest of the validity of this Lessee Guaranty or any other Security Document in any such proceeding; it is specifically understood, consented and agreed to that this Lessee Guaranty shall remain and continue in full force and effect and shall be enforceable against the Lessee to the same extent and with the same force and effect as if such proceedings had not been instituted; and it is the intent and purpose of this Lessee Guaranty that the Lessee shall and does hereby waive all rights and benefits which might accrue to the Lessee by reason of any such proceedings; (p) to the extent permitted by law, the release or discharge of the Lessee from the performance or observance of any obligation, covenant or agreement contained in this Lessee Guaranty by operation of law; (q) the default or failure of the Lessee fully to perform any of its obligations set forth in this Lessee Guaranty; (r) any release or impairment of the security pledged under the Mortgage Agreement or under any other Security Document; (s) the release, substitution or replacement in accordance with the terms of the Lease Agreement of any property subject thereto or any delivery, repossession, surrender or destruction of such property, in whole or in part; (t) any limitation on the liability or obligations of the Bondholder, the Agency, or the Lessee or any other obligor under any of the Security Documents, or any termination, cancellation, frustration, invalidity or unenforceability, in whole or in part, of the Lease Agreement, the Building Loan Contract, the Mortgage Agreement or any other Security Document or any term thereof, or the Bond; (u) any failure of the Agency or the Bondholder to mitigate damages resulting from any default by any Obligor under any of the Security Documents; (v) the merger or consolidation of any corporate obligor under any of the Security Documents into or with any other person, or any sale, lease or transfer of any or all of the assets of any such obligor to any person; (w) any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor; or (x) any other occurrence whatsoever, whether similar or dissimilar to the 7 foregoing. Section 2.3. No Waiver or Set-Off. No act or commission or omission of -------------------- any kind or at any time upon the part of the Agency or the Bondholder, or their successors and assigns, in respect of any matter whatsoever shall in any way impair the rights of the Bondholder to enforce any right, power or benefit under this Lessee Guaranty and no set-off, counterclaim, reduction, or diminution of any obligation, or any defense of any kind or nature (other than performance by the Lessee of its obligations hereunder), which the Lessee, or any other obligor under any of the Security Documents has or may have against the Agency or the Bondholder or any assignee or successor thereof shall be available hereunder to the Lessee. Section 2.4 Events of Default. An "Event of Default" shall exist if any ----------------- of the following occurs and is continuing: (a) The Lessee defaults in any guarantee referred to in Section 2.1 hereof or in any agreement contained in Section 2.8 hereof; (b) The Lessee fails to observe and perform any covenant, condition or agreement of this Lessee Guaranty and continuance of such failure for more than thirty (30) days after written notice (which shall be deemed given when set by registered or certified mailing) of such failure has been given to the Lessee by the Bondholder; (c) Any warranty, representation or other statement by or on behalf of the Lessee contained in this Lessee Guaranty is false, misleading or incorrect in any material respect as of the date made; (d) The Lessee shall (i) apply for or consent to the appointment of or the taking of possession by a receiver, liquidator, custodian or trustee of itself or of all or a substantial part of its property, (ii) admit in writing its inability to pay its debts as such debts become due, (iii) make general assignment for the benefit of its creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as now or thereafter in effect), (v) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding up, or composition or adjustment of debts, (vi) fail to controvert in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under such Bankruptcy Code, or (vii) take any action for the purpose of effecting any of the foregoing; (e) A proceeding or case shall be commenced, without the application or consent of the Lessee in any court of competent jurisdiction, seeking (i) liquidation, reorganization, dissolution, winding-up or composition or adjustment of debts, (ii) the appointment of a trustee, receiver, liquidator, custodian or the like of the Lessee or of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts or any order for relief against the Lessee shall be entered in an involuntary case under such Bankruptcy Code. 8 (f) Final judgment for the payment of money in excess of an aggregate uninsured liabilities of $100,000 shall be rendered against the Lessee and the same shall remain undischarged for a period of thirty (30) consecutive days during which execution shall not be effectively stayed; (g) There shall be a default in respect of any evidence of indebtedness for money borrowed by the Lessee (or with respect to the performance of any obligations of the Lessee incurred in connection with any indebtedness for money borrowed) where the effect of such default is to accelerate the maturity of such indebtedness or to permit the holders thereof (or a trustee on behalf of such holders) to cause such indebtedness to become due prior to its stated maturity, or any such indebtedness shall not be paid as and when due and payable; or (h) An Event of Default under the Mortgage Agreement, the Building Loan Contract or under any other Security Document shall occur and be continuing. Upon an Event of Default the Bondholder shall have the right to proceed first and directly against the Lessee under this Lessee Guaranty without proceeding against or exhausting any other remedies which it may have and without proceeding against or exhausting any other remedies which it may have and without resorting to any security held by the Bondholder or by any obligor under any of the Security Documents. All moneys recovered by the Bondholder pursuant to this Lessee Guaranty shall be used and applied in accordance with Section 8.04 of the Mortgage Agreement. Section 2.5. Waiver of Notice; Expenses. The Lessee hereby expressly -------------------------- waives notice from the Bondholder of its acceptance and reliance on this Lessee Guaranty or of any action taken or omitted in reliance hereon. The Lessee further expressly waives diligence, presentment, demand for payment, protest, any requirement that any right or power be exhausted or any action be taken against the Agency or the Lessee or against any collateral security for the Bond. The Lessee agrees to pay all costs, Bondholder's fees and commissions and expenses (including all court costs and reasonable attorneys' fees) which may be incurred by the Bondholder in enforcing or attempting to enforce this Lessee Guaranty following any default on the part of any Lessee hereunder, whether the same shall be enforced by suit or otherwise. Section 2.6. Dissolution or Merger of Lessee; Restrictions on Lessee. The ------------------------------------------------------- Lessee covenants that it will (i) maintain its corporation existence, (ii) continue to be a corporation subject to service of process in the State of New York and either organized under the laws of the State of New York, or organized under the laws of any state of the United States and duly qualified to do business as a foreign corporation in the State of New York, (iii) not liquidate, wind-up or dissolve or otherwise dispose of all or substantially all of its property, business or assets remaining after the execution and delivery of this Lessee Guaranty, and (iv) not consolidate with or merge into another entity or permit one or more entities to consolidate with or merge into it. The Lessee may, however, without violating the foregoing, consolidate with or merge into another entity, or permit one or more entities to consolidate with or merger into it, or sell or otherwise transfer all or substantially all of its property, business or assets to another such entity (and thereafter liquidate, wind-up or dissolve or not, as the Lessee may elect) if (i) the Lessee is the surviving, resulting or transferee entity, as the 9 case may be, or (ii) in the event that the Lessee is not the surviving, resulting or transferee entity, as the case may be, such entity is controlled by Coyne International Enterprises Corp. and (A) is a solvent entity subject to service of process in the State of New York and either organized under the laws of the State of New York, or organized under the laws of any other state of the United States and duly qualified to do business as a foreign corporation in the State of New York, (B) assumes in writing all of the obligations of the Lessee contained in this Lessee Guaranty and all other Security Documents (as defined in the Lease Agreement) to which the Lessee shall be a party and in the opinion of counsel who is acceptable to the Bondholder, (x) such entity shall be bound by all of the terms applicable to the Lessee of this Lessee Guaranty and all other Security Documents to which the predecessor Lessee entity shall have been a party, and (y) such action does not legally impair the security interest afforded by the Security Documents for the Bondholder, and (C) has a net worth (as determined in accordance with generally accepted accounting principles and certified by an independent public accountant) after the merger, consolidation, sale or transfer at least equal to that of the Lessee entity immediately prior to such merger, consolidation, sale or transfer. The Lessee further covenants and agrees that it is and will continue to be duly qualified to do business in the State of New York and that any entity succeeding to the rights of the Lessee under this Lessee Guaranty shall be and continue to be duly qualified to do business in the State of New York. Section 2.7. Benefit and Enforcement. This Lessee Guaranty is entered ----------------------- into by the Lessee for the benefit of the Agency and the Bondholder, all of whom shall be entitled in the same manner as set forth in the Mortgage Agreement to enforce performance and observance of this Lessee Guaranty to the same extent as if they were parties signatory hereto. Section 2.8. Survival of Guarantee Obligation. If the Bondholder receives -------------------------------- any payment on account of the liability guaranteed hereunder, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be transferred or repaid to a trustee, receiver, assignee for the benefit of creditors or any other party under any bankruptcy act or code, state or Federal law or common law or equitable doctrine, then to the extent of any sum not finally retained by the Bondholder, this Lessee Guaranty shall remain in full force and effect until the Lessee shall have made payment to the Bondholder of such sum, which payment shall be due on demand. ARTICLE III NOTICE OF SERVICE OF PROCESS, PLEADINGS AND OTHER PAPERS Section 3.1. Service of Process. The Lessee represents that it is subject ------------------ to service of process in the State of New York and covenants that it will remain so subject so long as the Bond is outstanding. If for any reason the Lessee should cease to be so subject to service of process in the State of New York, the Lessee hereby designates and appoints, without power of revocation, the law firm of O'Hara & Hanlon, 9 Albany Street, Cazenovia, New York 13035 (the "Agent") as the agent of the Lessee upon whom may be served all process, pleadings, notices or other papers which may be served upon the Lessee as a result of any of its obligations under this Lessee Guaranty. 10 Section 3.2. Notices. Any notice required to be sent to the Lessee, or ------- any notice including process, pleadings or other papers served upon the foregoing Agent shall at the same time be sent by registered or certified mail, postage prepaid, to the Lessee at the address set forth above or to such other address as may be furnished by the Lessee to the Bondholder in writing. Section 3.3. Consent to Jurisdiction. The Lessee irrevocably and ----------------------- unconditionally (a) agrees that any suit, action or other legal proceeding arising out of this Lessee Guaranty may be brought in the courts of record of the State of New York in Erie County or the courts of the United States, Western District of New York; (b) consents to the jurisdiction of each such court in any such suit, action or proceeding; and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts. For such time as any portion of the Bond shall be unpaid in whole, or in part, the Agent shall accept and acknowledge in the Lessee's behalf service of any and all process in any such suit, action or proceeding brought in any such court. The Lessee agrees and consents that any such service of process upon such Agent and written notice of such service to the Lessee in the manner set forth in Section 3.2 hereof shall be taken and held to be valid personal service upon the Lessee whether or not the Lessee shall then be doing, or at any time shall have done, business within the State of New York and that any such service of process shall be of the same force and validity as if service were made upon it according to the laws governing the validity and requirements of such service in the State of New York and waives all claim of error by reason of any such service. Such Agent shall not have any power or authority to enter any appearance or to file any pleadings in connection with any suit, action or other legal proceedings against the Lessee or to conduct the defense of any such suit, action or any other legal proceeding except as expressly authorized by the Lessee. ARTICLE IV MISCELLANEOUS Section 4.1. Lessee Guaranty to Become Effective. The obligations of the ----------------------------------- Lessee hereunder shall arise absolutely and unconditionally when the Bond shall have been issued, sold and delivered by the Agency. Section 4.2. Remedies Not Exclusive. No remedy herein conferred upon or ---------------------- reserved to the Bondholder is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lessee Guaranty or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any Event of Default, default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Bondholder to exercise any remedy reserved to it in this Lessee Guaranty, it shall not be necessary to give any notice, other than such notice as may be expressly provided in this Lessee Guaranty. In the event any provision contained in this Lessee Guaranty should be breached by any party and thereafter duly waived by the other party so empowered to act, such waiver shall be limited to the particular breach so waived and shall not be 11 deemed to waive any other breach hereunder. No waiver, amendment, release or modification of this Lessee Guaranty shall be established by conduct, custom or course of dealing, but solely by an instrument in writing duly executed by the parties thereunto duly authorized by this Lessee Guaranty. Section 4.3. Entire Agreement; Counterparts. This Lessee Guaranty ------------------------------ constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and may be executed simultaneously in several counter- parts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Section 4.4. Severability. The invalidity or unenforceability of any one ------------ or more phrases, sentences, clauses or sections in this Lessee Guaranty contained, shall not affect the validity or enforceability of the remaining portions of this Lessee Guaranty, or any part thereof. Section 4.5. Release upon Repayment of Bond. Upon payment of the Bond and ------------------------------ the indebtedness represented thereby pursuant to and in accordance with the Mortgage Agreement and the payment and satisfaction of all payments, obligations, covenants and agreements of the Lessee under the Lease Agreement, the Building Loan Contract and the other Security Documents, and, if applicable, upon payment of the costs, fees, commissions and expenses required by Section 2.5 hereof, the Bondholder shall release in writing the Lessee from its obligations hereunder except as provided in 2.8 hereof. Section 4.6. Applicable Law. This Lessee Guaranty shall be governed by -------------- and construed in accordance with the laws of the State of New York. Section 4.7. Successors and Assigns. This Lessee Guaranty shall be ---------------------- binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Section 4.8. Date of Lessee Guaranty for Reference Purposes Only. The --------------------------------------------------- date of this Lessee Guaranty shall be for reference purposes only. IN WITNESS WHEREOF, the Lessee has executed this Lessee Guaranty as of the year and day first above written. Midway-CTS Buffalo, Ltd. By: /s/ Raymond T. Ryan ----------------------------------- Vice President 12 STATE OF NEW YORK ) ) SS.: COUNTY OF ERIE ) On this 14th day of December, 1994 before me personally came Raymond T. Ryan to me known and known to me to be the individual described in and who executed the foregoing instrument, and who, being by me duly sworn, did depose and say that he resides in Manlius, New York; that he is the Vice President of Midway-CTS Buffalo, Ltd., a New York corporation and he executed the foregoing instrument and that he signed his name thereto by order of the board of directors of said corporation. /s/ Alexander Pobedinsky ------------------------------------ Alexander Pobedinsky Notary Public, State of New York No. 5010409 Qualified in Onondago County Commission Expires March 29, 1995 13 EX-10.8 22 PURCHASE AGREEMENT EXHIBIT 10.8 EXECUTION COPY COYNE INTERNATIONAL ENTERPRISES CORP., AS ISSUER BLUE RIDGE TEXTILE MANUFACTURING, INC., CLEAN TOWEL SERVICE, INC., OHIO GARMENT RENTAL, INC. AND MIDWAY-CTS BUFFALO, INC., AS SUBSIDIARY GUARANTORS $75,000,000 11 1/4% SENIOR SUBORDINATED SECURITIES DUE 2008 PURCHASE AGREEMENT DATED JUNE 23, 1998 NATIONSBANC MONTGOMERY SECURITIES LLC FIRST UNION CAPITAL MARKETS, A DIVISION OF WHEAT FIRST SECURITIES, INC. TABLE OF CONTENTS SECTION 1. REPRESENTATIONS AND WARRANTIES..................................................... 2 No Registration Required.................................................................... 2 No Integration of Offerings or General Solicitation......................................... 3 Eligibility for Resale under Rule 144A...................................................... 3 The Offering Memorandum..................................................................... 3 The Purchase Agreement...................................................................... 3 The Registration Rights Agreement and the DTC Agreement..................................... 4 Authorization of the Securities and the Exchange Securities................................. 4 Authorization of the Indenture.............................................................. 5 Description of the Securities and the Indenture............................................. 5 No Material Adverse Change.................................................................. 5 Independent Accountants..................................................................... 5 Preparation of the Financial Statements..................................................... 5 Incorporation and Good Standing of the Company and its Subsidiaries......................... 6 Capitalization and Other Capital Stock Matters.............................................. 6 Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required.. 6 No Material Actions or Proceedings.......................................................... 7 Intellectual Property Rights................................................................ 7 All Necessary Permits, etc.................................................................. 8 Title to Properties......................................................................... 8 Tax Law Compliance.......................................................................... 8 Company and Each Subsidiary Guarantor Not an 'Investment Company.'.......................... 8 Insurance................................................................................... 9 No Price Stabilization or Manipulation...................................................... 9 Company's Accounting System................................................................. 9 Compliance with Environmental Laws.......................................................... 9 Periodic Review of Costs of Environmental Compliance........................................ 10 ERISA Compliance............................................................................ 10 Solvency.................................................................................... 11 No Default in Indebtedness.................................................................. 11 Related Party Transactions.................................................................. 11 Industry Statistics......................................................................... 11 Credit Documents............................................................................ 11 Note and Warrant Repurchase Agreement....................................................... 11 Compliance with Regulation S................................................................ 12 Form of Regulation S Notes.................................................................. 12 SECTION 2. PURCHASE, SALE AND DELIVERY OF NOTES.............................................. 12 The Securities.............................................................................. 12 The Closing Date............................................................................ 12 Delivery of the Notes....................................................................... 13 Delivery of Offering Memorandum to the Initial Purchasers................................... 13 Initial Purchasers as Qualified Institutional Buyers........................................ 13 SECTION 3. ADDITIONAL COVENANTS.............................................................. 13 Initial Purchasers' Review of Proposed Amendments and Supplements........................... 13 Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters...... 13 Copies of the Offering Memorandum........................................................... 14 Blue Sky Compliance......................................................................... 14 Use of Proceeds............................................................................. 14 Ratings of the Notes........................................................................ 14
i The Depositary.............................................................................. 15 Additional Issuer Information............................................................... 15 Agreement Not To Offer or Sell Additional Notes............................................. 15 Future Reports to the Initial Purchasers.................................................... 15 Registration Rights Agreement............................................................... 15 No Integration.............................................................................. 15 Restriction on Repurchases.................................................................. 16 Legended Notes.............................................................................. 16 PORTAL...................................................................................... 16 Form D...................................................................................... 16 Due Diligence............................................................................... 16 SECTION 4. PAYMENT OF EXPENSES................................................................ 17 SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASERS............................ 17 Accountants' Comfort Letter................................................................. 17 No Material Adverse Change or Ratings Agency Change......................................... 17 Opinion of Counsel for the Company and the Subsidiary Guarantors............................ 18 Opinion of General Counsel for the Company and the Subsidiary Guarantors.................... 22 Opinion of Counsel for the Initial Purchasers............................................... 22 Officers' Certificate....................................................................... 23 Bring-down Comfort Letter................................................................... 23 PORTAL Listing.............................................................................. 23 Registration Rights Agreement............................................................... 23 Redemption of Notes and Warrants............................................................ 23 Additional Documents........................................................................ 23 SECTION 6. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES...................................... 24 SECTION 7. OFFER, SALE AND RESALE PROCEDURES.................................................. 24 Offers and Sales only to Qualified Institutional Buyers or Regulation S Investors.......... 24 No General Solicitation..................................................................... 24 Purchases by Non-Bank Fiduciaries........................................................... 24 Restrictions on Transfer.................................................................... 24 Delivery of Offering Memorandum............................................................. 25 SECTION 8. INDEMNIFICATION.................................................................... 25 Indemnification of the Initial Purchasers................................................... 25 Indemnification of the Company and the Subsidiary Guarantors................................ 27 Notifications and Other Indemnification Procedures.......................................... 27 Settlements................................................................................. 28 SECTION 9. CONTRIBUTION....................................................................... 28 SECTION 10.TERMINATION OF THIS AGREEMENT...................................................... 30 SECTION 11.REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY................................ 30 SECTION 12.NOTICES............................................................................ 30 SECTION 13.SUCCESSORS......................................................................... 31 SECTION 14.PARTIAL UNENFORCEABILITY........................................................... 31 SECTION 15.GOVERNING LAW PROVISIONS........................................................... 31 Consent to Jurisdiction..................................................................... 31 Waiver of Immunity.......................................................................... 32
ii SECTION 16. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL PURCHASERS.......................... 32 SECTION 17. GENERAL PROVISIONS................................................................ 32 SCHEDULE A .................................................................................. 1 ANNEX I .................................................................................. 1
iii PURCHASE AGREEMENT June 23, 1998 NATIONSBANC MONTGOMERY SECURITIES LLC FIRST UNION CAPITAL MARKETS, a division of Wheat First Securities, Inc. As Initial Purchasers c/o NATIONSBANC MONTGOMERY SECURITIES LLC 100 North Tryon Street, 7th Floor Charlotte, NC 28255 Ladies and Gentlemen: INTRODUCTORY. Coyne International Enterprises Corp., a New York corporation (the "Company"), proposes to issue and sell to the several Initial Purchasers named in Schedule A (the "Initial Purchasers"), acting severally and ---------- not jointly, the respective amounts set forth in such Schedule A of an ---------- $75,000,000 aggregate principal amount of the Company's 11 1/4% Senior Subordinated Notes due 2008 (the "Notes"). The Company's obligations under the Notes, including the payment of principal of, premium and Liquidated Damages (as defined in the Indenture), if any, and interest on the Notes will be unconditionally guaranteed (the "Subsidiary Guarantees" and collectively with the Notes, the "Securities") by Blue Ridge Textile Manufacturing, Inc., a Georgia corporation, Clean Towel Service, Inc., a Georgia corporation, Ohio Garment Rental, Inc., an Ohio corporation and Midway-CTS Buffalo, Ltd., a New York corporation, and their respective successors and assigns (together with any future subsidiary of the Company, each a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors"). NationsBanc Montgomery Securities LLC and First Union Capital Markets, a division of Wheat First Securities, Inc. have agreed to act as the several Initial Purchasers in connection with the offering and sale of the Securities. The Securities will be issued pursuant to an indenture dated as of June 26, 1998 (the "Indenture") among the Company, the Subsidiary Guarantors and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). Securities issued in book-entry form will be issued in the name of Cede & Co., as nominee of The Depositary Trust Company (the "Depositary") pursuant to a DTC Agreement, to be dated as of the Closing Date (as defined in Section 2) (the "DTC Agreement"), among the Company, the Subsidiary Guarantors, the Trustee and the Depositary. The holders of the Securities will be entitled to the benefits of a registration rights agreement to be dated as of June 26, 1998 (the "Registration Rights Agreement," attached hereto as Exhibit "A"), among the Company, the Subsidiary Guarantors and the Initial Purchasers, pursuant to which the Company will agree to file, within 45 days of the Closing Date, a registration statement with the Securities and Exchange Commission (the "Commission") 1 registering the Exchange Notes and the Exchange Subsidiary Guarantees (each as defined in the Registration Rights Agreement and together, the "Exchange Securities") under the Securities Act of 1933, as amended (the "Securities Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder). The Company and the Subsidiary Guarantors understand that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth herein and in the Offering Memorandum (as defined below) and agree that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers (the "Subsequent Purchasers") at any time after the date of this Agreement. The Securities are to be offered and sold to or through the Initial Purchasers without being registered with the Commission under the Securities Act, in reliance upon exemptions therefrom. The terms of the Securities and the Indenture will require that investors that acquire Securities expressly agree that Securities may only be resold or otherwise transferred, after the date hereof, if such Securities are registered for sale under the Securities Act or if an exemption from the registration requirements of the Securities Act is available (including the exemptions afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S") thereunder). The Company and the Subsidiary Guarantors have prepared and delivered to each Initial Purchaser copies of an Offering Memorandum "subject to completion" dated May 29, 1998 (the "Preliminary Offering Memorandum") and have prepared and will deliver to each Initial Purchaser, on the date hereof or the next succeeding day, copies of the Offering Memorandum dated June 23, 1998 describing the terms of the Securities, each for use by such Initial Purchaser in connection with its solicitation of offers to purchase the Securities. As used herein, the "Offering Memorandum" shall mean, with respect to any date or time referred to herein, the Offering Memorandum of the Company and the Subsidiary Guarantors dated June 23, 1998, including amendments or supplements thereto and any exhibits thereto, in the most recent form that has been prepared and delivered by the Company and the Subsidiary Guarantors to the Initial Purchasers in connection with their solicitation of offers to purchase Securities. Further, any reference to the Preliminary Offering Memorandum or the Offering Memorandum shall be deemed to refer to and include any Additional Issuer Information (as defined in Section 3(f)) furnished by the Company or the Subsidiary Guarantors prior to the completion of the distribution of the Securities. The Company and each Subsidiary Guarantor hereby jointly and severally confirm their agreements with the Initial Purchasers as follows: SECTION 1. REPRESENTATIONS AND WARRANTIES. The Company and each Subsidiary Guarantor hereby jointly and severally represent, warrant and covenant to each Initial Purchaser as follows: (a) No Registration Required. Subject to compliance by the Initial Purchasers with the representations and warranties set forth in Section 2(e) hereof and with the procedures set forth in Section 7 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the Securities Act or, until such time as the Exchange Securities are issued, pursuant to an effective registration statement, to qualify the Indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act", which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder). 2 (b) No Integration of Offerings or General Solicitation. The Company and the Subsidiary Guarantors have not, directly or indirectly, solicited any offer to buy or offered to sell, and will not, directly or indirectly, solicit any offer to buy or offer to sell, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the Securities Act. None of the Company, the Subsidiary Guarantors, their affiliates (as such term is defined in Rule 501(b) under the Securities Act (each, an "Affiliate"), or any person acting on their behalf (other than the Initial Purchasers, as to whom the Company and the Subsidiary Guarantors make no representation or warranty) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. With respect to those Securities sold in reliance upon Regulation S, (i) none of the Company, the Subsidiary Guarantors, their Affiliates or any person acting on their behalf (other than the Initial Purchasers, as to whom the Company and the Subsidiary Guarantors make no representation or warranty) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (ii) each of the Company and their Affiliates and any person acting on their behalf (other than the Initial Purchasers, as to whom the Company and the Subsidiary Guarantors make no representation or warranty) has complied and will comply with the offering restrictions set forth in Regulation S. (c) Eligibility for Resale under Rule 144A. Subject to compliance by the Initial Purchasers with the representations and warranties set forth in Section 2(e) hereof and with the procedures set forth in Section 7 hereof, the Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Date, of the same class as securities listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or quoted in a U.S. automated interdealer quotation system. (d) The Offering Memorandum. The Offering Memorandum does not, and at the Closing Date will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by any Initial Purchaser through NationsBanc Montgomery Securities LLC expressly for use in the Offering Memorandum. Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its date, contains all the information specified in, and meeting the requirements of, Rule 144A(d)(4). The Company and the Subsidiary Guarantors have not distributed and will not distribute, prior to the later of the Closing Date and the completion of the Initial Purchasers' distribution of the Securities, any offering material in connection with the offering and sale of the Securities other than a Preliminary Offering Memorandum or the Offering Memorandum. (e) The Purchase Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company and the Subsidiary Guarantors, enforceable in accordance with its terms, except as rights to indemnification and contribution hereunder may be limited by applicable law or public policy and except as the enforcement hereof may be limited by bankruptcy, insolvency, 3 reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (f) The Registration Rights Agreement and the DTC Agreement. At the Closing Date, each of the Registration Rights Agreement and the DTC Agreement will be duly authorized, executed and delivered by, and will be a valid and binding agreement of, the Company and the Subsidiary Guarantors, enforceable in accordance with its terms, except as rights to indemnification and contribution may be limited by applicable law or public policy and except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (g) Authorization of the Securities and the Exchange Securities. (i) The Notes to be purchased by the Initial Purchasers from the Company are in the form contemplated by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, at the Closing Date, will have been duly executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered against payment of the purchase price therefor, will constitute valid and binding agreements of the Company, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture; (ii) the Exchange Notes have been duly and validly authorized for issuance by the Company, and when issued and authenticated in accordance with the terms of the Indenture, the Registration Rights Agreement and the Exchange Offer (as defined in the Registration Rights Agreement), will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting enforcement of the rights and remedies of creditors or by general principles of equity and will be entitled to the benefits of the Indenture; (iii) the Subsidiary Guarantees are in the form contemplated by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, at the Closing Date, will have been duly executed by each of the Subsidiary Guarantors and, when authenticated in the manner provided for in the Indenture and delivered against payment of the purchase price for the Securities, will constitute valid and binding agreements of the Subsidiary Guarantors, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture; and (iv) the Exchange Subsidiary Guarantees have been duly authorized for issuance and exchange pursuant to the Indenture, the Registration Rights Agreement and the Exchange Offer and, when duly executed by each of the Subsidiary Guarantors and authenticated in the manner provided for in the Indenture and delivered in exchange for the Subsidiary Guarantees, will constitute valid and binding agreements of the Subsidiary Guarantors, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture. 4 (h) Authorization of the Indenture. The Indenture has been duly authorized by the Company and the Subsidiary Guarantors and, at the Closing Date, will have been duly executed and delivered by the Company and the Subsidiary Guarantors and will constitute a valid and binding agreement of the Company and the Subsidiary Guarantors, enforceable against the Company and the Subsidiary Guarantors in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (i) Description of the Securities and the Indenture. The Securities, the Exchange Securities and the Indenture will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum and will be in the respective forms previously delivered to the Initial Purchasers. (j) No Material Adverse Change. Except as otherwise disclosed in the Offering Memorandum, subsequent to the respective dates as of which information is given in the Offering Memorandum: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries, considered as one entity (any such change is called a "Material Adverse Change"); (ii) the Company and its subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company or, except for dividends paid to the Company or other subsidiaries, any of its subsidiaries on any class of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any class of capital stock. (k) Independent Accountants. Coopers & Lybrand, L.L.P., who have expressed their opinion with respect to the financial statements (which term as used in this Agreement includes the related Securities thereto) filed with the Commission included in the Offering Memorandum are independent public or certified public accountants within the meaning of Regulation S-X under the Securities Act and the Exchange Act. (l) Preparation of the Financial Statements. The financial statements, (including the notes thereto) included in the Offering Memorandum present fairly in all material respects the consolidated financial position of the Company and its subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related Securities thereto. The financial data set forth in the Offering Memorandum under the captions "Summary--Summary Unaudited As Adjusted Financial Information," "Summary--Summary Financial Information," "Selected Financial and Operating Data" and "Capitalization" fairly present in all material respects the information set forth therein on a basis consistent with that of the audited financial statements contained in the Offering Memorandum. The Company's ratios of earnings to fixed charges set forth in the Offering Memorandum under the captions "Summary--Summary Financial Information" 5 and "Selected Financial and Operating Data" have been calculated in compliance with Item 503(d) of Regulation S-K under the Securities Act. (m) Incorporation and Good Standing of the Company and its Subsidiaries. Each of the Company and its subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under each of this Agreement, the Registration Rights Agreement, the DTC Agreement, the Securities, the Exchange Securities, the Indenture, the Credit Agreement, dated as of June 26, 1998, among the Company, certain of its subsidiaries and NationsBank, N.A. (the "Credit Agreement") and all documents and instruments ancillary to the Credit Agreement (together with the Credit Agreement, the "Credit Documents") and that certain letter agreement, dated as of June 23, 1998, between the Company and Capital Resource Lenders II, LP and Exeter Venture Lenders, LP (the "Note and Warrant Repurchase Agreement"). Each of the Company and its subsidiaries is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. All of the issued and outstanding capital stock of each subsidiary has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim. The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the Subsidiary Guarantors. (n) Capitalization and Other Capital Stock Matters. At April 30, 1998, on a consolidated basis, after giving pro forma effect to the issuance and sale of the Securities pursuant hereto, initial borrowings under the Credit Documents and the application of the proceeds therefrom (in each case as described in the Offering Memorandum), the Company would have an authorized and outstanding capitalization as set forth in the Offering Memorandum under the caption "Capitalization". The Company's capital stock conforms in all material respects to the description thereof set forth in the Offering Memorandum. All of the outstanding shares of the Company's capital stock have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with federal and state securities laws. None of the outstanding shares of the Company's capital stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company or the Subsidiary Guarantors. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or any of its subsidiaries other than those accurately described in the Offering Memorandum. (o) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or is in default (or, with the giving of notice or lapse of time, would be in default) ("Default") under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the 6 property or assets of the Company or any of its subsidiaries is subject (each, an "Existing Instrument"), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change. The Company's and its subsidiaries' execution, delivery and performance of this Agreement, the Registration Rights Agreement, the DTC Agreement, the Indenture, the Credit Documents and the Note and Warrant Repurchase Agreement and the issuance and delivery of the Securities or the Exchange Securities, and consummation of the transactions contemplated hereby and thereby (i) have been duly authorized by all necessary corporate action and will not result in any violation of the provisions of the charter or by- laws of the Company or any subsidiary, (ii) after giving effect to the application of the proceeds from sale of the Notes as described in the Offering Memorandum will not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument, except for such conflicts, breaches, Defaults, Debt Repayment Triggering Events, liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company or any subsidiary. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Company's or its subsidiaries' execution, delivery and performance of this Agreement, the Registration Rights Agreement, the DTC Agreement, the Indenture, the Credit Documents or the Note and Warrant Repurchase Agreement or the issuance and delivery of the Securities or the Exchange Securities, or consummation of the transactions contemplated hereby and thereby, except such as have been obtained or made by the Company and its subsidiaries and are in full force and effect under the applicable state securities or blue sky laws, and with respect to the Registration Rights Agreement, the Securities Act and applicable state securities or blue sky laws. As used herein, a "Debt Repayment Triggering Event" means any event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries. (p) No Material Actions or Proceedings. There are no legal or governmental actions, suits or proceedings pending or, to the best of the Company's and the Subsidiary Guarantors' collective knowledge, threatened (i) against or affecting the Company or any of its subsidiaries, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company or any of its subsidiaries or (iii) relating to environmental or discrimination matters, where in any such case (A) there is a reasonable possibility that such action, suit or proceeding might be determined adversely to the Company or such subsidiary and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or adversely affect the consummation of the transactions contemplated by this Agreement. No material labor dispute with the employees of the Company or any of its subsidiaries exists or, to the best of the Company's and the Subsidiary Guarantors' collective knowledge, is threatened or imminent. (q) Intellectual Property Rights. The Company and its subsidiaries own or possess sufficient trademarks, trade names, patent rights, copyrights, licenses, approvals, 7 trade secrets and other similar rights (collectively, "Intellectual Property Rights") reasonably necessary to conduct their businesses as now conducted; and the expected expiration of any of such Intellectual Property Rights would not result in a Material Adverse Change. Neither the Company nor any of its subsidiaries has received any notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, would result in a Material Adverse Change. (r) All Necessary Permits, etc. The Company and each subsidiary possess such valid and current material certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses, and neither the Company nor any subsidiary has received any notice of proceedings relating to the revocation or modification of, or non- compliance with, any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could result in a Material Adverse Change. (s) Title to Properties. The Company and each of its subsidiaries has good and marketable title to all the properties and assets reflected as owned in the financial statements referred to in Section 1(l) above (or elsewhere in the Offering Memorandum), in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except such (i) as are reflected in the Offering Memorandum (including the financial statements and notes thereto included therein) or (ii) as do not materially and adversely affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Company or such subsidiary. The real property, improvements, equipment and personal property held under lease by the Company or any subsidiary are held under valid and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by the Company or such subsidiary. (t) Tax Law Compliance. The Company and its subsidiaries have filed all necessary federal, state and foreign income and franchise tax returns or have properly requested extensions thereof and have paid all taxes required to be paid by any of them and, if due and payable, any related or similar assessment, fine or penalty levied against any of them (except such as are being contested in good faith and by appropriate proceedings and have been properly reserved for in accordance with GAAP). The Company has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 1(l) above in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of the Company or any of its subsidiaries has not been finally determined. (u) Company and Each Subsidiary Guarantor Not an "Investment Company."`' The Company and the Subsidiary Guarantors have been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). Neither the Company nor any of the Subsidiary Guarantors is, and after receipt of payment for the Securities, initial borrowings under the Credit Documents and the application of the proceeds therefrom (in each case as described in the Offering Memorandum) will not be, an "investment company" within the meaning of the Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act. 8 (v) Insurance. Each of the Company and its subsidiaries are insured by recognized, financially sound institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and its subsidiaries against theft, damage, destruction and acts of vandalism. The Company has no reason to believe that it or any subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change. Neither of the Company nor any subsidiary has been denied any insurance coverage which it has sought or for which it has applied. (w) No Price Stabilization or Manipulation. Except as may be permitted by applicable federal or state securities laws, neither the Company nor any of the Subsidiary Guarantors has taken and will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of the Company or any of the Subsidiary Guarantors to facilitate the sale or resale of the Securities. (x) Company's Accounting System. The Company maintains a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (y) Compliance with Environmental Laws. Except as would not, individually or in the aggregate, result in a Material Adverse Change (i) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign law or regulation relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, "Materials of Environmental Concern"), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, "Environmental Laws"), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company or its subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company or any of its subsidiaries received since January 1, 1995 any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its subsidiaries is in violation of any Environmental Law; (ii) there is no claim, action or cause of action filed with a court or governmental authority, no investigation with respect to which the Company or any of its subsidiaries has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, 9 cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys' fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its subsidiaries, now or since January 1, 1995 (collectively, "Environmental Claims"), pending or, to the best of the Company's and the Subsidiary Guarantors' collective knowledge, threatened against the Company or any of its subsidiaries or any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law; and (iii) to the best of the Company's and the Subsidiary Guarantors' collective knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against the Company or any of its subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law. (z) Periodic Review of Costs of Environmental Compliance. In the ordinary course of its business, the Company conducts a periodic review of the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review and the amount of its established reserves, the Company has reasonably concluded that such associated costs and liabilities would not, individually or in the aggregate, result in a Material Adverse Change. (aa) ERISA Compliance. The Company and its subsidiaries and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "ERISA")) established or maintained by the Company, its subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in all material respects with ERISA. "ERISA Affiliate" means, with respect to the Company or a subsidiary, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "Code") of which the Company or such subsidiary is a member. No "reportable event" (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any "employee benefit plan" established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates which could reasonably be expected to result in a Material Adverse Change. No "employee benefit plan" established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates, if such "employee benefit plan" were terminated, would have any "amount of unfunded benefit liabilities" (as defined under ERISA) which could reasonably be expected to result in a Material Adverse Change. Neither the Company, its subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability which could reasonably be expected to result in a Material Adverse Change under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee 10 benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan" established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification. The forgoing representations and warranties shall be deemed to have been made to the best of the Company's knowledge to the extent such representations and warranties apply to any "multiemployer plan" (as defined in ERISA or the Code) to which the Company, its subsidiaries or any of their ERISA affiliates contribute or have obligations to contribute. (bb) Solvency. The Company and the Subsidiary Guarantors are, and immediately after the Closing Date on a consolidated basis, will be, Solvent. As used herein, the term "Solvent" means, with respect to the Company and the Subsidiary Guarantors on a particular date, that on such date (i) the fair market value of the assets of the Company and the Subsidiary Guarantors on a consolidated basis is greater than the total amount of respective liabilities (including contingent liabilities) of the Company and the Subsidiary Guarantors on a consolidated basis, (ii) the present fair salable value of the assets of the Company and the Subsidiary Guarantors on a consolidated basis is greater than the amount that will be required to pay the respective probable liabilities of the Company and the Subsidiary Guarantors on their debts on a consolidated basis as they become absolute and matured, (iii) the Company and the Subsidiary Guarantors are able to realize upon their respective assets and pay their debts and other liabilities on a consolidated basis, including contingent obligations on a consolidated basis, as they mature and (iv) the Company and the Subsidiary Guarantors do not have unreasonably small capital on a consolidated basis. (cc) No Default in Indebtedness. No event of default exists under any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument constituting Indebtedness (as defined in the Indenture) except for such events of default as could not, individually or in the aggregate, be reasonably expected to result in a Material Adverse Change. (dd) Related Party Transactions. There are no business relationships or related-party transactions involving the Company or any subsidiary or any other person that would be required to be described in the Offering Memorandum were it a prospectus to be filed as a part of a Registration Statement on Form S-1 under the Securities Act, which have not been described as would have been so required. (ee) Industry Statistics. The market-related and customer-related data and estimates included in the Offering Memorandum are based on or derived from sources which the Company and the Subsidiary Guarantors believe to be reliable and accurate. (ff) Credit Documents. The Credit Documents have been duly and validly authorized by the Company and its subsidiaries party thereto and, when duly executed and delivered by the Company and its subsidiaries party thereto, will be the valid and legally binding obligation of the Company and its subsidiaries party thereto, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (gg) Note and Warrant Repurchase Agreement. The Note and Warrant Repurchase Agreement has been duly and validly authorized by the Company and, 11 when duly executed and delivered by the Company, will be the valid and legally binding obligation of the Company, enforceable in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (hh) Compliance with Regulation S. The Company, the Subsidiary Guarantors and their respective affiliates and all persons acting on their behalf (other than the Initial Purchasers, as to whom the Company and the Subsidiary Guarantors make no representation) have complied with and will comply with the offering restrictions requirements of Regulation S in connection with the offering of the Securities outside the United States and, in connection therewith, the Offering Memorandum contains the disclosure required by Rule 902(g). (ii) Form of Regulation S Securities. The Securities sold in reliance on Regulation S will be represented upon issuance by a temporary global security that may not be exchanged for definitive securities until the expiration of the 40-day restricted period referred to in Rule 903(b)(3) of the Securities Act and only upon certification of beneficial ownership of such Securities by non-U.S. persons or U.S. persons who purchased such Securities in transactions that were exempt from the registration requirements of the Securities Act. Any certificate signed by an officer of the Company or any Subsidiary Guarantor and delivered to the Initial Purchasers or to counsel for the Initial Purchasers shall be deemed to be a representation and warranty by the Company or such Subsidiary Guarantor to each Initial Purchaser as to the matters set forth therein. SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES . (a) The Securities. The Company and the Subsidiary Guarantors jointly and severally agree to issue and sell to the several Initial Purchasers, severally and not jointly, all of the Securities upon the terms herein set forth. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Initial Purchasers agree, severally and not jointly, to purchase from the Company and the Subsidiary Guarantors the aggregate principal amount of Securities set forth opposite their names on Schedule -------- A, at a discounted purchase price of 2.75% of the principal amount thereof - payable on the Closing Date. (b) The Closing Date. Delivery of certificates for the Securities in definitive form to be purchased by the Initial Purchasers and payment therefor shall be made at the offices of NationsBanc Montgomery Securities LLC, 100 North Tryon Street, Charlotte, North Carolina (or such other place as may be agreed to by the Company and the Initial Purchasers) at 9:00 a.m. Charlotte time, on June 26, 1998 or such other time and date not later than 12:30 p.m., Charlotte time, on July 1, 1998 as the Initial Purchasers shall designate by notice to the Company (the time and date of such closing are called the "Closing Date"). Delivery of all closing documents shall be made at the offices of Latham & Watkins, 885 Third Avenue, New York, NY on the Closing Date. The Company and the Subsidiary Guarantors hereby acknowledge that circumstances under which the Initial Purchasers may provide notice to postpone the Closing Date as originally scheduled include, but are in no way limited to, any determination by the Company or the Initial Purchasers to recirculate to investors copies of an amended or supplemented 12 Offering Memorandum or a delay as contemplated by the provisions of Section 16 of this Agreement. (c) Delivery of the Securities. The Company and the Subsidiary Guarantors shall deliver, or cause to be delivered, to NationsBanc Montgomery Securities LLC for the accounts of the several Initial Purchasers certificates for the Securities at the Closing Date against the irrevocable release of a wire transfer of immediately available (federal, same-day) funds for the amount of the purchase price therefor. The certificates for the Securities shall be in such denominations ($1,000 or integral multiples thereof) and registered in the name of Cede & Co., as nominee of the Depositary, pursuant to the DTC Agreement and shall be made available for inspection on the business day preceding the Closing Date at a location in New York City as the Initial Purchasers may designate. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Initial Purchasers. (d) Delivery of Offering Memorandum to the Initial Purchasers. Not later than 6:00 p.m. on the next succeeding business day following the date of this Agreement, the Company shall deliver or cause to be delivered copies of the Offering Memorandum in such quantities and at such places as the Initial Purchasers shall reasonably request. (e) Initial Purchasers as Qualified Institutional Buyers. Each Initial Purchaser severally and not jointly represents and warrants to, and agrees with, the Company and the Subsidiary Guarantors that it is a "qualified institutional buyer" within the meaning of Rule 144A (a "Qualified Institutional Buyer") and an "accredited investor" within the meaning of Rule 501(a) under the Securities Act (an "Accredited Investor"). SECTION 3. ADDITIONAL COVENANTS. The Company and each Subsidiary Guarantor jointly and severally further covenant and agree with each Initial Purchaser as follows: (a) Initial Purchasers' Review of Proposed Amendments and Supplements'. Prior to amending or supplementing the Offering Memorandum, the Company shall furnish to the Initial Purchasers for review a copy of each such proposed amendment or supplement, and the Company shall not effect any such proposed amendment or supplement to which the Initial Purchasers reasonably object. (b) Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters. If, prior to the completion of the placement of the Securities by the Initial Purchasers with the Subsequent Purchasers (as evidenced by a notice in writing from the Initial Purchasers to the Company), any event shall occur or condition exist as a result of which it is necessary, in the opinion of counsel for the Initial Purchasers, to amend or supplement the Offering Memorandum in order to make the statements therein, in the light of the circumstances when the Offering Memorandum is delivered to a purchaser, not misleading, or if in the opinion of counsel for the Initial Purchasers it is otherwise necessary to amend or supplement the Offering Memorandum to comply with law, the Company and the Subsidiary Guarantors jointly and severally agree to promptly prepare (subject to Section 3(a) hereof) and furnish (at their own expense) to the Initial Purchasers, amendments or supplements to the Offering Memorandum so that the statements in the Offering Memorandum as so amended or supplemented will not, in the light of the circumstances when the Offering Memorandum is delivered to a purchaser, be misleading or so that the Offering Memorandum, as amended or supplemented, will comply with law. 13 Following the consummation of the Exchange Offer or the effectiveness of an applicable shelf registration statement and for so long as the Securities and the Exchange Securities are outstanding if, in the opinion of counsel to the Initial Purchasers, the Initial Purchasers or any of their affiliates (as such term is defined in the rules and regulations under the Securities Act) are required to deliver a prospectus in connection with sales of, or market-making activities with respect to, such securities, (A) to periodically amend the applicable registration statement so that the information contained therein complies with the requirements of Section 10(a) of the Securities Act, (B) to amend the applicable registration statement or supplement the related prospectus or the documents incorporated therein when necessary to reflect any material changes in the information provided therein so that the registration statement and the prospectus will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing as of the date the prospectus is so delivered, not misleading and (C) to provide the Initial Purchasers with copies of each amendment or supplement filed and such other documents as the Initial Purchasers may reasonably request. The Company and each Subsidiary Guarantor hereby expressly acknowledge that the indemnification and contribution provisions of Sections 8 and 9 hereof are specifically applicable and relate to each offering memorandum, registration statement, prospectus, amendment or supplement referred to in this Section 3(b). (c) Copies of the Offering Memorandum. The Company agrees to furnish the Initial Purchasers, without charge, as many copies of the Offering Memorandum and any amendments and supplements thereto as they shall have reasonably requested. (d) Blue Sky Compliance. The Company and each Subsidiary Guarantor shall cooperate with the Initial Purchasers and counsel for the Initial Purchasers to qualify or register the Securities for sale under (or obtain exemptions from the application of) state securities or blue sky laws of those jurisdictions designated by the Initial Purchasers, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Securities. Neither the Company nor any Subsidiary Guarantor shall be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. The Company will advise the Initial Purchasers promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company and each Subsidiary Guarantor shall use their respective best efforts to obtain the withdrawal thereof at the earliest possible moment. (e) Use of Proceeds. The Company shall apply the net proceeds from the sale of the Securities sold by it in the manner described under the caption "Use of Proceeds" in the Offering Memorandum. (f) Ratings of the Securities. The Company and each Subsidiary Guarantor shall take all reasonable action necessary to enable Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. ("S&P"), and Moody's Investors Service, Inc. ("Moody's") to provide their respective credit ratings of the Securities. 14 (g) The Depositary. The Company and each Subsidiary Guarantor will cooperate with the Initial Purchasers and use their best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of the Depositary. (h) Additional Issuer Information. At any time when the Company and the Subsidiary Guarantors are not subject to Section 13 or 15(d) of the Exchange Act, and for so long as any Securities outstanding constitute Transfer Restricted Securities as defined in the Registration Rights Agreement, for the benefit of holders and beneficial owners from time to time of Securities, the Company and the Subsidiary Guarantors shall furnish, at their expense, upon request, to holders and beneficial owners of Securities and prospective purchasers of Securities information ("Additional Issuer Information") satisfying the requirements of subsection (d)(4) of Rule 144A. (i) Agreement Not To Offer or Sell Additional Securities During the period of 180 days following the date of the Offering Memorandum, the Company will not, without the prior written consent of NationsBanc Montgomery Securities LLC (which consent may be withheld at the sole discretion of NationsBanc Montgomery Securities LLC), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open "put equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer, or announce the offering of, or file any registration statement under the Securities Act in respect of, any debt securities of the Company or securities exchangeable for or convertible into debt securities of the Company (other than as contemplated by this Agreement or the Offering Memorandum and to register the Exchange Securities). (j) Future Reports to the Initial Purchasers. During the period of five years hereafter the Company will furnish to NationsBanc Montgomery Securities LLC at 100 North Tryon Street, 7th Floor, Charlotte, NC 28255 Attention: Scott Holmes, and to First Union Capital Markets, 301 South College Street, TW-10, Charlotte, NC 28288 Attention: Rick Fogg (i) as soon as practicable after the end of each fiscal year, copies of any annual report delivered to the holders of any of the Issuer's securities (an "Annual Report") of the Company containing the consolidated balance sheet of the Company and its subsidiaries as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of the Company's independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of any proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company or any Subsidiary Guarantor with the Commission, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company or any Subsidiary Guarantors mailed generally to holders of their respective capital stock or debt securities (including the holders of the Securities or Exchange Securities). (k) Registration Rights Agreement. The Company and the Subsidiary Guarantors shall comply with all provisions and obligations of, and shall cause the Exchange Offer to be made in the appropriate form as contemplated by, the Registration Rights Agreement, and shall comply with all applicable federal and state securities laws in connection with the Exchange Offer. (l) No Integration. Each of the Company and the Subsidiary Guarantors agrees that it will not and will cause its Affiliates not to make any offer or sale of securities of the Company of any class if, as a result of the doctrine of "integration" 15 referred to in Rule 502 under the Securities Act, such offer or sale would render invalid (for the purpose of (i) the sale of the Securities by the Company and the Subsidiary Guarantors to the Initial Purchasers, (ii) the resale of the Securities by the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent Purchasers to others) the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof or by Rule 144A or by Regulation S thereunder or otherwise. (m) Restriction on Repurchases. Until the expiration of two years after the original issuance of the Securities, the Company and the Subsidiary Guarantors will not, and will cause their respective Affiliates not to, purchase or agree to purchase or otherwise acquire any Securities which are "restricted securities" (as such term is defined under Rule 144(a)(3) under the Securities Act), whether as beneficial owner or otherwise (except as agent acting as a securities broker on behalf of and for the account of customers in the ordinary course of business in unsolicited broker's transactions) unless, immediately upon any such purchase, the Company or any Subsidiary Guarantor or any Affiliate shall submit such Securities to the Trustee for cancellation. (n) Legended Securities. Each certificate for a Security will bear the legend contained in "Notice to Investors" in the Offering Memorandum for the time period and upon the other terms stated in the Offering Memorandum. (o) PORTAL. The Company and the Subsidiary Guarantors will use their best efforts to cause the Securities to be eligible for the National Association of Securities Dealers, Inc. PORTAL market (the "PORTAL market"). (p) Form D. If required under Rule 503 of the Securities Act, the Company and the Subsidiary Guarantors will file with the Commission, not later than 15 days after the Closing Date, five copies of a notice on Form D under the Securities Act (one of which will be manually signed by a person duly authorized by the Company); will otherwise comply with the requirements of Rule 503 under the Securities Act; and will furnish promptly to the Initial Purchasers evidence of each such required timely filing (including a copy thereof). (q) Due Diligence. In connection with the original distribution of the Securities, the Company and each of the Subsidiary Guarantors agree that, prior to any offer or resale of the Securities by the Initial Purchasers, the Initial Purchasers and counsel for the Initial Purchasers shall have the right to make reasonable inquiries into the business of the Company and its subsidiaries. The Company and each of the Subsidiary Guarantors also agree to provide answers to each prospective Subsequent Purchaser of Securities who so requests concerning the Company and its subsidiaries (to the extent that such information is available or can be acquired and made available to prospective Subsequent Purchasers without unreasonable effort or expense and to the extent the provision thereof is not prohibited by applicable law) and the terms and conditions of the offering of the Securities, as provided in the Offering Memorandum. NationsBanc Montgomery Securities LLC, on behalf of the Initial Purchasers, may, in its sole discretion, waive in writing the performance by the Company or any Subsidiary Guarantor of any one or more of the foregoing covenants or extend the time for their performance. 16 SECTION 4. PAYMENT OF EXPENSES. The Company and the Subsidiary Guarantors jointly and severally agree to pay all costs, fees and expenses incurred in connection with the performance of their obligations hereunder and in connection with the transactions contemplated hereby, including without limitation (i) all expenses incident to the issuance and delivery of the Securities (including all printing and engraving costs), (ii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Securities to the Initial Purchasers, (iii) all fees and expenses of the Company's and the Subsidiary Guarantors' counsel, independent public or certified public accountants and other advisors, (iv) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of each preliminary Offering Memorandum and the Offering Memorandum (including financial statements and exhibits), and all amendments and supplements thereto, this Agreement, the Registration Rights Agreement, the Indenture, the DTC Agreement, the Securities and the Exchange Securities, (v) all filing fees, attorneys' fees and expenses incurred by the Company or the Subsidiary Guarantors or the Initial Purchasers (attorney's fees of the Initial Purchasers shall be $7,500) in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Securities for offer and sale under the state securities or blue sky laws and, if requested by the Initial Purchasers, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising the Initial Purchasers of such qualifications, registrations and exemptions, (vi) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture, the Securities and the Exchange Securities, (vii) any fees payable in connection with the rating of the Securities or the Exchange Securities with any ratings agencies and the listing of the Securities with the PORTAL market, (viii) all fees and expenses (including reasonable fees and expenses of counsel) of the Company and the Subsidiary Guarantors in connection with approval of the Securities by DTC for "book-entry" transfer, and (ix) the performance by the Company and the Subsidiary Guarantors of their other obligations under this Agreement. Except as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the Initial Purchasers shall pay their own expenses, including the fees and disbursements of their counsel. SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASERS. The obligations of the several Initial Purchasers to purchase and pay for the Securities as provided herein on the Closing Date shall be subject to the accuracy of the representations and warranties on the part of the Company and the Subsidiary Guarantors set forth in Section 1 hereof as of the date hereof and as of the Closing Date as though then made and to the timely performance by the Company and the Subsidiary Guarantors of their covenants and other obligations hereunder, and to each of the following additional conditions: (a) Accountants' Comfort Letter. On the date hereof, the Initial Purchasers shall have received from Coopers & Lybrand, L.L.P., independent public or certified public accountants for the Company, a letter dated the date hereof addressed to the Initial Purchasers, in form and substance satisfactory to the Initial Purchasers, containing statements and information of the type ordinarily included in accountant's "comfort letters" to Initial Purchasers, delivered according to Statement of Auditing Standards Nos. 72 and 76 (or any successor bulletins), with respect to the audited and unaudited financial statements and certain financial information contained in the Registration Statement and the Offering Memorandum. (b) No Material Adverse Change or Ratings Agency Change. For the period from and after the date of this Agreement and prior to the Closing Date: 17 (i) in the judgment of the Initial Purchasers there shall not have occurred any Material Adverse Change; and (ii) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Company or any of its subsidiaries by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Securities Act. (c) Opinion of Counsel for the Company and the Subsidiary Guarantors. On the Closing Date the Initial Purchasers shall have received the favorable opinion of Blank Rome Comisky & McCauley LLP, counsel for the Company and the Subsidiary Guarantors, dated as of such Closing Date, in form and substance satisfactory to you, to the effect that: (i) each of the Company and the Subsidiary Guarantors has been organized and is validly subsisting as a corporation under the laws of the jurisdiction of its incorporation; (ii) each of the Company and the Subsidiary Guarantors has corporate power and authority to own, lease and operate its respective properties and to conduct its respective business as described in the Offering Memorandum and to enter into and perform its respective obligations under the Purchase Agreement, the Registration Rights Agreement, the Indenture, the Credit Documents, the Note and Warrant Repurchase Agreement, the Securities, the Exchange Securities and the DTC Agreement; (iii) all of the issued and outstanding capital stock of each of the Subsidiary Guarantors has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through the other Subsidiary Guarantors, free and clear of any adverse claim as defined in Section 8-102(a)(1) of the Pennsylvania Commercial Code; (iv) the authorized, issued and outstanding capital stock of the Company conforms in all material respects to the descriptions thereof set forth in the Offering Memorandum. All of the outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and, to such counsel's knowledge, have been issued in compliance in all material respects with the registration and qualification requirements, or exceptions therefrom, of federal and state securities laws; (v) the Purchase Agreement has been duly authorized, executed and delivered by the Company and the Subsidiary Guarantors; (vi) each of the Registration Rights Agreement and the DTC Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company and the Subsidiary Guarantors, enforceable in accordance with its terms, except as rights to indemnification or contribution may be limited by applicable law or public policy or except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance 18 or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles; (vii) the Indenture has been duly authorized, executed and delivered by the Company and the Subsidiary Guarantors and (assuming the due authorization, execution and delivery thereof by the Trustee) constitutes a valid and binding agreement of the Company and the Subsidiary Guarantors, enforceable against the Company and the Subsidiary Guarantors in accordance with its terms, except as rights to indemnification or contribution may be limited by applicable law or public policy or except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws relating to or affecting the rights and remedies of creditors or by general principles of equity; (viii) the Notes are in the form contemplated by the Indenture, have been duly authorized by all necessary corporate action on behalf of the Company for issuance and sale pursuant to this Agreement and the Indenture and, when executed by the Company and authenticated by the Trustee in the manner provided in the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee) and delivered against payment of the purchase price therefor, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as rights to indemnification or contribution may be limited by applicable law or public policy or except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws relating to or affecting enforcement of the rights and remedies of creditors or by general principles of equity and will be entitled to the benefits of the Indenture; (ix) the Exchange Notes have been duly authorized for issuance by all necessary corporate action on behalf of the Company, and when issued and authenticated in accordance with the terms of the Indenture, the Registration Rights Agreement and the Exchange Offer, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as rights to indemnification or contribution may be limited by applicable law or public policy or except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws relating to or affecting enforcement of the rights and remedies of creditors or by general principles of equity and will be entitled to the benefits of the Indenture; (x) the Subsidiary Guarantees are in the form contemplated by the Indenture, have been duly authorized for execution and delivery pursuant to this Agreement and the Indenture and have been duly executed by each of the Subsidiary Guarantors and, when authenticated in the manner provided for in the Indenture and delivered against payment of the purchase price for the Securities, will constitute valid and binding agreements of the Subsidiary Guarantors, enforceable in accordance with their terms, except as rights to indemnification or contribution may be limited by applicable law or public policy or except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture; 19 (xi) the Exchange Subsidiary Guarantees have been duly authorized for issuance and exchange pursuant to the Registration Rights Agreement, the Exchange Offer and the Indenture and, when duly executed by each of the Subsidiary Guarantors and authenticated in the manner provided for in the Indenture and delivered in exchange for the Subsidiary Guarantees, will constitute valid and binding agreements of the Subsidiary Guarantors, enforceable in accordance with their terms, except as rights to indemnification or contribution may be limited by applicable law or public policy or except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture; (xii) the Securities and the Indenture conform in all material respects to the descriptions thereof contained in the Offering Memorandum; (xiii) the statements in the Offering Memorandum under the captions "Description of Notes," "Principal Shareholders," "Description of Other Indebtedness," "Certain Relationships and Related Transactions" and "Certain United States Federal Tax Considerations for Non-United States Holders" insofar as such statements constitute matters of law, summaries of legal matters, charter or by-law provisions, documents or legal proceedings, or legal conclusions, have been reviewed by such counsel and are accurate and complete, in all material respects, with respect to the matters referred to therein; (xiv) no consent, approval, authorization or other order of, or registration or filing with, any court or other governmental authority or agency, is required for the Company's or the Subsidiary Guarantors execution, delivery and performance of the Purchase Agreement, the Registration Rights Agreement, the DTC Agreement, the Credit Documents, the Note and Warrant Repurchase Agreement, the Securities, the Exchange Securities or the Indenture, or consummation of the transactions contemplated thereby and by the Offering Memorandum, except as required under (i) federal securities law (in the case of the Registration Rights Agreement), (ii) applicable state securities or blue sky laws or (iii) the filing of mortgages, financing statements or other documents required to perfect security interests required under the Credit Documents; (xv) the execution and delivery of the Purchase Agreement, the Registration Rights Agreement, the DTC Agreement, the Credit Documents, the Note and Warrant Repurchase Agreement, the Securities, the Exchange Securities and the Indenture by the Company and the Subsidiary Guarantors and the performance by the Company and the Subsidiary Guarantors of their respective obligations thereunder (including the application of the proceeds from the Offering and initial borrowings under the Credit Documents, in each case, as described in the Offering Memorandum) (i) have been duly authorized by all necessary corporate action on the part of the Company and the Subsidiary Guarantors; (ii) will not result in any violation of the provisions of the charter or by-laws of the Company or any subsidiary; (iii) will not constitute a breach of, or Default or a Debt Repayment Triggering Event, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries under the Credit Documents or to the knowledge of such counsel, any other material Existing Instrument; or (iv) to the knowledge of such counsel, will not 20 result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company or any subsidiary; (xvi) the Company and the Subsidiary Guarantors are not, and after receipt of payment for the Securities (assuming application of the proceeds from the sale of the Notes as set forth in the Offering Memorandum under the heading "Use of Proceeds") will not be, an "investment company" within the meaning of the Investment Company Act; (xvii) based on the representations, warranties, covenants and agreements of the Company, the Subsidiary Guarantors and the Initial Purchasers set forth in this Purchase Agreement, no registration of the Securities under the Securities Act, and no qualification of an indenture under the Trust Indenture Act with respect thereto, is required for in connection with the purchase of the Securities by the Initial Purchasers or the initial resale of the Securities by the Initial Purchasers to Qualified Institutional Buyers or non-U.S. persons in the manner contemplated by this Agreement and the Offering Memorandum other than any registration or qualification that may be required in connection with the Registration Rights Agreement. Such counsel need express no opinion, however, as to when or under what circumstances any Securities initially sold by the Initial Purchasers may be reoffered or resold; and (xviii) each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its date, and each amendment or supplement thereto, as of its date (except for the financial statements and notes thereto and other financial and statistical data included in the Offering Memorandum, as to which no opinion need be expressed), contained all of the information required under Rule 144A(d) of the Securities Act. In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company and the Subsidiary Guarantors, representatives of the independent public or certified public accountants for the Company and the Subsidiary Guarantors and with representatives of the Initial Purchasers at which the contents of the Offering Memorandum, and any supplements or amendments thereto, and related matters were discussed and, although such counsel has not undertaken to determine independently, is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum (other than as expressly specified above), and any supplements or amendments thereto, on the basis of the foregoing, nothing has come to their attention which would lead them to believe that either the Offering Memorandum, as of its date or at the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief as to the financial statements or the notes thereto or other financial and statistical data, included in the Offering Memorandum or any amendments or supplements thereto). In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the federal law of the United States, to the extent they deem proper and specified in such opinion, upon the opinion (which shall be dated the Closing Date, shall be satisfactory in form and substance to the Initial Purchasers, shall expressly state that the Initial Purchasers may rely on such opinion as if it were addressed to them and shall be furnished to the Initial Purchasers) of other counsel of good standing whom they believe to be 21 reliable and who are satisfactory to counsel for the Initial Purchasers; provided, however, that such counsel shall further state that they believe that they and the Initial Purchasers are justified in relying upon such opinion of other counsel, and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. (d) Opinion of General Counsel for the Company and the Subsidiary Guarantors. On the Closing Date the Initial Purchasers shall have received the favorable opinion of O'Hara, Hanlon, Knych & Pobedinsky, LLP, general counsel for the Company and the Subsidiary Guarantors, dated as of such Closing Date, in form and substance satisfactory to you, to the effect that: (i) each of the Company and the Subsidiary Guarantors is (i) in good standing under the laws of its jurisdiction of incorporation and (ii) duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change; (ii) to the best knowledge of such counsel, neither the Company nor any subsidiary is in violation of its charter or by-laws or any law, administrative regulation or administrative or court decree applicable to the Company or any subsidiary or is in Default in the performance or observance of any obligation, agreement, covenant or condition contained in any material Existing Instrument, except in each such case for such violations or Defaults as would not, individually or in the aggregate, result in a Material Adverse Change; (iii) each of the Credit Documents and the Note and Warrant Repurchase Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company and each of the Subsidiary Guarantors party thereto, enforceable in accordance with its terms, except as rights to indemnification or contribution may be limited by applicable law or public policy or except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles; In rendering such opinion, such counsel may rely as to matters involving the application of laws of any jurisdiction other than the General Corporation Law of the State of Delaware, the laws of the State of New York or the federal law of the United States, to the extent they deem proper and specified in such opinion, upon the opinion (which shall be dated the Closing Date, shall be satisfactory in form and substance to the Initial Purchasers, shall expressly state that the Initial Purchasers may rely on such opinion as if it were addressed to them and shall be furnished to the Initial Purchasers) of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Initial Purchasers; provided, however, that such counsel shall further state that they believe that they and the Initial Purchasers are justified in relying upon such opinion of other counsel. (e) Opinion of Counsel for the Initial Purchasers. On the Closing Date the Initial Purchasers shall have received the favorable opinion of Latham & Watkins, counsel for 22 the Initial Purchasers, dated as of such Closing Date, with respect to such matters as may be reasonably requested by the Initial Purchasers. (f) Officers' Certificate. On the Closing Date the Initial Purchasers shall have received a written certificate executed by the Chairman of the Board, Chief Executive Officer or President of the Company and the Chief Financial Officer or Chief Accounting Officer of the Company, dated as of the Closing Date, to the effect set forth in subsection (b)(ii) of this Section 5, and further to the effect that: (i) for the period from and after the date of this Agreement and prior to the Closing Date there has not occurred any Material Adverse Change; (ii) the representations, warranties and covenants of the Company and the Subsidiary Guarantors set forth in Section 1 of this Agreement are true and correct with the same force and effect as though expressly made on and as of the Closing Date; and (iii) the Company and the Subsidiary Guarantors have complied with all the agreements and satisfied all the conditions on their respective part to be performed or satisfied at or prior to the Closing Date. (g) Bring-down Comfort Letter. On the Closing Date the Initial Purchasers shall have received from Coopers & Lybrand, L.L.P., independent public or certified public accountants for the Company, a letter dated such date, in form and substance satisfactory to the Initial Purchasers, to the effect that they reaffirm the statements made in the letter furnished by them pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the Closing Date. (h) PORTAL Listing. At the Closing Date the Securities shall have been designated for trading on the PORTAL market. (i) Registration Rights Agreement. The Company and the Subsidiary Guarantors shall have entered into the Registration Rights Agreement and the Initial Purchasers shall have received executed counterparts thereof. (j) Redemption of Notes and Warrants. Concurrently with the Closing, the Company shall redeem the outstanding notes and warrants from Capital Resource Partners II, LP and Exeter Venture Lenders, LP as described in the Offering Memorandum under the caption "Use of Proceeds." (k) Additional Documents. On or before the Closing Date, the Initial Purchasers and counsel for the Initial Purchasers shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained. If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Initial Purchasers by notice to the Company at any time on or prior to the Closing Date, which termination shall be without liability 23 on the part of any party to any other party, except that Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination. SECTION 6. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If the sale to the Initial Purchasers of the Securities on the Closing Date is not consummated because of any refusal, inability or failure on the part of the Company or any Subsidiary Guarantor to perform any agreement herein or to comply with any provision hereof (except such refusal, inability or failure that is due to the breach of any material term or condition of this Agreement by the Initial Purchasers), the Company and the Subsidiary Guarantors jointly and severally agree to reimburse the Initial Purchasers (or such Initial Purchasers as have terminated this Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Initial Purchasers in connection with the proposed purchase and the offering and sale of the Securities, including but not limited to fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges. SECTION 7. OFFER, SALE AND RESALE PROCEDURES. Each of the Initial Purchasers, on the one hand, and the Company and each of the Subsidiary Guarantors, on the other hand, hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities: (i) Offers and Sales only to Qualified Institutional Buyers or Regulation S Investors. Offers and sales of the Securities will be made only by the Initial Purchasers or Affiliates thereof qualified to do so in the jurisdictions in which such offers or sales are made. Each such offer or sale shall only be made (A) to persons whom the offeror or seller reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) or (B) non- U.S. persons outside the United States to whom the offeror or seller reasonably believes offers and sales of the Securities may be made in reliance upon Regulation S under the Securities Act, upon the terms and conditions set forth in Annex I hereto, which Annex I is hereby ------- ------- expressly made a part hereof. (ii) No General Solicitation. The Securities will be offered by approaching prospective Subsequent Purchasers on an individual basis. No general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) will be used in the United States in connection with the offering of the Securities. (iii) Purchases by Non-Bank Fiduciaries. In the case of a non- bank Subsequent Purchaser of Securities acting as a fiduciary for one or more third parties, in connection with an offer and sale to such purchaser pursuant to clause (i) above, each third party shall, in the judgment of the applicable Initial Purchaser, be an Institutional Accredited Investor or a Qualified Institutional Buyer or a non-U.S. person outside the United States. (iv) Restrictions on Transfer. Upon original issuance by the Company, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Securities (and all securities issued in exchange therefor or in substitution thereof, other than the Exchange Securities) shall bear the following legend: 24 "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTION SET FORTH IN (A) ABOVE." (v) Delivery of Offering Memorandum. Each Initial Purchaser will deliver to each purchaser of the Securities from such Initial Purchaser, in connection with its original distribution of the Securities, a copy of the Offering Memorandum, as amended and supplemented at the date of such delivery. SECTION 8. INDEMNIFICATION. (a) Indemnification of the Initial Purchasers. The Company and the Subsidiary Guarantors jointly and severally agree to indemnify and hold harmless each Initial Purchaser, its officers and employees, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act and the Exchange Act against any 25 loss, claim, damage, liability or expense, as incurred, to which such Initial Purchaser or such officer, employee or controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (i) upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (ii) in whole or in part upon any inaccuracy in the representations and warranties of the Company or any Subsidiary Guarantor contained herein; or (iii) in whole or in part upon any failure of the Company or any Subsidiary Guarantor to perform any of their collective obligations hereunder or under law; or (iv) any act or failure to act or any alleged act or failure to act by any Initial Purchaser in connection with, or relating in any manner to, the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon any matter covered by clause (i) above, provided that the Company and the Subsidiary Guarantors shall not be liable under this clause (iv) to the extent that a court of competent jurisdiction shall have determined by a final judgment that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Initial Purchaser through its gross negligence or willful misconduct; and to reimburse each Initial Purchaser and each such controlling person for any and all reasonable expenses (including the reasonable fees and disbursements of counsel chosen by NationsBanc Montgomery Securities LLC to the extent provided for in Section 8(c)) as such expenses are reasonably incurred by such Initial Purchaser or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers expressly for use in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto); and provided, further, that with respect to any Preliminary Offering Memorandum, the foregoing indemnity agreement shall not inure to the benefit of any Initial Purchaser from whom the person asserting any loss, claim, damage, liability or expense purchased Securities, or any person controlling such Initial Purchaser, if copies of the Offering Memorandum were timely delivered to the Initial Purchaser pursuant to Section 2 and a copy of the Offering Memorandum (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Initial Purchaser to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Securities to such person, and if the Offering Memorandum (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage, liability or expense. The indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that the Company and the Subsidiary Guarantors may otherwise have. 26 (b) Indemnification of the Company and the Subsidiary Guarantors. Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company and the Subsidiary Guarantors and each of their directors and each person, if any, who controls the Company or any Subsidiary Guarantor within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company or any Subsidiary Guarantor or any such director, or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Initial Purchaser), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), or arises out of or is based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers expressly for use therein; and to reimburse the Company, the Subsidiary Guarantors, or any such director or controlling person for any legal and other expenses reasonably incurred by the Company and the Subsidiary Guarantors, or any such director or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company and the Subsidiary Guarantors hereby acknowledge that the only information that the Initial Purchasers have furnished to the Company expressly for use in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto) are the statements set forth (A) as the last paragraph on page (iii) of the Offering Memorandum concerning stabilization by the Initial Purchasers and (B) in the third, fifth and sixth paragraphs under the caption "Plan of Distribution" in the Offering Memorandum; and the Initial Purchasers confirm that such statements are correct. The indemnity agreement set forth in this Section 8(b) shall be in addition to any liabilities that each Initial Purchaser may otherwise have. (c) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 8 or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party and provides notice to an indemnified party, the indemnifying party will be entitled to participate in and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such 27 action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with one local counsel), approved by the indemnifying party (NationsBanc Montgomery Securities LLC for the Initial Purchasers in the case of Section 8(b) and Section 9), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (d) Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. SECTION 9. CONTRIBUTION. If the indemnification provided for in Section 8 required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein other than by reason of the limitations or exceptions set forth in Section 8, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits 28 received by the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Subsidiary Guarantors on the one hand, and the Initial Purchasers, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (net of discounts to the Initial Purchasers but before deducting expenses) received by the Company and the Subsidiary Guarantors, and the total discount received by the Initial Purchasers bear to the aggregate initial offering price of the Securities. The relative fault of the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by the Company and the Subsidiary Guarantors, on the one hand, or the Initial Purchasers, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8(c) with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8(c) for purposes of indemnification. The Company, the Subsidiary Guarantors and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9. Notwithstanding the provisions of this Section 9, no Initial Purchaser shall be required to contribute any amount in excess of the discount received by such Initial Purchaser in connection with the Securities distributed by it. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective commitments as set forth opposite their names in Schedule A. For purposes of this Section 9, each ---------- officer and employee of an Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as such Initial Purchaser, and each director of the Company or any Subsidiary Guarantor, and each person, if any, who controls the Company or any Subsidiary Guarantor with the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company and the Subsidiary Guarantors. 29 SECTION 10. TERMINATION OF THIS AGREEMENT. Prior to the Closing Date, this Agreement may be terminated by the Initial Purchasers by notice given to the Company if at any time (i) trading in securities generally on either the Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the NASD; (ii) a general banking moratorium shall have been declared by any of federal or New York authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States' or international political, financial or economic conditions, as in the judgment of the Initial Purchasers is material and adverse and makes it impracticable to market the Securities in the manner and on the terms described in the Offering Memorandum or to enforce contracts for the sale of securities; (iv) in the judgment of the Initial Purchasers there shall have occurred any Material Adverse Change; or (v) the Company or any of the Subsidiary Guarantors shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the judgment of the Initial Purchasers may interfere materially with the conduct of the business and operations of the Company or the Subsidiary Guarantors regardless of whether or not such loss shall have been insured. Any termination pursuant to this Section 10 shall be without liability on the part of (a) the Company or the Subsidiary Guarantors to any Initial Purchaser, except that the Company and the Subsidiary Guarantors shall be obligated, jointly and severally, to reimburse the expenses of the Initial Purchasers pursuant to Sections 4 and 6 hereof, (b) any Initial Purchaser to the Company or any of the Subsidiary Guarantors, or (c) of any party hereto to any other party except that the provisions of Section 8 and Section 9 shall at all times be effective and shall survive such termination. SECTION 11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The respective indemnities, agreements, representations, warranties and other statements of the Company and the Subsidiary Guarantors, of their officers and of the several Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or the Company or any Subsidiary Guarantor or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder and any termination of this Agreement until such time as all of the Securities have been fully paid or redeemed by the Company. SECTION 12. NOTICES. All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows: If to the Initial Purchasers: NationsBanc Montgomery Securities LLC 100 North Tryon Street 7th Floor Charlotte, NC 28255 Facsimile: 704-386-3270 Attention: Scott Holmes with a copy to: Latham & Watkins 885 Third Avenue 30 New York, NY 10022 Attention: Kirk Davenport, Esq. If to the Company or any Subsidiary Guarantors: Coyne International Enterprises Corp. 140 Cortland Avenue P. O. Box 4854 Syracuse, NY 13221 Facsimile: 315-475-9978 Attention: Chief Financial Officer with a copy to: O'Hara, Hanlon, Knych & Pobedinsky, LLP One Park Place Syracuse, NY 13202 Facsimile: 315-422-3943 Attention: Alexander Pobedinsky, Esq. Any party hereto may change the address for receipt of communications by giving written notice to the others. SECTION 13. SUCCESSORS. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Initial Purchasers pursuant to Section 16 hereof, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8 and Section 9, and in each case their respective successors, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Securities as such from any of the Initial Purchasers merely by reason of such purchase. SECTION 14. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. SECTION 15. GOVERNING LAW PROVISIONS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. (a) Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Related Proceedings") may be instituted in the federal courts of the United States of America located in the City and County of New York or the courts of the State of New York in each case located in the City and County of New York (collectively, the "Specified Courts"), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, 31 notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. (b) Waiver of Immunity. With respect to any Related Proceeding, each party irrevocably waives, to the fullest extent permitted by applicable law, all immunity (whether on the basis of sovereignty or otherwise) from jurisdiction, service of process, attachment (both before and after judgment) and execution to which it might otherwise be entitled in the Specified Courts, and with respect to any Related Judgment, each party waives any such immunity in the Specified Courts or any other court of competent jurisdiction, and will not raise or claim or cause to be pleaded any such immunity at or in respect of any such Related Proceeding or Related Judgment. SECTION 16. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL PURCHASERS. If any one or more of the several Initial Purchasers shall fail or refuse to purchase Securities that it or they have agreed to purchase hereunder on the Closing Date, and the aggregate number of Securities which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase does not exceed 10% of the aggregate number of the Securities to be purchased on such date, the other Initial Purchasers shall be obligated, severally, in the proportions that the number of Securities set forth opposite their respective names on Schedule A bears to the aggregate number of Securities set forth ---------- opposite the names of all such non-defaulting Initial Purchasers, or in such other proportions as may be specified by the Initial Purchasers with the consent of the non-defaulting Initial Purchasers, to purchase the Securities which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase on such date. If any one or more of the Initial Purchasers shall fail or refuse to purchase Securities and the aggregate number of Securities with respect to which such default occurs exceeds 10% of the aggregate number of Securities to be purchased on the Closing Date, and arrangements satisfactory to the Initial Purchasers and the Company for the purchase of such Securities are not made within 48 hours after such default, this Agreement shall terminate without liability of any party to any other party except that the provisions of Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination. In any such case either the Initial Purchasers or the Company shall have the right to postpone the Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Offering Memorandum or any other documents or arrangements may be effected. As used in this Agreement, the term "Initial Purchaser" shall be deemed to include any person substituted for a defaulting Initial Purchaser under this Section 10. Any action taken under this Section 16 shall not relieve any defaulting Initial Purchaser from liability in respect of any default of such Initial Purchaser under this Agreement. SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The Table of Contents and the section headings herein 32 are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. Each of the parties hereto acknowledges that it is a sophisticated business person who was adequately represented by counsel during negotiations regarding the provisions hereof, including, without limitation, the indemnification provisions of Section 8 and the contribution provisions of Section 9, and is fully informed regarding said provisions. Each of the parties hereto further acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the risks in light of the ability of the parties to investigate the Company and the Subsidiary Guarantors, their affairs and their respective businesses in order to assure that adequate disclosure has been made in the Registration Statement, any preliminary Offering Memorandum and the Offering Memorandum (and any amendments and supplements thereto), as required by the Securities Act and the Exchange Act. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. 33 Very truly yours, COYNE INTERNATIONAL ENTERPRISES CORP. By: /s/ Donald F. X. Keegan ----------------------------------- Name: Donald F. X. Keegan Title: V.P BLUE RIDGE TEXTILE MANUFACTURING, INC., AS GUARANTOR By: /s/ Donald F. X. Keegan ----------------------------------- Name: Donald F. X. Keegan Title: V.P OHIO GARMENT RENTAL, INC., AS GUARANTOR By: /s/ Donald F. X. Keegan ----------------------------------- Name: Donald F. X. Keegan Title: V.P MIDWAY-CTS BUFFALO, LTD, AS GUARANTOR By: /s/ Donald F. X. Keegan ----------------------------------- Name: Donald F. X. Keegan Title: V.P CLEAN TOWEL SERVICE, INC., AS GUARANTOR By: /s/ Donald F. X. Keegan ----------------------------------- Name: Donald F. X. Keegan Title: V.P S-1 The foregoing Purchase Agreement is hereby confirmed and accepted by the Initial Purchasers as of the date first above written. NATIONSBANC MONTGOMERY SECURITIES LLC FIRST UNION CAPITAL MARKETS, A DIVISION OF WHEAT FIRST SECURITIES, INC. As the several Initial Purchasers By NATIONSBANC MONTGOMERY SECURITIES LLC By: /s/ J. Scott Holmes -------------------------------- Name: J. Scott Holmes Title: Principal S-2 SCHEDULE A
AGGREGATE PRINCIPAL AMOUNT INITIAL PURCHASERS OF SECURITIES TO BE PURCHASED NationsBanc Montgomery Securities LLC........... $56,250,000 First Union Capital Markets, a division of Wheat First Securities, Inc.......................... 18,750,000 Total........................................ $75,000,000
A-1 ANNEX I Resale Pursuant to Regulation S. Each Initial Purchaser understands that: (a) Such Initial Purchaser agrees that it has not offered or sold and will not offer or sell the Securities in the United States or to, or for the benefit or account of, a U.S. Person (other than a distributor), in each case, as defined in Rule 902 under the Securities Act (i) as part of its distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering of the Securities pursuant hereto and the Closing Date, other than in accordance with Regulation S of the Securities Act or another exemption from the registration requirements of the Securities Act. Such Initial Purchaser agrees that, during such 40-day restricted period, it will not cause any advertisement with respect to the Securities (including any "tombstone" advertisement) to be published in any newspaper or periodical or posted in any public place and will not issue any circular relating to the Securities, except such advertisements as are permitted by and include the statements required by Regulation S. (b) Such Initial Purchaser agrees that, at or prior to confirmation of a sale of Securities by it to any distributor, dealer or person receiving a selling concession, fee or other remuneration during the 40-day restricted period referred to in Rule 903(b)(3) under the Securities Act, it will send to such distributor, dealer or person receiving a selling concession, fee or other remuneration a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the Offering and the Closing Date, except in either case in accordance with Regulation S under the Securities Act (or Rule 144A or to Accredited Institutions in transactions that are exempt from the registration requirements of the Securities Act), and in connection with any subsequent sale by you of the Securities covered hereby in reliance on Regulation S during the period referred to above to any distributor, dealer or person receiving a selling concession, fee or other remuneration, you must deliver a notice to substantially the foregoing effect. Terms used above have the meanings assigned to them in Regulation S." (c) Such Initial Purchaser agrees that the Securities offered and sold in reliance on Regulation S will be represented upon issuance by a global security that may not be exchanged for definitive securities until the expiration of the 40-day restricted period referred to in Rule 903(b)(3) of the Securities Act and only upon certification of beneficial ownership of such Securities by non-U.S. persons or U.S. persons who purchased such Securities in transactions that were exempt from the registration requirements of the Securities Act. Annex I-1 EX-10.9 23 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of June 26, 1998, by and among Coyne International Enterprises Corp., a New York corporation (the "Company"), Blue Ridge Textile Manufacturing, Inc., a Georgia corporation, Clean Towel Service, Inc., a Georgia corporation, Ohio Garment Rental, Inc., an Ohio corporation and Midway-CTS Buffalo, Ltd., a New York corporation (the "Guarantors") and NationsBanc Montgomery Securities LLC and First Union Capital Markets, a division of Wheat First Securities, Inc. (the "Initial Purchasers"), each of whom has severally agreed to purchase the Company's Series A 11 1/4% Senior Subordinated Notes due 2008 (together with the guarantees thereof by the Guarantors, the "Initial Notes") pursuant to the ------------- Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated as of June 23, 1998 (the "Purchase Agreement"), by and among the Company, the ------------------ Guarantors and the Initial Purchasers (i) for your benefit and for the benefit of each other Initial Purchaser and (ii) for the benefit of the holders from time to time of the Notes (including you and each other Initial Purchaser). In order to induce the Initial Purchasers to purchase the Initial Notes, the Company and the Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 5(h) of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Broker-Dealer: Any broker or dealer registered under the Exchange ------------- Act. Closing Date: The date of this Agreement. ------------ Commission: The Securities and Exchange Commission. ---------- Consummate: A Registered Exchange Offer shall be deemed ---------- "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company and the Guarantors to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Initial Notes that were tendered by Holders thereof pursuant to the Exchange Offer. Damages Payment Date: With respect to the Notes, each Interest -------------------- Payment Date. Effectiveness Target Date: As defined in Section 5. ------------------------- Exchange Act: The Securities Exchange Act of 1934, as amended. ------------ Exchange Notes: The Series B 11 1/4% Senior Subordinated Notes due -------------- 2008 together with the guarantee thereof by the Guarantors to be issued under the Indenture to Holders in exchange for Transfer Restricted Securities pursuant to this Agreement. Exchange Offer: The registration by the Company and the Guarantors -------------- under the Securities Act of the Exchange Notes pursuant to a Registration Statement pursuant to which the Company and the Guarantors offer the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement ------------------------------------- relating to the Exchange Offer, including the related Prospectus. Exempt Resales: The transactions in which the Initial Purchasers -------------- propose to sell the Initial Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Securities Act and pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act. Holders: As defined in Section 2(b) hereof. ------- Indemnified Holder: As defined in Section 8(a) hereof. ------------------ Indenture: The Indenture, dated as of June 26, 1998, among the --------- Company, the Guarantors and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such ------- Indenture is amended or supplemented from time to time in accordance with the terms thereof. Initial Notes: The Series A 11 1/4% Senior Subordinated Notes due ------------- 2008 together with the guarantees thereof by the Guarantors issued under the Indenture pursuant to the Purchase Agreement. Initial Placement: The issuance and sale by the Company and the ----------------- Guarantors of the Initial Notes to the Initial Purchasers pursuant to the Purchase Agreement. Initial Purchasers: As defined in the preamble hereto. ------------------ Interest Payment Date: As defined in the Indenture and the Notes. --------------------- 2 Liquidated Damages Payment Date: With respect to the Initial Notes, ------------------------------- each Interest Payment Date. NASD: National Association of Securities Dealers, Inc. ---- Notes: The Initial Notes and the Exchange Notes. ----- Person: An individual, partnership, corporation, trust or ------ unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as ---------- amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Purchase Agreement: The Purchase Agreement, dated as of June 23, ------------------ 1998, among the Company, the Guarantors and the Initial Purchasers, as such Purchase Agreement is amended or supplemented from time to time in accordance with the terms thereof. Record Holder: With respect to any Damages Payment Date relating to ------------- the Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. Registration Default: As defined in Section 5 hereof. -------------------- Registration Statement: Any registration statement of the Company ---------------------- and the Guarantors relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Securities Act: The Securities Act of 1933, as amended. -------------- Shelf Filing Deadline: As defined in Section 4 hereof. --------------------- Shelf Registration Statement: As defined in Section 4 hereof. ---------------------------- Transfer Restricted Securities: Each Note, until the earliest to ------------------------------ occur of (a) the date on which such Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement and (c) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act or by a Broker-Dealer pursuant to the 3 "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein). Trust Indenture Act: The Trust Indenture Act of 1939 (15 U.S.C. ------------------- Section 77aaa-77bbbb) as in effect on the date of the Indenture. Underwritten Registration or Underwritten Offering: A registration ------------------------- --------------------- in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the ------------------------------ benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a ----------------------------------------- holder of Transfer Restricted Securities (each, a "Holder") whenever such Person ------ owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 45 days after the Closing Date, a Registration Statement under the Securities Act relating to the Exchange Notes and the Exchange Offer, (ii) use their best efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 135 days after the Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer; provided, however, that neither the Company nor the Guarantors shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to service of process in suits or taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject, and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Exchange Notes to be offered in exchange for the Transfer Restricted Securities and to permit resales of Notes held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company and the Guarantors shall cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 4 30 days after the date notice of the Exchange Offer is mailed to the Holders. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Notes shall be included in the Exchange Offer Registration Statement. The Company and the Guarantors shall use their best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 Business Days thereafter. (c) The Company and the Guarantors shall indicate in a "Plan of Distribution" section contained in the Prospectus forming a part of the Exchange Offer Registration Statement that any Broker-Dealer who holds Initial Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Initial Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. Neither the Company nor the Guarantors shall have a duty to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement unless the Company shall have received written notice from any Broker-Dealer (each such Broker-Dealer so notifying the Company, a "Notifying Broker-Dealer") ----------------------- of its prospectus delivery requirement under the Act within fifteen (15) business days following the Consummation of the Exchange Offer; provided, that the Company shall prominently disclose such notice requirement in the Exchange Offer Registration Statement and in the letter of transmittal related thereto. In the event that the Company shall have received timely notice, the Company and the Guarantors shall use their best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective and (ii) the date on which a Broker-Dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities, provided that, following the 30th day after the Consummation of the Exchange Offer, the Company shall not be required to amend or supplement the Exchange Offer Registration Statement if (i) in the judgment of the Company's board of Directors exercised reasonably and in good faith the use of the Exchange Offer Registration Statement and the disclosure required to be made therein would materially interfere with a valid business purpose of the Company or the Guarantors and (ii) the Company delivers a notice to such effect to such Broker-Dealers setting forth the period of time (the "Prospectus Delivery Delay ------------------------- Period") (which - ------ 5 shall not be greater than 60 days) for which the Company's obligation to so amend or supplement the Exchange Offer Registration Statement will be suspended; and provided further that if the Company receives written notice from all Notifying Broker-Dealers that they no longer have a prospectus delivery requirement under the Act, the Company's obligation to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended during such period shall terminate. Notwithstanding the foregoing, there shall not be more than one Prospectus Delivery Delay Period declared in any one calendar year. The Company shall use its reasonable efforts to minimize the length of any Prospectus Delivery Delay Period and shall promptly notify such Broker-Dealers upon the termination thereof. The Company shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 180-day (or shorter as provided in the foregoing sentence) period in order to facilitate such resales. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company and the Guarantors are not ------------------ required to file an Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a)(i) below have been complied with), or (ii) any Holder of Transfer Restricted Securities shall notify the Company within 20 business days of the Consummation of the Exchange Offer (A) that such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) such Holder is a Broker-Dealer and holds Initial Notes acquired directly from the Company or one of its affiliates, then, upon such Holder's request, the Company and the Guarantors shall (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration ------------------ Statement") on or prior to the earliest to occur of (1) the 30th day after --------- the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement, and (2) the 30th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above (such earliest date being the "Shelf Filing Deadline"), which Shelf Registration Statement --------------------- shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use their best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 90th day after the Shelf Filing Deadline. The Company and the Guarantors shall use their best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of 6 Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years following the effective date of such Shelf Registration Statement. If in the judgment of the Company's Board of Directors exercised reasonably and in good faith the use of the Shelf Registration Statement and the disclosure required to be made therein would materially interfere with a valid business purpose of the Company or the Guarantors, the Company may deliver a notice to such effect to the Holders, and upon receipt of such notice, the Holders shall cease distribution of the Notes under a Shelf Registration Statement for the period of time (the "Shelf Delay Period") set forth in such notice (which shall ------------------ not be greater than 60 days). Notwithstanding the foregoing, there shall not be more than one Shelf Delay Period declared in any one calendar year. The Company shall use its reasonable efforts to minimize the length of any Shelf Delay Period and shall promptly notify the Holders upon the termination thereof. (b) Provision by Holders of Certain Information in Connection with the ------------------------------------------------------------------ Shelf Registration Statement. No Holder of Transfer Restricted Securities may - ---------------------------- include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 business days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the ------------------------- Exchange Offer has not been Consummated within 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post- effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and each of the -------------------- Guarantors hereby jointly and severally agree to pay liquidated damages to each Holder of Transfer Restricted Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the liquidated 7 damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.30 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued liquidated damages shall be paid to Record Holders by the Company by wire transfer of immediately available funds or by federal funds check on each Damages Payment Date, as provided in the Indenture. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of liquidated damages with respect to such Transfer Restricted Securities will cease. All obligations of the Company and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Note shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the ------------------------------------- Exchange Offer, the Company and the Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Initial Notes. The Company and each Guarantor hereby agree to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Company and each Guarantor hereby agree, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a favorable resolution by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of 8 this Agreement rely on the position of the Commission enunciated in Morgan ------ Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings - --------------------- ---------------------- Corporation (available May 13, 1988), as interpreted in the Commission's letter - ----------- to Shearman & Sterling dated July 2, 1993, and similar no-action letters (which may include any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Notes obtained by such Holder in exchange for Initial Notes acquired by such Holder directly from the Company. (b) Shelf Registration Statement. In connection with the Shelf ---------------------------- Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof. (c) General Provisions. In connection with any Registration Statement and ------------------ any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes by Broker-Dealers), the Company and the Guarantors shall: (i) use their best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Securities Act or any regulation thereunder, financial statements of the Guarantors) for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use their best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post- effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition 9 of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish without charge to each of the Initial Purchasers, each selling Holder named in any Registration Statement, and each of the underwriter(s), if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review of such Holders and underwriter(s) in connection with such sale, if any, for a period of at least five business days, and the Company and the Guarantors will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which a selling Holder of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s), if any, shall reasonably object in writing within five business days after the receipt thereof (such objection to be deemed timely made upon confirmation of telecopy transmission of such objection within such period). The objection of a selling Holder or underwriter, if any, shall be deemed to be reasonable if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the Initial Purchasers, each selling Holder named in any Registration Statement, and to the underwriter(s), if any, make the Company's and the Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such 10 document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (vi) make available at reasonable times for inspection by the selling Holders, any managing underwriter participating in any disposition pursuant to such Registration Statement and any attorney or accountant retained by such a selling Holder or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post- effective amendment as soon as practicable after the Company and/or any of the Guarantors is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (viii) cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Notes covered thereby or the underwriter(s), if any; (ix) furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including financial statements and schedules, all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) enter into such agreements (including an underwriting agreement), and make such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be requested by any Initial Purchaser or by any Holder of Transfer Restricted Securities or underwriter in 11 connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Guarantors shall: (A) furnish to each Initial Purchaser, each selling Holder and each underwriter, if any, in such substance and scope as they may request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the Consummation of the Exchange Offer and, if applicable, the effectiveness of the Shelf Registration Statement: (1) a certificate, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of the Company and each of the Guarantors, confirming, as of the date thereof, the matters set forth in paragraphs (i) and (iii) of Section 5 (f) of the Purchase Agreement and such other matters as such parties may reasonably request; (2) an opinion or opinions, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Guarantors, covering the matters set forth in paragraphs (c) and (d) of Section 5 of the Purchase Agreement and such other matters as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors, the Initial Purchasers' representatives and the Initial Purchasers' counsel in connection with the preparation of such Registration Statement and the related Prospectus and, although such counsel has not undertaken to determine independently, is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained therein, such counsel advises that, on the basis of the foregoing (relying as to materiality upon facts provided to such counsel by officers and other representatives of the Company and the Guarantors and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and 12 schedules and other financial and statistical data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the independent accountants for the Company and the Guarantors, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 5(a) of the Purchase Agreement, without exception; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company or the Guarantors pursuant to this clause (xi), if any. If at any time the representations and warranties of the Company and the Guarantors contemplated in clause (A)(1) above cease to be true and correct, the Company or the Guarantors shall so advise the Initial Purchasers and the underwriter(s), if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s) may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that neither the Company nor the Guarantors shall be required to register or qualify as a foreign corporation where it is not then so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not then so subject; (xiii) shall issue, upon the request of any Holder of Initial Notes covered by the Shelf Registration Statement, Exchange Notes, having an aggregate principal amount equal to the aggregate principal amount of Initial Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Exchange Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Notes, as the case may be; in return, the Initial Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in 13 such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use their best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xvi) if any fact or event contemplated by clause (c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use their reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xix) otherwise use their best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to their security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve- month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) cause the Indenture to be qualified under the Trust Indenture Act not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and to execute and use their best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; 14 (xxi) cause all Transfer Restricted Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company or the Guarantors are then listed if requested by the Holders of a majority in aggregate principal amount of Initial Notes or the managing underwriter(s), if any; and (xxii) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of ------ the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's and the Guarantors' expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's or the Guarantors' performance of or compliance with this Agreement will be borne by the Company and/or the Guarantors, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Initial Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements thereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company and the Guarantors will, in any event, bear their internal expenses (including, without limitation, all salaries and expenses of their respective officers and employees 15 performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company and the Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Guarantors will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors jointly and severally agree to indemnify and hold harmless each Holder, its officers and employees, and each person, if any, who controls any Holder within the meaning of the Securities Act and the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Holder or such officer, employee or controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement or exhibit thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and to reimburse each Holder and each such controlling person for any and all reasonable expenses (including the reasonable fees and disbursements of counsel to the extent provided for in Section 8(c)) as such expenses are reasonably incurred by such Holder or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by any Holder expressly for use in any Registration Statement or Prospectus (or any amendment or supplement or exhibit thereto); and provided, further, that with respect to any Registration Statement or Prospectus, the foregoing indemnity agreement shall not inure to the benefit of any Holder from whom the person asserting any loss, claim, damage, liability or expense purchased Notes, or any person controlling such Holder, if copies of the Prospectus were timely delivered to the Holder and a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Holder to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Notes 16 to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage, liability or expense. The indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that the Company and the Guarantors may otherwise have. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors and each of their respective directors and officers who sign a Registration Statement and each person, if any, who controls the Company or any Subsidiary Guarantor within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company or any Guarantor or any such director, officer or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Holder), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement or exhibit thereto), or arises out of or is based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Registration Statement or Prospectus (or any amendment or supplement or exhibit thereto), in reliance upon and in conformity with written information furnished to the Company by the Holders expressly for use therein; and to reimburse the Company, the Guarantors, or any such director or controlling person for any legal and other expenses reasonably incurred by the Company and the Guarantors, or any such director or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The indemnity agreement set forth in this Section 8(b) shall be in addition to any liabilities that each Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 8 or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party and provides notice to an indemnified party, the indemnifying party will be entitled to participate in and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise 17 between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with one local counsel), approved by the indemnifying party, representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (d) If the indemnification provided for in this Section 8 is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein other than by reason of the limitations or exceptions set forth in this Section 8, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other hand, from any Exchange Offer or offering of the Notes pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantors, on the one hand, and the Holders, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand, and the Holders, on the other hand, in connection with any Exchange Offer or offering of the Notes pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from any offering of the Notes pursuant to this Agreement (before deducting expenses) received by the Company and the Guarantors, and the total proceeds received by the Holders bear to the aggregate offering price of the Notes. The relative fault of the Company and the Guarantors, on the one hand, and the Holders, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by the Company and the 18 Guarantors, on the one hand, or the Holders, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8(c) with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 8(d); provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8(c) for purposes of indemnification. The Company, the Guarantors and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 8(d). Notwithstanding the provisions of this Section 8(d), no Holder shall be required to contribute any amount in excess of the proceeds received by such Holder upon the sale of the Notes. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several, and not joint, in proportion to their respective Holdings of Notes. For purposes of this Section 8(d), each officer and employee of a Holder, and each person, if any, who controls a Holder within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as such Holder, and each director and officer of the Company or any Guarantor, and each person, if any, who controls the Company or any Guarantor with the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company and the Guarantors. SECTION 9. RULE 144A The Company and the Guarantors each hereby agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any 19 underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) Remedies. The Company and the Guarantors each hereby agree that -------- monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company and the Guarantors will not -------------------------- on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of the Guarantors has entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Notes. The Company and the Guarantors will ------------------------------- not take any action, or permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be ---------------------- amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered; 20 (e) Notices. All notices and other communications provided for or ------- permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company or a Guarantor: Coyne International Enterprises Corp. 140 Cortland Avenue P.O. Box 4854 Syracuse, NY 13221 Telecopier No.: (315) 475-9978 Attention: Chief Financial Officer With a copy to: O'Hara, Hanlon, Knych & Pobedinsky, LLP One Park Place Syracuse, NY 13202 Telecopier No.: (315)-422-3943 Attention: Alex Pobedinsky and 21 Blank Rome Comisky & McCauley, LLP One Logan Square Philadelphia, PA 19103 Telecopier No.: (215) 569-5555 Attention: Fred Lipman All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of ---------------------- and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ------------- ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions ------------ contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the other Operative ---------------- Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company and the Guarantors with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 22 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. COYNE INTERNATIONAL ENTERPRISES CORP. By: /s/ Donald F. X. Keegan ----------------------------------------- Name: Donald F. X. Keegan Title: V.P BLUE RIDGE TEXTILE MANUFACTURING ,INC., as Guarantor By: /s/ Donald F. X. Keegan ----------------------------------------- Name: Donald F. X. Keegan Title: V.P CLEAN TOWEL SERVICE, INC., as Guarantor By: /s/ Donald F. X. Keegan ----------------------------------------- Name: Donald F. X. Keegan Title: V.P MIDWAY-CTS BUFFALO, LTD., as Guarantor By: /s/ Donald F. X. Keegan ----------------------------------------- Name: Donald F. X. Keegan Title: V.P OHIO GARMENT RENTAL, INC., as Guarantor By: /s/ Donald F. X. Keegan ----------------------------------------- Name: Donald F. X. Keegan Title: V.P S-1 The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. NATIONSBANC MONTGOMERY SECURITIES LLC FIRST UNION CAPITAL MARKETS BY: NATIONSBANC MONTGOMERY SECURITIES LLC By: /s/ J. Scott Holmes ------------------------------ J. Scott Holmes Principal S-2 EX-10.10 24 PROMISSORY NOTE PROMISSORY NOTE FOR VALUE RECEIVED, the undersigned, J. Stanley Coyne, residing at 989 James Street, Syracuse, New York 13203 (the "Maker"), promises to pay to the order of Coyne International Enterprises Corp, a New York corporation having an office and principal place of business at 140 Cortland Avenue, Syracuse, New York (the "Holder"), the principal sum of One Million One Hundred Ten Thousand Dollars ($1,110,000.00) in lawful money of the United States, with interest thereon at the applicable Federal rate under Section 1274(d), compounded annually pursuant to Reg. 1.7872-3(b) of the Internal Revenue Code of 1986 and regulations thereunder, from September 1, 1994 until the debt is paid in full. Principal and interest payments are deferred during the lifetime of the Maker. The Maker may pre-pay principal and/or accrued interest in full or in part at any time. Payments shall be made to the Holder at the Holder's address shown above or at such other place as may be designated in writing by the Holder. The entire unpaid balance due hereunder shall be payable in full six (6) months after the date of death of the Maker. The Maker waives presentment, protest, demand for payment and notice of default, dishonor, or nonpayment. This instrument cannot be modified or terminated orally. This Promissory Note is secured by a second mortgage on certain real property of the Maker located in Nantucket, Massachusetts, dated the same day as this Promissory Note. IN WITNESS WHEREOF, the Maker has executed this instrument on September 27, 1994 at Syracuse, New York. /s/ J. Stanley Coyne ---------------------------------- J. Stanley Coyne STATE OF NEW YORK ) COUNTY OF ONONDAGA ) ss.: On this 27 day of September, 1994, before me personally came J. Stanley Coyne to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that he executed the same. /s/ Linda M. Selley ---------------------------------- Notary Public MORTGAGE DEED J. STANLEY COYNE, of 989 James Street, Syracuse, NY 13203, for consideration paid, grant to COYNE INTERNATIONAL ENTERPRISES CORP., a New York corporation having an address of 140 Cortland Avenue, Syracuse, NY, with MORTGAGE COVENANTS, to secure the payment of ONE MILLION ONE HUNDRED TEN THOUSAND AND NO/100 ($1,110,000.00) DOLLARS as provided in a promissory note of even date herewith, the land together with the structures thereon situate at 8 Winter Street, Nantucket Town and County, Massachusetts, bounded and described as follows: NORTHERLY by Liberty Street, 55.26 feet; EASTERLY by Winter Street, 57.74 feet; SOUTHERLY by land now or formerly of Millie Williams, 67.10 feet; and WESTERLY by land now or formerly of Lucille Sanguinetti, 64.60 feet. Containing 3,747 square feet, more or less, and being shown on plan of "Land of Rita Prentice Davis, dated March 24, 1962" drawn by Josiah S. Barrett, Engineer, recorded in April, 1962. Subject to a prior mortgage to Nantucket Bank dated February 17, 1993 in Book 408, Page 262 at the Nantucket Registry of Deeds. For Grantor's title see Deed recorded at Book 217, Page 114 at said Registry. Mortgagor covenants and agrees with the mortgagee that in the event the mortgaged premises or any part thereof becomes vested in anyone other than the mortgagor without the prior written consent of the mortgagee, the whole sum of principal and interest due under the note secured hereby shall become immediately due and payable at the option of the mortgagee. This mortgage is upon the STATUTORY CONDITION for any breach of which or any conditions of this mortgage or the note secured hereby, the mortgagee shall have the STATUTORY POWER OF SALE. WITNESS my hand and seal this 27th day of September, 1994. /s/ J. Stanley Coyne ---------------------------------- J. Stanley Coyne STATE OF NEW YORK , ss September 27, 1994 Then personally appeared the above-named J. Stanley Coyne and acknowledged the foregoing instrument to be his correct free act and deed, before me /s/ Linda M. Seeley ---------------------------------- Notary Public My Commission Expires: June 10, 1995 EX-10.11 25 AGREEMENT PROMISSORY NOTE --------------- $1,285,161.57 Syracuse, New York August 3, 1995 FOR VALUE RECEIVED, J. Stanley Coyne ("Maker") hereby promises to pay to the order of OnBank & Trust Co., as Trustee ("Holder"), or it successors or assigns, the principal sum of ONE MILLION TWO HUNDRED EIGHTY-FIVE THOUSAND ONE HUNDRED SIXTY-ONE AND 57/100 DOLLARS ($1,285,161.57), with interest from the date hereof at the rate of ten percent (10%) per annum. Principal and all accrued interest shall be paid eight years from the date hereof when this Note shall become due and payable in full. The principal amount due each Trust is shown on Exhibit A. This Promissory Note is given in payment for certain shares of Coyne International Enterprises Corp. ("CTS") pursuant to a Stock Purchase Agreement between Maker and Holder dated October 7, 1994. Maker agrees that if the transactions under said Agreement do not qualify for installment sales treatment under the Internal Revenue Code, or if income taxes are otherwise due prior to the payment date of this Note, Maker will, within thirty days after written demand from Holder, prepay a sufficient amount of interest on this Note to enable Holder to pay the income tax which shall be due. All payments shall be made to Holder at its offices at 101 South Salina Street, Syracuse, NY 13202 or at such other address as shall hereafter be designated by the Holder in writing. Maker has pledged certain shares in Coyne International Enterprises Corp. purchased from Holder as collateral security for payment of this Note, pursuant to a Pledge and Security Agreement of even date. This note shall be governed by the laws of the State of New York in all respects, including matters of construction, validity and performance. /s/ J. Stanley Coyne ----------------------------------- J. Stanley Coyne INDEMNIFICATION AGREEMENT ------------------------- August 3, 1995 OnBank & Trust Co. 101 South Salina Street Syracuse, New York 13202 Gentlemen: This Indemnification Agreement is being furnished to you to satisfy the requirement contained in paragraph 7 of the Stock Purchase Agreement between us dated October 7, 1994. In consideration of your agreement to enter into the Stock Purchase Agreement, I hereby agree to indemnify, defend, and hold you harmless against any claims, actions, damages, losses, costs or expenses which may arise from or relate to my purchase of certain shares of stock of Coyne International Enterprises Corp. pursuant to the Stock Purchase Agreement, including the amount of any deductibles under your E&O insurance policy, which may arise from or relate to the Stock Purchase Agreement or my purchase of the stock of Coyne International Enterprises Corp. pursuant to this Agreement. My obligations under this Indemnification Agreement shall be binding upon me, my estate, and my successors and assigns. Further, in order to secure my indemnification obligation, I am providing you with the attached Guaranty of my obligations by Coyne International Enterprises Corp. Very truly yours, /s/ J. Stanley Coyne J. Stanley Coyne GUARANTY For value received, receipt of which is acknowledged, COYNE INTERNATIONAL ENTERPRISES CORP. hereby guarantees full payment and performance of all obligations of J. Stanley Coyne under the foregoing Indemnification Agreement. This is a guarantee of payment and not of collection and it is absolute, unconditional, and irrevocable. COYNE INTERNATIONAL ENTERPRISES CORP. By:/s/ Thomas M. Coyne --------------------------------- Thomas M. Coyne, President STATE OF NEW YORK ) ) ss.: COUNTY OF ONONDAGA ) On this 13 day of June, 1995, before me personally came Thomas M. Coyne to me known, who, being duly sworn, did depose and say that he resides in Skaneateles, New York, that he is the President of Coyne International Enterprises Corp., the corporation described in and which executed the above instrument, and that he signed his name thereto by order of the Board of Directors of said corporation. /s/ Linda M. Selley ----------------------------- Notary Public EX-12.1 26 COMPUTATION OF RATIO OF EARNINGS Exhibit 12.1 COYNE INTERNATIONAL ENTERPRISES CORP. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (dollars in thousands)
Six Months Year Ended October 31, Ended April 30, ---------------------------------------------------- ------------------- 1993 1994 1995 1996 1997 1997 1998 -------- -------- -------- -------- -------- -------- -------- Income (loss) before income taxes, extraordinary item and cumulative effect of change in accounting principles $ 2,563 $ (224) $ 1,341 $ 1,393 $ 4,077 $ 1,662 $(15,673) -------- -------- -------- -------- -------- -------- -------- Fixed charges: Interest on loans and notes $ 4,451 $ 5,292 $ 5,706 $ 6,198 $ 6,130 $ 3,118 $ 3,107 Amortization of debt issuance costs and original issue discount $ 208 $ 224 $ 548 $ 588 $ 585 $ 292 $ 288 Interest component of rental expense $ 1,172 $ 1,268 $ 1,311 $ 883 $ 825 $ 423 $ 393 -------- -------- -------- -------- -------- -------- -------- Total fixed charges included in earnings $ 5,831 $ 6,784 $ 7,565 $ 7,669 $ 7,540 $ 3,833 $ 3,788 Capitalized interest $ 128 $ 97 -------- -------- -------- -------- -------- -------- -------- Total fixed charges $ 5,831 $ 6,784 $ 7,693 $ 7,766 $ 7,540 $ 3,833 $ 3,788 -------- -------- -------- -------- -------- -------- -------- Income (loss) before income taxes, extraordinary item, cumulative effect of change in accounting principles and fixed charges $ 8,394 $ 6,560 $ 8,906 $ 9,062 $ 11,617 $ 5,495 $(11,885) -------- -------- -------- -------- -------- -------- -------- Ratio of earnings to fixed charges 1.440 -- 1.158 1.167 1.541 1.434 -- ======== ======== ======== ======== ======== ======== ======== Deficiency of earnings to fixed charges -- $ (224) $ -- $ -- $ -- $ -- $(15,673) ======== ======== ======== ======== ======== ======== ========
EX-21 27 SUBSIDIARIES OF THE COMPANY EXHIBIT 21.1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY
JURISDICTION PARENT SUBSIDIARY OF INCORPORATION - -------------------------- ---------------------------------------- ------------------------- Coyne International Blue Ridge Textile Manufacturing, Inc. Georgia Enterprises Corp. ("CTS") CTS Clean Towel Service, Inc. Georgia CTS Ohio Garment Rental, Inc. Ohio CTS Midway-CTS Buffalo, Ltd. New York
EX-23.1 28 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-4 (File No. 333- ) of our report dated December 19, 1997, on our audits of the financial statements and financial statement schedules of Coyne International Enterprises Corp. We also consent to the references to our firm under the caption "Experts". Pricewaterhouse Coopers LLP Syracuse, New York July 30, 1998 Report of Independent Accounts Board of Directors Coyne International Enterprises Corp. In connection with our audits of the consolidated financial statements of Coyne International Enterprises Corp. and Subsidiaries as of October 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which financial statements are included in the Prospectus, we have also audited the financial statement schedule listed in Item 21 herein. In our opinion, this financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Pricewaterhouse Coopers LLP Syracuse, New York December 19, 1997 EX-27.1 29 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF COYNE INTERNATIONAL ENTERPRISE CORP. AND SUBSIDIARIES FOR THE SIX MONTHS ENDED APRIL 30, 1998 AND FOR THE YEAR ENDED OCTOBER 31, 1997. 0001066242 COYNE INTERNATIONAL ENTERPRISES CORP YEAR 6-MOS OCT-25-1997 OCT-31-1998 OCT-27-1996 OCT-26-1998 OCT-25-1997 APR-25-1998 1,272,192 570,298 0 0 11,957,651 13,372,682 0 0 5,131,861 6,452,940 42,651,331 48,131,791 83,136,900 87,561,170 41,336,952 44,917,979 102,620,744 110,116,239 35,881,661 42,704,625 58,557,183 58,815,691 0 0 4,806,200 4,806,200 769 769 5,090,093 (10,820,583) 102,620,744 110,116,239 8,263,079 5,012,343 122,934,763 67,028,209 5,801,679 3,742,506 112,142,961 62,049,364 0 0 0 0 6,715,224 20,652,521 4,076,578 (15,673,676) 2,025,000 237,000 2,051,578 (15,910,676) 0 0 0 0 0 0 2,051,578 (15,910,676) 0.0 0.0 0.0 0.0
EX-99.1 30 LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL TO TENDER FOR EXCHANGE 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008 OF COYNE INTERNATIONAL ENTERPRISES CORP. PURSUANT TO THE PROSPECTUS DATED , 1998 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON____________, 1998 UNLESS EXTENDED - -------------------------------------------------------------------------------- To: IBJ Schroder Bank & Trust Company, The Exchange Agent - -------------------------------------------------------------------------------- By registered or certified mail: By Facsimile: (212) 858-2611 IBJ Schroder Bank & Trust Company P.O. Box 84 Bowling Green Station New York, NY 10274-0084 Confirm by telephone: (212) 858-2103 Attn: Reorganization Department By Overnight Courier or hand delivery IBJ Schroder Bank & Trust Company One State Street New York, NY 10004 Attn: Securities Processing Window, Subcellar 1(SC-1) - -------------------------------------------------------------------------------- DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS INSTRUMENT VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE PROSPECTUS (AS DEFINED BELOW) AND THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned acknowledges receipt of the Prospectus, dated , 1998 (the "Prospectus") of Coyne International Enterprises Corp., Blue Ridge Textile Manufacturing, Inc., Clean Towel Service, Inc., Ohio Garment Rental, Inc., and Midway-CTS Buffalo, Ltd. (collectively, the "Company") and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 11 1/4% Series B Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement, for each $1,000 principal amount of its outstanding 11 1/4% Series A Senior Subordinated Notes due 2008 (the "Initial Notes"), of which $75,000,000 principal amount is outstanding. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1998, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term shall mean the latest date and time to which the Exchange Offer is extended. The term "Holder" with respect to the Exchange Offer means any person in whose name Initial Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. Capitalized terms used but not defined herein have the respective meanings set forth in the Prospectus. This Letter of Transmittal is to be used by holders of Initial Notes if (i) certificates representing the Initial Notes are to be physically delivered to the Exchange Agent herewith, (ii) tender of the Notes is to be made by book entry transfer to the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering" by any financial institution that is a participant in the Book-Entry Transfer Facility and whose name appears on a security position listing as the owner of Notes (such participants acting on behalf of holders, are referred to herein, together with such holders, as "Authorized Holders") or (iii) tender of the Initial Notes is to be made according to the guaranteed delivery procedures described in the Prospectus under the caption "The Exchange Offer -- Guaranteed Deliver Procedures." See Instruction 2. Delivery of documents to the Book- Entry Transfer Facility does not constitute delivery to the Exchange Agent. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Initial Notes must complete this letter in its entirety. [_] CHECK HERE IF INITIAL NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER ARE ENCLOSED HEREWITH. [_] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution:__________________________________________________ Account Number:_________________________________________________________________ Transaction Code Number:________________________________________________________ Principal Amount of Tendered Initial Notes:_____________________________________ If Holders desire to tender Initial Notes pursuant to the Exchange Offer and (i) time will not permit this Letter of Transmittal, certificates representing Initial Notes or other required document to reach the Exchange Agent prior to the Expiration Date, or (ii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date, such Holders may effect a tender of such Initial Notes in accordance with the guaranteed delivery procedures set forth in the prospectus under the caption "The Exchange Offer-- Guaranteed Delivery Procedures." See Instruction 2 below. 2 [_] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING (SEE INSTRUCTION 2): Name of Registered or Acting Holder(s):_________________________________________ Window Ticket No. (if any):_____________________________________________________ Date of Execution of Notice of Guaranteed Delivery:_____________________________ Name of Eligible Institution that Guaranteed Delivery:_______________________________________________________ If Delivered by Book-Entry Transfer, the Account Number:_____________________________________________________________ Transaction Code Number:________________________________________________________ [_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD ENDING ON THE EARLIER OF: (1) 180 DAYS FROM THE DATE ON WHICH THE EXCHANGE OFFER REGISTRATION STATEMENT IS DEEMED EFFECTIVE OR (2) THE DATE ON WHICH A PARTICIPATING BROKER-DEALER IS NO LONGER REQUIRED TO DELIVER A PROSPECTUS IN CONNECTION WITH MARKET MAKING OR OTHER TRADING ACTIVITIES, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE NOTES; PROVIDED, HOWEVER, THAT THE COMPANY HAS NO OBLIGATION TO AMEND OR SUPPLEMENT THE PROSPECTUS UNLESS IT HAS RECEIVED WRITTEN NOTICE FROM A PARTICIPATING BROKER-DEALER OF ITS PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WITHIN FIFTEEN BUSINESS DAYS FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER. Name:___________________________________________________________________________ Address:________________________________________________________________________ Attention:______________________________________________________________________ 3 List below the Initial Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and principal amount of Initial Notes should be listed on a separate signed schedule affixed hereto. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE BOXES BOX 1 DESCRIPTION OF 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
- ------------------------------------------------------------------------------------------------------- AGGREGATE PRINCIPAL PRINCIPAL AMOUNT NAME(S) AND ADDRESS(ES OF AMOUNT TENDERED (MUST BE REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY AN INTEGRAL (PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) MULTIPLE OF $1,000)** - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- TOTAL - ------------------------------------------------------------------------------------------------------- * Need not be completed by Holders tendering by book-entry transfer. ** Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of 11 1/4% Series A Senior Subordinated Notes due 2008 will be deemed to have tendered the entire aggregate principal amount represented by the column labeled "Aggregate Principal Amount Represented by Certificate(s)." If the space provided above is inadequate, list the certificate numbers and principal amounts on a separate signed schedule and affix the list to this Letter of Transmittal. - -------------------------------------------------------------------------------------------------------
The minimum permitted tender is $1,000 in principal amount of 11 1/4% Series A Senior Subordinated Notes due 2008. All other tenders must be in integral multiples of $1,000. 4
- --------------------------------------------------------------------------------------------- BOX 2 BOX 3 SPECIAL REGISTRATION SPECIAL DELIVERY INSTRUCTIONS INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7) (SEE INSTRUCTIONS 5, 6 AND 7) To be completed ONLY if certificates for To be completed ONLY if certificates for Initial Notes in a principal amount not Initial Notes in a principal amount not tendered, or Exchange Notes issued in tendered, or Exchange Notes issued in exchange for Initial Notes accepted for exchange for Initial Notes accepted for exchange, are to be issued in the name of exchange, are to be sent to someone other someone other than the undersigned. than the undersigned, or to the undersigned at an address other than that shown above. Name____________________________________ Name__________________________________________ (Please Print) (Please Print) Address_________________________________ Address_______________________________________ (Include Zip Code) Include Zip Code) (Tax Identification or Social Security (Tax Identification or Social Security Number) Number) - ---------------------------------------------------------------------------------------------
BOX 4 BROKER-DEALER STATUS [_] Check this box if the Beneficial Owner of the Initial Notes is a Participating Broker-Dealer and such Participating Broker-Dealer acquired the Initial Notes for its own account as a result of market-making activities or other trading activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THIS LETTER OF TRANSMITTAL TO DONALD F.X. KEEGAN, CHIEF FINANCIAL OFFICER OF THE COMPANY, VIA FACSIMILE: (315) 475-9978. THE TENDER OF INITIAL NOTES VIA AGENT'S MESSAGE WILL NOT CONSTITUTE NOTICE TO THE COMPANY OF A HOLDER'S STATUS AS A PARTICIPATING BROKER-DEALER. PARTICIPATING BROKER-DEALERS DESIRING TO PROVIDE SUCH NOTICE MUST STILL DO SO IN WRITING WITHIN FIFTEEN BUSINESS DAYS FOLLOWING THE CONSUMMATION OF THE EXCHANGE OFFER. NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to Coyne International Enterprises Corp., Blue Ridge Textile Manufacturing, Inc., Clean Towel Service, Inc., Ohio Garment Rental, Inc., and Midway-CTS Buffalo, Ltd. (collectively, the "Company"), the principal amount of Initial Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Initial Notes tendered in accordance with this Letter of Transmittal, the undersigned exchange, assigns and transfers to, 5 or upon the order of, the Company all right, title and interest in and to the Initial Notes tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company in connection with its Exchange Offer) with respect to the tendered Initial Notes with the full power of substitution to (i) present such Initial Notes and all evidences of transfer and authenticity to, or transfer ownership of, such Initial Notes on the account books maintained by the Book-Entry Transfer Facility to, or upon, the order of, the Company, (ii) deliver certificates for such Initial Notes to the Company and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Company, (iii) present such Initial Notes for transfer on the books of the Company and receive all benefits and otherwise exercise all rights of beneficial ownership of such Initial Notes and (iv) otherwise to cause such Initial Notes to be exchanged, assigned and transferred, all in accordance with the terms of the Exchange Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign and transfer the Initial Notes tendered hereby and that the Company will acquire good, valid and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims, when the same are acquired by the Company. The undersigned hereby further represents that any Exchange Notes acquired in exchange for Initial Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the undersigned, that neither the undersigned nor an other such person has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that neither the undersigned nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended, of the Company. In addition, the undersigned and any such other person acknowledge that (a) any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must, in the absence of an exemption therefrom, comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale of the Exchange Notes and cannot rely on the position of the Staff of the Securities and Exchange Commission enunciated in no-action letters and (b) failure to comply with such requirements in such instance could result in the undersigned or such person incurring liability under the Securities Act for which the undersigned or such person is not indemnified by the Company. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Initial Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a Prospectus in connection with any resale of such Exchange Notes, however, by so acknowledging and by delivering a Prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Unless otherwise notified in accordance with the instructions set forth herein in Box 4 under "Broker-Dealer Status," the Company will assume that the undersigned is not a participating Broker-Dealer. The undersigned agrees that it shall, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the Notes tendered hereby. The undersigned further agrees that acceptance of any and all validly tendered Initial Notes by the Company and the issuance of Exchange Notes in exchange shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement (as defined in the Prospectus) and that the Company shall have no further obligations or liabilities thereunder. 6 The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "Exchange Offer--Conditions." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Initial Notes tendered hereby and, in such event, the Initial Notes not exchanged will be returned to the undersigned at the address shown above. Subject to compliance with securities laws, the Company also expressly reserves the right, in its sole discretion, to (i) extend or terminate the Exchange Offer and (ii) to amend the Exchange Offer in any respect and at any time or from time to time until the Existing Notes are accepted for exchange. The Company may terminate the Exchange Offer, in its sole discretion, regardless of whether any of the events set forth in the Offer to Exchange under "Exchange Offer--Conditions" shall have occurred or shall have been determined by the Company to have occurred. The undersigned understands that there is no assurance that the Exchange Offer will be consummated or, if consummated, that the Company will determine to consummate the Exchange Offer on [ ], 1998. The undersigned understands that although the Expiration Date currently is scheduled to occur on [ ], 1998, the Company reserves the right, in its sole discretion, to extend the Expiration Date or terminate the Exchange Offer for any reason. For purposes of the Exchange Offer, the Company shall be deemed to have accepted validly tendered Initial Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. If any Initial Notes tendered herewith are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Initial Notes will be returned, without expense, to the undersigned at the address shown below or to a different address as may be indicated herein in Box 3 under "Special Delivery Instructions" as promptly as practicable after the Expiration Date. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned, and every obligation of the undersigned under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representative, successors and assigns. The undersigned understands that tenders of Initial Notes pursuant to the procedures described under the caption "The Exchange Offer--Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the prospectus under the caption "The Exchange Offer--Withdrawal of Tenders." Unless otherwise indicated in Box 2 under "Special Registration Instructions," please issue the certificates (or electronic transfers) representing the Exchange Notes issued in exchange for the Initial Notes accepted for exchange and any certificates (or electronic transfers) for Initial Notes not tendered or not exchanged, in the name(s) of the undersigned. Similarly, unless otherwise indicated in Box 3 under "Special Delivery Instructions," please send the certificates, if any, representing the Exchange Notes issued in exchange for the Initial Notes accepted for exchange and any certificates for the Initial Notes not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below in the undersigned's signature(s). In the event that both "Special Registration Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Initial Notes accepted for exchange in the name(s) of, and return any certificates for Initial Notes not tendered or not exchanged to, the person(s) so indicated. The undersigned 7 understandings that the Company has no obligation pursuant to the "Special Registration Instructions" and "Special Delivery Instructions" to transfer any Initial Notes from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the Initial Notes so tendered. Holders who wish to tender their Initial Notes and (i) whose Initial Notes are not immediately available or (ii) who cannot deliver the Initial Notes, this letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date, may tender their Initial Notes according to the guaranteed delivery procedures set forth in the prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2 regarding the completion of this Letter of Transmittal printed below. The below lines must be signed by the registered holder(s) exactly as their name(s) appear(s) on the Initial Notes or by a participant in the Book-Entry Transfer Facility, exactly as such participant's name appears on a security position listing as the owner of the Initial Notes, or by person(s) authorized to become registered holder(s) by a properly completed bond power from the registered holder(s), a copy of which must be transmitted with this Letter of Transmittal. If Initial Notes to which this letter of Transmittal relate are held of record by two or more joint holders, then all such holders must sign this Letter of Transmittal. PLEASE SIGN HERE WHETHER OR NOT INITIAL NOTES ARE BEING PHYSICALLY TENDERED HEREBY X - - ____________________________ __________________________ Date X - - ____________________________ __________________________ Date Area code and telephone number:____________ If signature is by a trustee, executor, administrator, guardian, attorney-in- fact, officer or corporation or other person acting in a fiduciary or representative capacity, then such person must (i) set forth his or her full title below and (ii) submit evidence satisfactory to the Company of such person's authority so to act. See Instruction 5 regarding the completion of this Letter of Transmittal printed below. Name(s):________________________________________________________________________ (Please Print) Capacity:_______________________________________________________________________ Address:________________________________________________________________________ (Include Zip Code) 8 MEDALLION SIGNATURE GUARANTEE (If required by Instruction 5) Certain Signatures must be Guaranteed by an Eligible Institution Signature(s) Guaranteed by an Eligible Institution:_____________________________ (Authorized Signature) ________________________________________________________________________________ (Growing Your Business Book) ________________________________________________________________________________ (Name of Firm) ________________________________________________________________________________ (Address, Include Zip Code) ________________________________________________________________________________ (Area Code and Telephone Number) Dated:__________________________________________________________________________ 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR INITIAL NOTES OR BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Initial Notes (or a confirmation of book-entry transfer into the Exchange Agent's account with the Book-Entry Transfer Facility for tendered Initial Notes transferred electronically), as well as a properly completed and duly executed copy of this Letter of Transmittal (or facsimile thereof), or (in the case of a book-entry transfer) an Agent's Message (as defined below) in lieu of this letter of Transmittal, a Substitute Form W-9 (or facsimile thereof) and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. The tender of Initial Notes via Agent's Message will not constitute notice to the Company of a holder's status as a Participating Broker-Dealer. Participating Broker-Dealers desiring to provide such notice must still do so in writing within fifteen business days following the consummation of the Exchange Offer. THE METHOD OF DELIVERY OF CERTIFICATES FOR INITIAL NOTES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE RISK OF THE TENDERING HOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. AS AN ALTERNATIVE TO DELIVERY BY MAIL, THE HOLDER MAY WISH TO USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. Neither the Company nor the Exchange agent is under an obligation to notify any tendering holder of the Company's acceptance of tendered Initial Notes prior to the completion of the Exchange Offer. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a book-entry confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the terms of this Letter of Transmittal against such participant. 2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Initial Notes but whose Initial Notes are not immediately available or who cannot deliver their certificates for Initial Notes (or comply with the procedures for book-entry transfer prior to the Expiration Date), the Letter of Transmittal (or Agent's Message) and any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Initial Notes according to the guaranteed delivery procedures set forth below. Pursuant to such procedures: (i) such tender must be made by or through a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States (an "Eligible Institution"); (ii) prior to the Expiration Date, the Exchange Agent must have received from the holder and the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or hand delivery) setting forth the name and address of the holder, the 10 certificate number or numbers of the tendered Initial Notes, and the principal amount of tendered Initial Notes and stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) or Agent's Message, together with the tendered Initial Notes (or a confirmation of book-entry transfer into the Exchange Agent's account with the Book-Entry Transfer Facility for Initial Notes transferred electronically) and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal (or Agent's Message) and certificates representing the tendered Initial Notes in proper form for transfer (or a confirmation of book-entry transfer into the Exchange Agent's account with the Book-Entry Transfer Facility for Initial Notes transferred electronically), and any other documents required by the Letter of Transmittal must be received by the Exchange Agent within three New York Stock Exchange trading days after the Expiration Date. Any holder who wishes to tender Initial Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery relating to such Initial Notes prior to the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by a Holder who attempted to use the guaranteed delivery procedure. 3. TENDER BY HOLDER. Only a holder of Initial Notes may tender such Initial Notes in the Exchange Offer. Any beneficial owner of Initial Notes who is not the registered holder and who wishes to tender should arrange with such holder to execute and deliver this Letter of Transmittal on such owner's behalf or must, prior to completing and executing this Letter of Transmittal and delivering such Initial Notes, either make appropriate arrangements to register ownership of the Initial Notes in such owner's name or obtain a properly completed bond power from the registered holder. 4. PARTIAL TENDERS. Tenders of Initial Notes will be accepted only in integral multiples of $1,000 in principal amount. If less than the entire principal amount of Initial Notes is tendered, the tendering holder should fill in the principal amount tendered in the column labeled "Aggregate Principal Amount Tendered" of the box entitled "Description of Notes" (Box 1) above. The entire principal amount of Initial Notes delivered to the Exchange agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of Initial Notes is not tendered, Initial Notes for the principal amount of Initial Notes not tendered and Exchange Notes exchanged for any Initial Notes tendered will be sent to the holder at his or her registered address (or transferred to the account of the Book-Entry Facility designated above), unless a different address (or account) is provided in the appropriate box on this Letter of Transmittal, as soon as practicable following the Expiration Date. 5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Initial Notes tendered herewith, the signatures must correspond with the name(s) as written on the face of the tendered Initial Notes without alteration, enlargement, or any change whatsoever. If this Letter of Transmittal is signed by a participant in the Book-Entry Transfer Facility, the signature must correspond with the name as it appears on the security position listing as the owner of the Initial Notes. 11 If any of the tendered Initial Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Initial Notes are held in different names on several Initial Notes, it will be necessary to complete, sign, and submit as many separate copies of the Letter of Transmittal documents as there are names in which tendered Initial Notes are held. If this Letter of Transmittal is signed by the registered holder or Acting Holder, and Exchange Notes are to be issued and any untendered or unaccepted principal amount of Initial Notes are to be reissued or returned to the registered holder or Acting Holder, then, the registered holder or Acting Holder need not and should not endorse any tendered Initial Notes nor provide a separate bond power. In any other case (including if this Letter of Transmittal is not signed by the Acting Holder), the registered holder or Acting Holder must either properly endorse the Initial Notes tendered or transmit a properly completed separate bond power with this Letter of Transmittal (in either case, executed exactly as the name(s) of the registered holder(s) appear(s) on such Initial Notes, and, with respect to a participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Initial Notes, exactly as the name(s) of the participant(s) appear(s) on such security position listings), with the signature(s) on the endorsement or bond power guaranteed by an Eligible Institution unless such certificates or bond powers are signed by an Eligible Institution. If this Letter of Transmittal or any Initial Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and evidence satisfactory to the Company of their authority to so act must be submitted with this Letter of Transmittal. No Medallion signature guarantee is required if (i) this Letter of Transmittal is signed by the registered holder(s) of the Initial Notes tendered herewith (or by a participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of the tendered Initial Notes) and the issuance of Exchange Notes (and an Initial Notes not tendered or not accepted) are to be issued directly to such registered holder(s) (or, if signed by a participant in the Book-Entry Transfer Facility, any Exchange Notes or Initial Notes not tendered or not accepted are to be deposited to such participant's account at such Book-Entry Transfer Facility) and neither the "Special Delivery instructions" (Box 3) nor the "Special Registration Instructions" (Box 2) has been completed, or (ii) such Initial Notes are tendered for the account of an Eligible Institution. In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. 6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the applicable box, the name and address (or account at the Book- Entry Transfer Facility) in which the Exchange Notes and/or substitute Initial Notes for principal amounts not tendered or not accepted for exchange are to be sent (or deposited), if different from the name and address or account of the person signing this Letter of Transmittal. In the case of issuance in a different name, the employer identification number or social security number of the person named must also be indicated and the indicated and the tendering holders should complete the applicable box. If no such instructions are given, the Exchange Notes (and any Initial Notes not tendered or not accepted) will be issued in the name of and sent to the Acting Holder of the Initial Notes or deposited at such Acting Holders' account at the Book-Entry Transfer Facility. 12 7. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the sale and transfer of Initial Notes to it or its order pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the transfer and sale of Initial Notes to the Company or its order pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or on any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption from taxes therefrom is not submitted with this Letter of Transmittal, the amount of transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the Initial Notes listed in this Letter of Transmittal. 8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder of any Initial Notes which are accepted for exchange must provide the Company (as payor) with its correct taxpayer identification number ("TIN"), which, in the case of a holder who is an individual, is his or her social security number. If the Company is not provided with the correct TIN, the Holder may be subject to a $50 penalty imposed by Internal Revenue Service. (If withholding results in an over-payment of taxes, a refund may be obtained.) Certain holders (including, among other, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed "Guidelines for certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. To prevent backup withholding, each tendering holder must provide such holder's correct TIN by completing the Substitute Form W-9 set forth herein, certifying that the TIN provided is correct (or that such holder is awaiting a TIN), and that (i) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of failure to report a interest or dividends or (ii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the Initial Notes are registered in more than one name or are not in the name of the actual owner, see the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for information on which TIN to report. The Company reserves the right in its sole discretion to take whatever steps are necessary to comply with the Company's obligation regarding backup withholding. 9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of tendered Initial Notes will be determined by the Company, in its sole discretion, which determination will be final and binding. The Company reserves the right to reject any and all Initial Notes not validly tendered or any Initial Notes, the Company's acceptance of which may, in the opinion of the Company or its counsel, be unlawful. The Company also reserves the right to waive any conditions of the Exchange Offer or defects or irregularities in tenders of Initial Notes as to any ineligibility of any holder who seeks to tender Initial Notes in the Exchange Offer (includes this Letter of Transmittal and the instructions hereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Initial Notes must be cured within such time as the Company shall determine. Neither the Company nor the Exchange Agent shall be under any duty to give notification of defects or irregularities with respect to tenders of Initial Notes, and shall not incur any liability for failure to give such notification. 10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend, waive, or modify specified conditions in the Exchange Offer in the case of any tendered Initial Notes. 13 11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or contingent tender of Initial Notes on transmittal of this Letter of Transmittal will be accepted. 12. MUTILATED, LOST, STOLEN, OR DESTROYED INITIAL NOTES. Any tendering holder whose Initial Notes have been mutilated, lost, stolen, or destroyed should contact the Exchange Agent at the address indicated above for further instruction. 13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the Prospectus may be directed to the Exchange Agent at the address set forth above. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. 14. ACCEPTANCE OF TENDERED INITIAL NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF INITIAL NOTES. Subject to the terms and conditions of the Exchange Offer, the Company will accept for exchange all validly tendered Initial Notes as soon as practicable thereafter. For purposes of the Exchange Offer, the Company shall be deemed to have accepted tendered Initial Notes when, as and if the Company has given written and oral notice thereof to the Exchange agent. If any tendered Initial Notes are not exchanged pursuant to the Exchange Offer for any reason, such unexchanged Initial Notes will be returned, without expense, to the undersigned at the address shown above (or credited to the undersigned's account at the Book-Entry Transfer Facility designated above) or at a different address as may be indicated under "Special Delivery Instructions." 15. WITHDRAWAL. Tenders may be withdrawn only pursuit to the limited withdrawal rights set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal of Tenders." 14 PAYOR'S NAME: COYNE INTERNATIONAL ENTERPRISES CORP. ____________________________________________________________ Name (if joint names, list first and circle the name of the person or entity whose number you enter in Part I below. See instructions if your name has changed.) ____________________________________________________________ Address ____________________________________________________________ City, State and ZIP Code SUBSTITUTE FORM W-9 ____________________________________________________________ DEPARTMENT OF List account number(s) here (optional) THE TREASURY INTERNAL ____________________________________________________________ REVENUE SERVICE PAYER'S REQUEST FOR Part 1 - PLEASE PROVIDE YOUR Social Security Number TAXPAYER TAXPAYER IDENTIFICATION or TIN IDENTIFICATION NUMBER ("TIN") IN THE BOX AT NUMBER (TIN) RIGHT AND CERTIFY BY STATING AND DATING BELOW ____________________________________________________________ Part 2 - Check the box if you are NOT subject to backup withholding under the provisions of section 3408(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that you are subject to backup withholding as a result of failure to report all interest of dividends or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. [_] ____________________________________________________________ SIGNATURE DATE Awaiting TIN [_] CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED ON THE FORM IS TRUE, CORRECT AND COMPLETE. NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 15 EX-99.2 31 NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO COYNE INTERNATIONAL ENTERPRISES CORP. 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008 This form must be used by a holder of a 11 1/4% Series A Senior Subordinated Notes due 2008 (the "Initial Notes") of Coyne International Enterprises Corp. (the "Company"), who wishes to tender Initial Notes to the Exchange Agent pursuant to the guaranteed delivery procedures described in "The Exchange Offer--Guaranteed Delivery Procedures" of the Prospectus, dated __________ (the "Prospectus"), and in Instruction 2 to the related Letter of Transmittal. Any holder who wishes to tender Initial Notes pursuant to such guaranteed delivery procedures must ensure that the Exchange Agent receives this Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange Offer. Capitalized terms not defined herein have the meanings ascribed to them in the Prospectus or the Letter of Transmittal. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _____________, UNLESS EXTENDED (THE "EXPIRATION DATE"). To: IBJ Schroder Bank & Trust Company (the "Exchange Agent") By Registered or Certified Mail: [Address] Attn: By Overnight Courier: IBJ Schroder Bank & Trust Company [Address] Attn: By Hand: IBJ Schroder Bank & Trust Company [Address] Attn: By Facsimile: ( ) Attn: Confirm by telephone: ( ) DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. LADIES AND GENTLEMEN: The undersigned hereby tenders to the Company, upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Initial Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal. The undersigned hereby tenders the Initial Notes listed below: CERTIFICATE NUMBER(S) (IF KNOWN) OF INITIAL AGGREGATE PRINCIPAL NOTES OR ACCOUNT NUMBER AT THE BOOK-ENTRY AMOUNT PRESENTED FACILITY _______________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ PLEASE SIGN AND COMPLETE Signatures of Registered Holder(s) Date: , 1998 or Address:________________________________ Authorized Signatory:_________________ ________________________________________ ______________________________________ Area Code and Telephone No.:____________ ______________________________________ Name of Registered Holder(s):_________ ______________________________________ ______________________________________ This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as their name(s) appear on certificates for Initial Notes or on a security position listing as the owner of Initial Notes, or by person(s) authorized to become Holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. Please print name(s) and address(es) Name(s):________________________________________________________________________ - -------------------------------------------------------------------------------- Capacity:_______________________________________________________________________ Address(es):____________________________________________________________________ - -------------------------------------------------------------------------------- GUARANTEE (Not to be used for signature guarantee) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or correspondent in the United States, or is otherwise an Eligible guarantor institution@ within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the Initial Notes tendered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Initial Notes into the Exchange Agent's account at Book-Entry Transfer Facility described in the Prospectus under the caption The Exchange Offer -- Guaranteed Delivery Procedures@ and in the Letter of Transmittal) and any other required documents, all by 5:00 p.m., New York City time, on the third New York Stock Exchange trading day following the Expiration Date. Name of Firm:____________________________ _________________________________ Authorized Signature Address:_________________________________ _________________________________________ Area Code and Telephone No.:_____________ Name:____________________________ Title:___________________________ Date:______________________, 1997 DO NOT SEND INITIAL NOTES WITH THIS FORM. ACTUAL SURRENDER OF INITIAL NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL. INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY 1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and any other required documents to the Exchange Agent is at the election and sole risk of the holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. As an alternative to delivery by mail, the holders may wish to consider using an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. For a description of the guaranteed delivery procedures, see Instruction 2 of the Letter of Transmittal. 2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of Guaranteed Delivery is signed by the registered holder(s) of the Initial Notes referred to herein, the signature must correspond with the name(s) written on the face of the Initial Notes without alteration, enlargement, or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Initial Notes, the signature must correspond with the name shown on the security position listing as the owner of the Initial Notes. If this Notice of Guaranteed Delivery is signed by a person other than the registered holder(s) of any Initial Notes listed or a participant of the Book- Entry Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by appropriate bond powers, signed as the name of the registered holder(s) appears on the Initial Notes or signed as the name of the participant shown on the Book-Entry Transfer Facility security position listing. If this Notice of Guarantee Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, or other person acting in a fiduciary or representative capacity, such person should so indicate when signing and submit with the Letter of Transmittal evidence satisfactory to the Company of such person authority to so act. 3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the Prospectus may be directed to the Exchange Agent at the address set forth above. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. EX-99.3 32 INSTRUCTIONS FROM BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER OF COYNE INTERNATIONAL ENTERPRISES CORP. 11 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2008 To Registered Holder and/or Participant of the Book-Entry Transfer Facility: The undersigned hereby acknowledges receipt of the Prospectus, dated __________ (the "Prospectus"), of Coyne International Enterprises Corp., Blue Ridge Textile Manufacturing, Inc., Clean Towel Service, Inc., Ohio Garment Rental, Inc., and Midway-CTS Buffalo, Ltd. (collectively, the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to the action to be taken by you relating to the Exchange Offer with respect to the 11 1/4% Series A Senior Subordinated Notes due 2008 (the "Initial Notes") held by you for the account of the undersigned. The aggregate face amount of the Initial Notes held by you for the account of the undersigned is (FILL IN AMOUNT): $_______________ of the 11 1/4% Series A Senior Subordinated Notes due 2008. With respect to the Exchange Offer, the undersigned hereby instructs you (CHECK APPROPRIATE BOX): [__] TO TENDER the following Initial Notes held by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT OF INITIAL NOTES TO BE TENDERED, IF ANY): $ [__] NOT TO TENDER any Initial Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Initial Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representation and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that (i) the undersigned's principal residence is in the state of (fill in state) ____________, (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes, (iv) the undersigned acknowledges that any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospects delivery requirements of the Securities Act of 1933, as amended (the "Act"), in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in no- action letters that are discussed in the section of the Prospectus entitled "The Exchange Offer--Resales of the Exchange Notes," and (v) the undersigned is not an "affiliate," as defined in Rule 405 under the Act, of the Company; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Initial Notes. [__] Check this box if the Beneficial Owner of the Initial Notes is a Participating Broker-Dealer and such Participating Broker-Dealer acquired the Initial Notes for its own account as a result of market-making activities or other trading activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THESE INSTRUCTIONS TO DONALD F.X. KEEGAN, CHIEF FINANCIAL OFFICER OF THE COMPANY, VIA FACSIMILE: (315) 475-9978. THE TENDER OF INITIAL NOTES VIA AGENT'S MESSAGE WILL NOT CONSTITUTE NOTICE TO THE COMPANY OF A HOLDER'S STATUS AS A PARTICIPATING BROKER-DEALER. PARTICIPATING BROKER-DEALERS DESIRING TO PROVIDE SUCH NOTICE MUST STILL DO SO IN WRITING WITHIN FIFTEEN BUSINESS DAYS FOLLOWING THE CONSUMMATION OF THE EXCHANGE OFFER. SIGN HERE Name of beneficial owner(s):____________________________________________________ Signature(s):___________________________________________________________________ Name (please print):____________________________________________________________ Address:________________________________________________________________________ ------------------------------------------------------------------ ------------------------------------------------------------------ Telephone number:_______________________________________________________________ Taxpayer Identification or Social Security Number:______________________________ Date:___________________________________________________________________________ -----END PRIVACY-ENHANCED MESSAGE-----