-----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, EgfVs4YgpP+DLFrw23QZm9l3XAxjTH8EcPXoeP4jrqxxabMGLYmJw/JEiSTiL6mQ sGHMY77W6fe9iWvhy/5aww== 0000722642-97-000013.txt : 19971211 0000722642-97-000013.hdr.sgml : 19971211 ACCESSION NUMBER: 0000722642-97-000013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971210 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GUEST SUPPLY INC CENTRAL INDEX KEY: 0000722642 STANDARD INDUSTRIAL CLASSIFICATION: PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844] IRS NUMBER: 222320483 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11955 FILM NUMBER: 97735376 BUSINESS ADDRESS: STREET 1: 4301 U.S. HWY ONE CITY: MONMOUTH JUNCTION STATE: NJ ZIP: 08852 BUSINESS PHONE: 9082463011 MAIL ADDRESS: STREET 1: P.O. BOX 902 STREET 2: 720 U S HIGHWAY ONE CITY: MONMOUTH JUNCTION STATE: NJ ZIP: 08852 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) - ---- OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended September 30, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) - ---- OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-11955 GUEST SUPPLY, INC. - --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New Jersey 22-2320483 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4301 U.S. Highway One Monmouth Junction, New Jersey 08852-0902 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (609) 514-9696 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ------------------------------- ---------------------------- Common Stock, without par value New York Stock Exchange, Inc. Securities registered pursuant to Section 12(g) of the Act: NONE --------------- (Title of class) Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers, pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] PAGE 2 State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. Aggregate market value as of November 21, 1997 . . . . . . . . . . . . . $89,902,902 Indicate the number of shares outstanding of each of the issuer's classes of capital stock, as of the latest practicable date. Common Stock, without par value, as of November 21, 1997. . . . . . . . . . . . 6,227,807 DOCUMENTS INCORPORATED BY REFERENCE List hereunder the documents, all or portions of which are incorporated by reference herein and the Part of the Form 10-K into which the document is incorporated: Part III incorporates information by reference from portions of the Registrant's Proxy Statement for the 1998 Annual Meeting of Shareholders to be held on January 15, 1998. PAGE 3 PART I ITEM 1. BUSINESS. General ------- The Company operates principally as a manufacturer, packager and distributor of personal care guest amenities, housekeeping supplies, room accessories and textiles to the lodging industry. The Company also manufactures and packages personal care products for major consumer products and retail companies. Personal care guest amenity items include shampoo, hair conditioner, soap, bath gel, hand and body lotion, mouthwash, shoe care and sewing kits, shower caps, soap dishes and decorative containers and trays. The Company makes available more than 20 amenity items in a variety of brands in Company-designed packaging options. Housekeeping supplies for the lodging industry consist primarily of paper products, cleaning chemicals and cleaning implements. Room accessories include such items as wastebaskets, glassware, stationery, laundry bags, pens, shower curtains and signs. Textiles include sheets, towels and bedding. In total, the Company distributes more than 100 different product categories. The products manufactured and packaged for its consumer products and retail customers include health and beauty aid items such as shampoo, hair conditioner, hand and body lotions, liquid soaps and bath additives. The Company has pursued a strategy designed to enhance its leadership position in the lodging supply industry by becoming a full-service company with a nationwide network of Company-operated distribution centers which provide prompt delivery to hotel properties. Each center consists of a warehouse and sales office and is staffed by sales personnel who call on customers to obtain orders and provide customer service. The Company's amenity product lines consist of customized amenity programs designed by the Company for hotel chains ("customized corporate amenity programs") or for individual lodging establishments ("customized individual amenity programs") and uncustomized amenities and accessories. Customized corporate amenity programs consist of one or more items which are presented in Company-designed packaging. This packaging displays the corporate name or logo of the hotel chain or lodging establishment for which the program is designed. PAGE 4 Customized corporate amenity programs are designed for hotel chains, such as Choice International, The Four Seasons, Holiday Inns, Howard Johnson, Hyatt Hotels, Marriott Corporation, Ramada and Wyndham Hotels and may consist of up to 20 amenity and accessory items. In some cases, purchasing decisions for these programs are made by the central buying organization for the chain, and in other cases, such decisions are made by individual members or franchisees of the chain. Customized individual amenity programs typically consist of six to 12 amenity and accessory items. Individual programs generally involve more elaborate designing and packaging, in an attempt to accent the guest room decor and the marketing image of the particular lodging establishment. The Company has designed individual amenity programs for such lodging establishments as Scottsdale Princess in Scottsdale, Arizona, Boston Harbor Hotel in Boston, Massachusetts, Nikko Hotels International in New York, New York, and The Registry Hotels in Dallas, Texas, and for cruiseship lines such as Holland America and Royal Caribbean. The Company sells amenities in uncustomized color coordinated packaging under such brand names as Jhirmack , Jergens , Bath and Body Works and Neutrogena . Some of these brand name products are also sold as part of customized amenity programs. In addition, the Company markets its own lines of guest amenity lines under the "Heritage Collection ," "Botanicals " and "Nautic " labels. The Company's lodging industry customers consist of hotel chains (including supply divisions), individual members or franchisees of hotel chains, independent hotel properties, management companies and cruise ship lines. The Company distributes its products to approximately 14,000 customers worldwide. The Company has supply agreements with each of the 10 largest lodging chains in the United States. The Company's strategy is to increase its penetration of the lodging industry at all levels and to become a "one-stop shopping" supplier to lodging establishments. In order to increase operating efficiencies and responsiveness to customer needs, the Company has become a more vertically integrated supplier of customized and uncustomized amenity programs by enhancing its design capability, expanding its distribution network and increasing its manufacturing capabilities. In addition, the Company sells disposable housekeeping products, room accessories and textiles in order to provide a complete range of products to the lodging industry. PAGE 5 As part of this strategy, the Company, through its manufacturing subsidiary Guest Packaging, Inc., manufactures and packages substantially all of its liquid products such as shampoos, hair conditioners, hand and body lotions and bath gels, as well as a portion of its bar soap requirements. The Company's manufacturing operations allow the Company to provide both the service and wide variety of products required by the lodging industry. In fiscal 1997, the Company completed a program to expand its manufacturing facility and to increase its production capability and capacity. See "Manufacturing, Packaging and Shipping" below. The Company's Breckenridge-Remy Co. ("Breckenridge") subsidiary (doing business as Guest Distribution) also contributes to the Company's strategy of vertical integration through an improved and expanded product line and national distribution capability. In addition to personal care products and room accessories, Breckenridge markets a line of paper products, cleaning chemicals, glassware, housekeeping items and textiles. Breckenridge's business includes a direct sales force and a network of 12 distribution centers. This distribution network provides the Company with the ability to warehouse products in close proximity to the lodging properties served by the Company. In addition, each distribution center is staffed with a direct sales force who call on customers to obtain sales orders and provide direct customer service. The Company currently has approximately 110 sales consultants. Management believes that the Company's product line and distribution capability has provided improved service to all of its customer groups. Products -------- The Company markets and sells a broad range of personal care, housekeeping and disposable products for use in lodging establishments. The Company's amenity product line consists of more than 20 different products, including shampoo, hair conditioner, soap, bath gel, hand and body lotion, mouthwash, shower caps, soap dishes, shoe shine and sewing kits and decorative containers and trays. Six amenity products account for a substantial majority of the Company's sales of customized and uncustomized packaging options. The Company's housekeeping, room accessory and textile product lines include paper products, cleaning chemicals, cleaning implements, sheets, towels and other bed linens, and other housekeeping items and accessories such as wastebaskets, glassware, stationery, laundry bags, pens, shower curtains and signs. The Company believes that its range of products for the lodging industry is one of the most extensive available from a single source in the United States. PAGE 6 Customized amenity programs consist of one or more items which are packaged and presented in Company designed bottles, boxes, tubes and wrappings. The packaging and wrappings display the corporate name or logo of the hotel chain or lodging establishment for which the program is designed. Customized corporate amenity programs are designed for hotel chains. Customized individual amenity programs typically consist of six to 12 amenity and accessory items. These programs generally involve more elaborate design and packaging, in an attempt to accent the guest room decor and the marketing image of the particular lodging establishment. The sales price per room stay for an amenity program varies with the number of items selected by the customer. A customized individual amenity program typically contains several items and is priced from $1.50 and up per room stay. Because customized corporate amenity programs and uncustomized amenity programs also vary widely in number of items, the cost of such programs also vary widely. The Company sells national brand name products, as well as generic and the Company's own private label products and accessories. During the fiscal year ended September 30, 1997, less than 10% of the Company's sales were attributable to sales of national brand name products which include Bath and Body Works , Jhirmack , Jergens and Neutrogena . Guest Supply also markets guest amenity programs under the "Institute Swiss " label and under Guest Supply's "Botanicals ," "Nautic ," "Heritage Jefferson Floral ," "Heritage American Country " and "Heritage Yankee Stripes ". These programs were designed by the Company as an alternative to customized amenity programs with inventory available for immediate delivery. The Company has entered into arrangements with certain manufacturers of national brand name products pursuant to which the Company has been granted the exclusive right to market certain products to the lodging industry in the United States. Certain of these manufacturers have reserved the right to approve the design of the packaging of their products and to monitor quality control with respect to the manufacturing and packaging processes. None of such exclusivity arrangements obligates the Company to purchase products from any one supplier or to market any brand exclusively. PAGE 7 The Company believes that there are adequate alternative sources of supply available for all products it currently distributes. Moreover, the Company believes that its competitive success is dependent more on the quality of the Company's services, design capability and the selection and availability of products, than on the availability of any one particular brand name product or group of products. Design, Marketing and Sales --------------------------- In the view of the Company, an important aspect of its marketing approach and competitive position is the capability of its professional design staff to assist customers in designing customized packaging and in the coordination and presentation of their amenity programs. In addition, the Company believes that its position in the industry is in part attributable to the Company's ability, on a single source basis, to design, manufacture, package and distribute complete customized amenity programs for its customers which meet the customers' corporate image, product and budgetary requirements and which include brand name products with a reputation for high quality and wide-spread consumer acceptance. The design of amenity programs takes into account five essential elements: packaging components (size, shape and type of container), packaging graphics (colors and logos), brand identity (use of national or generic brands), product mix (which amenity items to present) and presentation method (tray, placemat, wicker basket or decorative tin). The Company's design personnel, who include graphic, industrial and mechanical artists and packaging engineers, are responsible for creating packages, selecting colors and applying graphic designs to accent guest room decor and for the production of finished engineering drawings and materials specifications. The Company's design personnel consult directly with the Company's customers on all aspects of the design of guest room amenities, at times leading to unique and proprietary packaging and presentations of amenity programs. The Company's design process can vary in length, depending on the customer's needs and complexity of the program. Once a design is accepted by the customer and a purchase order is received, the initial shipment is typically made within ten to 14 weeks and the balance of the shipment is generally delivered over the next 12 to 24 months. The Company employs direct sales personnel who consult regularly with the Company's existing customers and solicit new customers. In addition, the Company employs in-house sales people responsible for telemarketing sales PAGE 8 and customer service. Further, the senior management of the Company devotes a substantial amount of time to sales activities, as well as to the overall coordination of customers' amenity programs and the development of new concepts to enhance the effectiveness of the programs. The Company believes that prompt, professional and responsive customer service is an important element in attracting new customers and satisfying existing ones. In addition, the Company maintains regional distribution centers throughout the United States. This distribution network consists of 12 regional warehouses and a central warehouse and distribution facility in Sayreville, New Jersey. These distribution centers provide the Company with the ability to deliver manufactured and purchased products to the lodging properties served by the Company throughout the United States. In addition, each regional distribution center is staffed with route salespersons who call on customers to obtain sales orders and provide direct customer service. See "Item 2. Properties." The Company attends most major trade conventions and exhibits its product lines at such events. At September 30, 1997 and 1996, one customer accounted for 20.1% and 22.2%, respectively, of the Company's total accounts receivable, and 13.2% and 11.1%, respectively, of the Company's total sales in 1997 and 1996. For the year ended September 30, 1995, sales to two customers totaled 11.3% and 10.8% of the Company's total sales and accounted for approximately 36% of the Company's total accounts receivable. The Company's consolidated sales included approximately $5,789,000, $5,750,000 and $4,882,000, respectively, by foreign subsidiaries for the fiscal years ended September 30, 1997, September 30, 1996 and September 30, 1995. The Company currently has subsidiaries located in England, New Zealand and Canada. At September 30, 1997 and September 30, 1996, the Company had unfilled orders for its products which aggregated approximately $11,215,000 and $12,500,000, respectively. Most of the amount for fiscal 1997 is expected to be shipped by September 30, 1998. Unfilled orders are not necessarily an important indicator of total future sales, since a substantial portion of the Company's revenues are attributable to sales of disposable house- keeping products and accessories, uncustomized amenity products and corporate amenity programs which are ordered for delivery on a current basis and for which no significant PAGE 9 unfilled orders exist. In addition, certain orders are subject to further confirmation. Substantially all of the Company's sales are to customers to whom the Company extends credit. The Company's credit policy generally requires payment in full within 30 days and allows discounts in certain cases for early payment. Manufacturing, Packaging and Shipping ------------------------------------- Most of the amenity products marketed and distributed by the Company are sold in packaging and wrappings designed to customer specifications by the Company and are customized with the name of the particular hotel, in the case of customized individual amenity programs, or the corporate logo of the lodging chain in the case of customized corporate amenity programs, and also display the brand name of the product, where appropriate. In some cases, the shapes of the containers are also designed specifically to the customer's requirements. Packaging components include bottles, boxes, bags, packets, tubes and various other containers that come in a wide range of sizes and shapes. The Company's manufacturing facility is located in Rahway, New Jersey. This facility has approximately 68,000 square feet of production space. The plant has 21 filling lines including 10 highly automated lines which the Company believes incorporate the most efficient technology presently available. Each line is equipped to apply front, back, and full wrap labels, and video jets for batch and date coding of each container. A variety of reactors or compounding vessels with capacities ranging from 100 to 6,000 gallons are located at this facility as well as 249,000 gallons of liquid bulk storage vessels. The facility also includes an analytical and development laboratory. In fiscal 1997, the Company completed a program to expand its manufacturing facility and to increase its production capability and capacity. As part of this expansion project, 18,000 square feet of manufacturing space was added to the Company's facility in Rahway, New Jersey. Additional mixing and storage tanks were installed increasing compounding capacity by more than 350%. The Company installed four new high-speed filling lines which are highly automated and provide the Company with the capacity and capability to manufacture retail size health and beauty aid products in high volume. PAGE 10 In December 1996, the Company occupied a new, leased 226,000 square foot warehouse facility in Sayreville, New Jersey, which consolidated all of the Company's New Jersey warehousing facilities. The new facility was fully operational by April 1, 1997. The Company believes that with the new equipment and systems, it will be in a position to improve efficiency in the production of high-quality health and beauty aid products thereby providing the Company with what it believes will be a competitive advantage. See "Item 2. Properties" below and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" below. Currently, the Company compounds and fills substantially all of its liquid products. Compounding involves the batch mixing of components such as detergents, conditioners, dyes and fragrances in accordance with proprietary formulas. Filling entails the transfer of finished products from bulk to the unit of use containers in which they are distributed. In addition, the Company utilizes its manufacturing facility to compound, fill and package a variety of products used by consumer product companies and retailers. These are principally health and beauty aid items such as shampoo, hair conditioner, hand and body lotions, liquid soaps and bath additives. In some instances the Company also formulates products for its customers. The Company believes that these services, among others, are attractive to these companies since most lack production expertise or the costs of providing these functions in-house could be prohibitive. The Company's other products such as soaps, shower caps, soap dishes, shoe shine and sewing kits, toothpaste, toothbrushes, razors, shaving creams, paper products, cleaning chemicals, cleaning implements, glassware and other accessories are produced by independent manufacturers. Soaps are manufactured in accordance with the Company's specifications, including colors and fragrances, from materials furnished by suppliers selected by the Company. Additionally, the Company manufactures a portion of its bar soap requirements, which it sells to the lodging industry, at its facility in Rahway, New Jersey. The bottles and other packaging components for the Company's products are manufactured by independent suppliers in accordance with the Company's or the Company's customers' specifications. In certain instances, these independent suppliers utilize equipment and molds owned by the Company. In certain instances, the Company also utilizes the services PAGE 11 of companies which decorate the bottles and other packaging components prior to delivery to the Company or to its contract packagers. The Company usually orders the component materials for its products in bulk quantities directly from the manufacturers of such products for delivery to its manufacturing facilities or to the facilities of the Company's contract packagers. This procedure permits the Company to assure adequate supplies of product components and to benefit from quantity discounts and other economies of scale. Substantially all of the Company's finished products are shipped to the Company's warehouse facilities for later shipment to its customers. See "Item 2. Properties" below. In the view of the Company, an important aspect of its marketing approach and competitive position is its capacity for localized distribution. The ability to store and distribute both manufactured and purchased products in close proximity to the lodging properties served by the Company is a service which the Company believes will assist in providing improved service to its existing customer groups and in attracting new customers. Quality Control --------------- The Company believes that maintaining the highest standards of quality in all aspects of its operations is an important aspect of its ability to generate customer confidence and to maintain its competitive position. To that end, the Company carries and markets only products that have a reputation for quality and that meet the Company's own quality standards. The Company sends its representatives from time to time to the facilities of its suppliers to inspect and approve the manufacturing and packaging of all products prior to acceptance by the Company for delivery to customers. In addition, certain suppliers of materials to the Company also approve the Company's manufacturing procedures and inspect the packaged products to insure compliance with their own quality standards. The Company has adopted strict quality assurance systems and procedures which it regularly reviews and revises with a view to maintaining the consistency of the quality of its products. The Company adheres to all applicable filling and packaging regulations of the U.S. Food and Drug Administration, as well as others which are not technically applicable to the Company's operations. PAGE 12 Proprietary Rights ------------------ Although the Company follows a policy of protecting its proprietary rights to its products and designs to the full extent legally permissible, it does not believe that its business as a whole is materially dependent upon such protection. Such protection has significance primarily in the Company's marketing efforts. The Company has received protection under federal trademark and copyright laws for certain names used in its business, including Guest Supply , L'avenie , Guest Design , Whispermint , Alliance , Evergreen , Botanicals , Nautic and the Heritage Collection . The Company, from time to time, applies for copyright and design patent protection for the designs of certain bottles and other packaging components designed by the Company. In addition, pursuant to arrangements with the producers of its packaging components, the Company has obtained title to the molds which it has developed for the production of certain bottles and other packaging components. Many of these arrangements restrict these companies from using the Company's molds for anyone other than the Company without the Company's consent. The aggregate net book value of all molds owned by the Company at September 30, 1997 was approximately $1,583,000. Competition ----------- The business of supplying disposable products, amenities and accessories to the lodging industry and of manufacturing and packaging personal care products for consumer product and retail companies is highly competitive. Important competitive factors include price, product range, distribution capability and product quality and design. The Company competes with companies which offer customized amenity programs and broad lines of customized and uncustomized amenity and personal care products, as well as large distributors of housekeeping and related products. The Company believes that it can compete effectively with these companies in view of the variety and quality of products it offers, the scope and efficiency of customer services, its distribution capability and price. In addition, the Company believes that its ability to offer professional and sophisticated design assistance in formulating customized amenity programs and products for customers enhances its competitive position and distinguishes the Company from most of its competitors. PAGE 13 Personnel --------- As of September 30, 1997, the Company had approximately 880 employees. None of the Company's employees is covered by a collective bargaining agreement, and the Company considers its relationship with its employees to be excellent. Executive Officers ------------------ The current executive officers of the Company are as follows: Age at Name Position with the Company September 30, 1997 ------------------- --------------------------- ------------------ Clifford W. Stanley President, Chief Executive 51 Officer and Chairman of the Board of Directors R. Eugene Biber Vice President - Operations 49 Teri E. Unsworth Vice President - Market 46 Development and Director Paul T. Xenis Vice President - Finance 37 and Secretary Clifford W. Stanley has been President and Chief Executive Officer of the Company since January 1988, a director of the Company since January 1987 and Chairman of the Board of Directors since August 1997. From April 1986 to January 1988, he was Executive Vice President and Chief Financial Officer of the Company. Mr. Stanley joined the Company in August 1985 as Vice President - Finance. From 1984 until joining the Company, Mr. Stanley was Vice President and Chief Operating Officer for Transfer Print Foils, Inc. (hot stamping foils). During the period from 1982 to 1984, he was Vice President of Finance for the Permacel Division of Avery International. From 1979 through 1982, Mr. Stanley was a Vice President of Johnson & Johnson. R. Eugene Biber has been Vice President - Operations of the Company since 1997. Prior to joining the Company, Mr. Biber was Senior Vice President at Dep Corporation from 1988 to 1995. Prior to 1988, Mr. Biber worked for Richardson-Vicks and Procter & Gamble, where he was Director of Manufacturing and Distribution for a hair- care division. PAGE 14 Teri E. Unsworth has been Vice President - Market Development since joining the Company in May 1985 and a director of the Company since November 1989. Prior thereto, Ms. Unsworth was employed by Vidal Sassoon, Inc. as Director of Sales from 1979 to 1981, as Product Director from 1981 to 1983 and as Group Product Director from 1983 to 1985. Paul T. Xenis has been Vice President - Finance since May 1994. From April 1984 to May 1994, he was Corporate Controller of the Company. Prior to joining the Company, Mr. Xenis was a senior accountant with KMG Main Hurdman (now part of KPMG Peat Marwick LLP) from 1981 to 1984. Mr. Xenis also serves as Secretary of the Company. ITEM 2. PROPERTIES. The Company's executive offices and principal operating facilities are located in Monmouth Junction, New Jersey, where the Company leases approximately 21,900 square feet of space in an office building. The lease expires on December 15, 2006 and provides for three five-year renewal options. In connection with its manufacturing and packaging operations, the Company currently leases a manufacturing facility in Rahway, New Jersey. The manufacturing facility consists of approximately 68,000 square feet of space. The lease for this facility expires in 2010. See "Item 1. Business - Manufacturing, Packaging and Shipping" above. This lease may be cancelled by the Company on 90 days' notice. During fiscal 1997, the Company moved into a newly constructed 226,000 square foot distribution and warehouse facility designed to its specifications in Sayreville, New Jersey. This new facility consolidated all of the Company's then existing New Jersey warehousing facilities. The lease for the facility expires in November 2006. As part of its regional distribution strategy, the Company currently also leases 12 regional warehouses. The warehouses range in size from 12,000 square feet to 60,000 square feet and are located in Ohio (three), Michigan, Indiana, Texas, Florida, Illinois, Maryland, California, Georgia and North Carolina. The leases for these warehouses have expiration dates through 2003. PAGE 15 ITEM 3. LEGAL PROCEEDINGS. In July 1994, Valley Products Co., Inc. ("Valley") commenced an action in the United States District Court for the Western District of Tennessee against Hospitality Franchise Systems, Inc. ("HFS") and certain of its subsidiaries (including those that franchise Days Inn, Howard Johnson, Ramada, Super 8 and Park Inn hotels and motels), and against the Company and Marietta Corporation ("Marietta"). The complaint arose from HFS's decision to terminate Valley's authority to sell guest room amenities to HFS franchisees, and to enter into "preferred vendor agreements" with the company and Marietta for guest room amenities. The complaint alleged claims under federal and state antitrust laws for tying, exclusive dealing and monopolization, and related common law and federal trademark law claims. On December 22, 1994, the District Court issued an order dismissing the Valley complaint as to all defendants and denying Valley's motion to amend its complaint. Valley appealed that order to the United States Court of Appeals in May 1996. On October 22, 1997, the Court of Appeals issued a decision affirming the order of dismissal by the District Court. Valley has not filed a petition for certiorari to the United States Supreme Court, and its time to do so will expire at approximately the end of January 1998. From time to time, the Company is party to certain other claims, suits and complaints which arise in the ordinary course of business. Currently, there are no such claims, suits or complains which, in the opinion of management, would have a material adverse effect on the Company's financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. PAGE 16 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock trades on the New York Stock Exchange, Inc. ("NYSE") under the symbol GSY. Prior to August 6, 1996, the Company's common stock was traded on the NASDAQ National Market System under the symbol GEST. The table below sets forth the high and low closing prices during each of the last two fiscal years on the NYSE and the NASDAQ National Market System, as applicable. The approximate number of holders of the Company's common stock at September 30, 1997 was 500. No cash dividends have been declared on the common stock since the Company was organized. Market Price Range ------------------ Year Ended September 30, 1997 ----------------------------- High Low ------- ------- First Quarter $17.625 $11.875 Second Quarter 17.375 13.875 Third Quarter 14.500 8.750 Fourth Quarter 15.500 9.375 Year Ended September 30, 1996 ----------------------------- High Low ------- ------- First Quarter $23.125 $18.000 Second Quarter 23.250 11.250 Third Quarter 17.250 11.875 Fourth Quarter 16.750 12.375 On November 21, 1997, the closing sales price for the Company's common stock was $14.625 per share. PAGE 17 ITEM 6. SELECTED FINANCIAL DATA. Years Ended September 30, In thousands except per share amounts 1997 1996 1995 1994 1993 -------- -------- -------- -------- -------- Sales $200,917 $179,042 $159,450 $116,325 $ 97,851 Gross Profit 42,825 37,998 37,365 30,751 26,804 Selling, General and Administrative Expenses 34,043 30,919 28,409 24,858 22,865 Operating Income 8,782 7,079 8,956 5,893 3,939 Income Before Extraordinary Item1 3,816 3,151 5,090 4,117 1,412 Net Income 3,816 3,151 5,090 4,117 2,243 Working Capital 39,626 35,223 27,475 22,689 21,810 Total Assets 112,669 102,888 95,607 72,967 55,621 Total Long-term Liabilities 32,642 28,292 22,866 16,778 13,793 Total Liabilities 66,072 60,485 56,498 39,722 26,960 Total Equity 46,597 42,403 39,109 33,245 28,661 Common Share Data - ----------------- Weighted Average Shares and Share Equivalents Outstanding 6,990 7,074 7,293 7,041 6,470 Earnings Per Share Before Extraordinary Item1 $0.55 $0.45 $0.70 $0.58 $0.22 Earnings Per Share $0.55 $0.45 $0.70 $0.58 $0.35 Book Value Per Share $7.53 $6.89 $6.36 $5.50 $4.82 1 Extraordinary item results from the utilization of net operating loss carryforwards. PAGE 18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Fiscal 1997 Compared to Fiscal 1996 - ----------------------------------- Sales for the year ended September 30, 1997 increased by 12.2% or $21.9 million to $200.9 million from $179.0 million for the year ended September 30, 1996. Revenues from hotel customers increased $19.5 million or 12.7% to $172.5 million. This increase in sales to hotels is the result of the addition of new customers, the sale of additional products to existing customers and the continued expansion of the Company's product line. New customers were added by the direct sales force in existing sales territories and by new salespeople and territories that were established during fiscal 1997. In February 1997, a sales and distribution center was opened in Greensboro, North Carolina, increasing market share in that geographic area. Hotel customers were also added through new or expanded agreements with hotel management companies and hotel corporations. In August 1997, the Company signed an agreement with Marriott International, which increased the number of properties serviced from 225 to 950 and expanded the product line to include room accessories in addition to personal care amenities. Sales of additional products to existing hotel customers were achieved by the direct sales force at individual properties and by national account managers at hotel corporations. This increased penetration at existing accounts can be attributed to sales management, sales training, territory realignment and the use of the Company's catalog. Sales to consumer product companies and retailers were $28.4 million compared to $26.0 million for the year ended September 30, 1996. The increase of $2.4 million or 9.3%, which the Company attributes to the service and capabilities it provides, came from an existing customer. The Company discontinued manufacturing Proctor & Gamble body wash products during fiscal 1997, rather than during our 1998 second fiscal quarter as originally anticipated. These products are now produced by Proctor & Gamble at their own facility. At present, one long-term customer accounts for substantially all of contract manufacturing revenue. Gross profit for the year ended September 30, 1997 was $42.8 million or 21.3% of sales compared to $38.0 million or 21.2% for the year ended September 30, 1996. The most significant single factor affecting gross profit in fiscal 1997 was a charge to cost of sales in the amount of $2.2 million in the second quarter ended March 31, 1997. This charge was primarily the result of damaged, obsolete and below-standard inventory identified during the recent consolidation of the Company's seven New Jersey warehouses to its new central distribution facility and an increase to the Company's obsolescence reserve. Excluding the effects of this charge, gross profit as a percentage of sales for the year ended September 30, 1997 totaled 22.4%. In addition, an increase in textile sales also contributed to the decrease in gross profit as a percentage of sales as a result of a lower gross profit associated with textiles compared to the Company's other products. Also, the full year effect in fiscal 1997 of a pricing concession made to a major contract manufacturing customer in late fiscal 1996 further reduced gross margin percent. Offsetting all of these factors were improved manufacturing efficiencies, lower warehousing cost in the new facilities and increased volume. PAGE 19 Selling, general and administrative expenses were $34.0 million or 16.9% of sales for the year ended September 30, 1997 compared to $30.9 million or 17.3% for the prior year. The increase of $3.1 million was due primarily to increased payroll and payroll related costs. The decrease in selling, general and administrative costs as a percentage of sales was the result of increased sales volume combined with the Company's cost containment program. The effective tax rate increased to 43.2% in fiscal 1997 from 41.3% in fiscal 1996. The increase is primarily due to taxes incurred in foreign jurisdictions. Fiscal 1996 Compared to Fiscal 1995 - ----------------------------------- Sales for the year ended September 30, 1996 increased by 12.3% or $19.6 million to $179.0 million from $159.4 million for the year ended September 30, 1995. Revenues from hotel customers increased $16.7 million or 12.2% to $153.0 million. This increase is the result of sales of additional products to existing customers, the addition of new customers, an increase in the sales of textiles and the continued introduction of new items to the Company's product line. Sales to consumer product companies and retailers were $26.0 million compared to $23.1 million for the year ended September 30, 1995. The increase of $2.9 million or 12.7% was due to increased sales to existing customers. The Company attributes this increase to the service and capabilities it provides to its customers. Gross profit for the year ended September 30, 1996 was $38.0 million or 21.2% of sales compared to $37.4 million or 23.4% for the year ended September 30, 1995. The decrease in gross profit as a percentage of sales was due to a number of factors. In the Company's second fiscal quarter, a major retail customer temporarily reduced its orders with the Company. Both the temporary nature and timing of this decrease in orders limited the Company's ability to reduce operating costs or seek replacement business. Gross profit as a percentage of sales was also reduced by a pricing concession to a customer which the Company believes was necessary to gain incremental volume in the future. In the fourth fiscal quarter, the Company experienced higher than anticipated waste factors over standard, and as a result recorded an inventory adjustment of approximately $0.6 million. Manufacturing inefficiencies also contributed to the decline in gross profit rate as a result of the expansion project which is now essentially completed. The increase in textiles product sales also contributed to a decline in gross profit as a percentage of sales as a result of a lower gross profit rate associated with textiles when compared with the Company's other products. Selling, general and administrative expenses were $30.9 million or 17.3% of sales for the year ended September 30, 1996 compared to $28.4 million or 17.8% for the prior year. The increase of $2.5 million was due primarily to increased payroll and payroll related costs. The decrease in selling, general and administrative costs as a percentage of sales was the result of increased sales volume combined with the Company's cost containment program. The effective tax rate increased to 41.3% in fiscal 1996 from 35.2% in fiscal 1995. The increase in tax rate is the result of a reduction in the utilization of net operating loss carryforwards PAGE 20 Liquidity and Capital Resources - ------------------------------- The Company had $39.6 million of working capital at September 30, 1997 compared to $35.2 million at September 30, 1996. This increase of $4.4 million was due primarily to a reclassification of current maturities as a result of the refinancing of the Company's revolving credit agreement and term loans in December 1997. At September 30, 1997, the Company had a $22.0 million secured revolving credit facility. This credit facility bears interest at a rate equal to LIBOR plus 1.5%, the bank's prime rate or a fixed rate, as selected by the Company. In addition, the Company had outstanding term loans in the amount of $10.9 million payable in equal monthly installments with maturities from February 1999 through November 2002. At September 30, 1997, the Company had outstanding $17.6 million under its revolving credit facility at an interest rate ranging from 6.97% to 8.5% and had an unused amount available of $4.4 million. On December 3, 1997, the Company completed a Private Placement in the amount of $25.0 million of unsecured senior notes with fixed interest rates ranging from 6.70% to 7.06%. These notes have maturities ranging from 2003 to 2009. Concurrently with the issuance of the notes, the Company entered into a credit agreement with two banks for a five-year $15.0 million unsecured revolving credit facility. Availability under the new facility is based upon agreed levels of eligible accounts receivable and bears interest at a rate equal to LIBOR plus .85% or the bank's prime rate, as selected by the Company. These loans are subject to certain financial covenants. The proceeds from the notes and new credit facility were used to repay the outstanding balance under the existing credit facility and term notes. The Company believes that the amount available under its new revolving credit facility together with the cash flow from operations will be sufficient to meet the Company's short-term working capital requirements and its identifiable long-term capital needs. The Company also believes that, if necessary, additional financing will be available to it on commercially reasonable terms. Recently Issued Accounting Standards - ------------------------------------ In June 1997, the Financial Accounting Standards Board released Statement No. 130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosures About Segments of an Enterprise and Related Information." Both statements become effective for fiscal years beginning after December 15, 1997 with early adoption permitted. These statements require disclosure of certain components of changes in equity and certain information about operating segments and geographic areas of operation. Management believes that these statements will not have any effect on the results of operations or financial position of the Company. PAGE 21 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. GUEST SUPPLY, INC. AND SUBSIDIARIES Consolidated Financial Statements September 30, 1997, 1996 and 1995 PAGE 22 Index to Financial Statements Page Number ------ 1. Financial Statements: Independent Auditors' Report. . . . . . . . . . . . 23 Consolidated Balance Sheets -- September 30, 1997 and 1996. . . . . . . . . . . . . . . . . . . . . . 24 Consolidated Statements of Operations -- Years Ended September 30, 1997, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . . .25 Consolidated Statements of Cash Flows -- Years Ended September 30, 1997, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . . .26 Consolidated Statements of Shareholders' Equity -- Years Ended September 30, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . .28 Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . .29 2. Financial Statement Schedule: II - Valuation and Qualifying Accounts. . . . . . . .36 All other schedules have been omitted because they are inapplicable or the information is provided in the financial statements, including the notes thereto. PAGE 23 Independent Auditors' Report ---------------------------- The Board of Directors and Shareholders Guest Supply, Inc.: We have audited the consolidated financial statements of Guest Supply, Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Guest Supply, Inc. and subsidiaries as of September 30, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 1997 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP Short Hills, New Jersey November 18, 1997, except as to the note on Long Term Debt which is as of December 3, 1997 PAGE 24 CONSOLIDATED BALANCE SHEETS Guest Supply, Inc. and Subsidiaries September 30, Dollars In Thousands except per share amounts 1997 1996 - --------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 4,152 $ 2,591 Accounts receivable, net of allowance for doubtful accounts of $1,032 - 1997 and $898 - 1996 30,429 28,084 Inventories 34,676 33,362 Deferred income taxes 2,067 1,557 Prepaid expenses and other current assets 1,732 1,822 - --------------------------------------------------------------------------- Total current assets 73,056 67,416 Property and equipment, net of accumulated depreciation and amortization 33,141 29,810 Other assets 1,312 134 Excess of cost over net assets acquired, net of accumulated amortization of $4,257 - 1997 and $3,889 - 1996 5,160 5,528 - --------------------------------------------------------------------------- $112,669 $102,888 =========================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 32,493 $ 28,320 Current maturities of long-term debt 937 3,873 - --------------------------------------------------------------------------- Total current liabilities 33,430 32,193 - --------------------------------------------------------------------------- Long-term debt 27,617 24,972 Deferred income taxes 5,025 3,320 - --------------------------------------------------------------------------- Total long-term liabilities 32,642 28,292 - --------------------------------------------------------------------------- Commitments and contingencies Shareholders' equity: Preferred stock - without par value; authorized 1,000,000 shares, outstanding none Common stock - without par value; stated value $0.10; authorized 20,000,000 shares, issued and outstanding 6,190,307 shares - 1997 and 6,156,075 shares - 1996 546 543 Additional paid-in capital 35,336 35,042 Retained earnings 10,745 6,929 Cumulative foreign currency translation adjustments (30) (111) - --------------------------------------------------------------------------- Total shareholders' equity 46,597 42,403 - --------------------------------------------------------------------------- $112,669 $102,888 =========================================================================== The accompanying notes are an integral part of these consolidated financial statements. PAGE 25 CONSOLIDATED STATEMENTS OF OPERATIONS Guest Supply, Inc. and Subsidiaries Years Ended September 30, Dollars In Thousands except per share amounts 1997 1996 1995 - --------------------------------------------------------------------------- Sales $200,917 $179,042 $159,450 Cost of sales 158,092 141,044 122,085 - --------------------------------------------------------------------------- Gross profit 42,825 37,998 37,365 Selling, general and administrative expenses 34,043 30,919 28,409 - --------------------------------------------------------------------------- Operating income 8,782 7,079 8,956 Interest and other income 45 53 10 Interest expense (2,110) (1,764) (1,109) - --------------------------------------------------------------------------- Income before income taxes 6,717 5,368 7,857 Income tax expense 2,901 2,217 2,767 - --------------------------------------------------------------------------- Net income $ 3,816 $ 3,151 $ 5,090 =========================================================================== Earnings per common share: Primary $0.55 $0.45 $0.70 =========================================================================== Fully diluted $0.54 $0.45 $0.68 =========================================================================== The accompanying notes are an integral part of these consolidated financial statements. PAGE 26 CONSOLIDATED STATEMENTS OF CASH FLOWS Guest Supply, Inc. and Subsidiaries Years Ended September 30, Dollars in Thousands 1997 1996 1995 - ------------------------------------------------------------------------------ Cash flows from operating activities: Net income $ 3,816 $ 3,151 $ 5,090 - ------------------------------------------------------------------------------ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,888 3,345 2,800 Provision for losses on accounts receivable 880 316 223 Gain on sale of fixed assets (172) Deferred income tax expense 1,195 1,321 442 Changes in assets and liabilities: (Increase) decrease in accounts receivable (3,225) 263 (9,636) Increase in inventories (1,314) (5,093) (6,137) Decrease (increase) in prepaid expenses and other current assets 90 (906) (183) Increase in other assets (178) (37) (13) Increase (decrease) in accounts payable and accrued expenses 4,217 (2,906) 10,315 - ------------------------------------------------------------------------------ Net cash provided by (used in) operating activities 9,197 (546) 2,901 - ------------------------------------------------------------------------------ Cash flows from investing activities: Capital expenditures (6,881) (4,280) (9,953) Increase in other assets (1,000) Proceeds from sale of fixed assets 202 - ------------------------------------------------------------------------------ Net cash used in investing activities (7,679) (4,280) (9,953) - ------------------------------------------------------------------------------ Cash flows from financing activities: Proceeds from revolving credit agreement 52,528 55,685 58,247 Repayment on revolving credit agreement (48,945) (57,081) (49,492) Proceeds from issuance of long-term debt 10,500 Repayment of long-term debt (3,874) (3,655) (1,909) Proceeds from issuance of common stock 253 121 308 - ------------------------------------------------------------------------------ Net cash (used in) provided by financing activities (38) 5,570 7,154 - ------------------------------------------------------------------------------ Foreign currency translation adjustments 81 22 (59) - ------------------------------------------------------------------------------ Net increase in cash and cash equivalents 1,561 766 43 Cash and cash equivalents at beginning of year 2,591 1,825 1,782 - ------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 4,152 $ 2,591 $ 1,825 ============================================================================== The accompanying notes are an integral part of these consolidated financial statements. PAGE 27 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) Guest Supply, Inc. and Subsidiaries Years Ended September 30, Dollars in Thousands 1997 1996 1995 - --------------------------------------------------------------------------- Supplemental disclosures of cash flow information: Cash paid during the year for: Interest, net of capitalized interest $2,099 $1,674 $1,082 Income taxes, net of refunds $ 928 $1,739 $1,909 Supplemental schedule of non-cash financing and investing activities: The Company received an income tax benefit on the exercise of certain of its stock options in the amount of $44 in 1997 and $125 in 1995 which benefit was credited to additional paid-in capital. In June 1995, the $400 convertible subordinated note was converted into 38,709 shares of the Company's stock. The accompanying notes are an integral part of these consolidated financial statements. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Guest Supply, Inc. and Subsidiaries Dollars in Thousands Cumulative Retained Foreign Additional Earnings Currency Number Paid-in (Accumulated Translation of Shares Amount Capital Deficit) Adjustment - ----------------------------------------------------------------------------- Balance, September 30, 1994 6,044,592 $532 $34,099 $(1,312) $(74) Net Income 5,090 Sales through employee stock option and purchase plans 40,534 4 188 Common stock warrants exercised 22,500 2 114 Conversion of convertible debt 38,709 4 396 Tax benefit associated with exercise of stock options 125 Equity adjustments from foreign currency translation (59) - ----------------------------------------------------------------------------- Balance, September 30, 1995 6,146,335 542 34,922 3,778 (133) Net income 3,151 Sales through employee stock option and purchase plans 9,740 1 120 Equity adjustments from foreign currency translation 22 - ----------------------------------------------------------------------------- Balance, September 30, 1996 6,156,075 543 35,042 6,929 (111) Net income 3,816 Sales through employee stock option and purchase plans 34,232 3 250 Tax benefit associated with exercise of stock options 44 Equity adjustments from foreign currency translation 81 - ----------------------------------------------------------------------------- Balance, September 30, 1997 6,190,307 $546 $35,336 $10,745 $(30) ============================================================================= The accompanying notes are an integral part of these consolidated financial statements. PAGE 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Guest Supply, Inc. and Subsidiaries Dollars in Thousands except per share amount BUSINESS DESCRIPTION The Company operates principally as a manufacturer, packager and distributor of personal care guest amenities, housekeeping supplies, room accessories and textiles to the lodging industry. The Company also manufactures and packages products for major consumer products and retail companies. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation - The consolidated financial statements include the accounts of Guest Supply, Inc. and all of its subsidiaries ("the Company"), each of which is wholly owned. All significant intercompany transactions and balances are eliminated in consolidation. Risks and uncertainties - The Company's revenues are dependent on the continued operation of its manufacturing facility and its various distribution centers. The operation of these facilities involves many risks, including the breakdown, failure or substandard performance of equipment, natural disasters and the need to comply with directives of governmental agencies. The occurrence of material operational problems, including but not limited to the above events, may have a material adverse effect on the productivity and profitability of a particular facility or with respect to certain facilities, the Company as a whole, during the period of such operational difficulty. In addition, other factors may cause the Company's results to differ materially from historically levels. Some of the most significant factors include a down-turn in the lodging industry resulting in lower demand for the Company's products, the unanticipated loss of, or decline in sales to a major customer, pricing pressures and unforeseen inefficiencies at the Company's manufacturing facility. Foreign Currency Translation - Foreign currency transactions and financial statements are translated into US dollars at current exchange rates except revenues, costs and expenses which are translated at average exchange rates during each reporting period. Exchange gains and losses resulting from foreign currency transactions are included in the Consolidated Statements of Operations currently, whereas, adjustments resulting from translations of financial statements are reflected as a separate component of shareholders' equity. Use of Estimates - In conformity with generally accepted accounting principles, the preparation of financial statements 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. Actual results could differ from those estimates. Inventories - Inventories are stated at the lower of cost or market. Cost is determined by using the weighted-average and first-in, first-out methods. Property and equipment - Property and equipment are carried at cost. Depreciation and amortization is calculated for financial reporting purposes using the straight-line method based on the estimated useful lives of the assets as follows: buildings, 40 years; machinery and equipment, 3 to 15 years; furniture and fixtures, 3 to 8 years; computers, 3 to 10 years and leasehold improvements, the shorter of the life of the lease or the life of the asset. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized. Excess of cost over net assets acquired - Excess of cost over net assets acquired is being amortized using the straight-line method over 25 years. The Company continually evaluates the amortization period of its intangible assets. Estimates of useful lives are revised when circumstances or events indicate that the original estimate is no longer appropriate. Revenue - Revenues are recognized at the time goods are shipped and title has passed. Credit is generally extended to customers within these industries on an uncollateralized basis. Concentration of Credit Risk - Concentration of credit risk consists principally of accounts receivable. At September 30, 1997 and 1996, one customer accounted for 20.1% and 22.2%, respectively, of the Company's total accounts receivable, and 13.2% and 11.1%, respectively, of the Company's total sales in 1997 and 1996. For the year ended September 30, 1995, sales to two customers totaled 11.3% and 10.8% of the Company's total sales and accounted for approximately 36% of the Company's total accounts receivable. Income taxes - The provision for income taxes is based on earnings reported in the financial statements under the asset and liability approach in accordance with SFAS No. 109 "Accounting for Income Taxes." Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Statements of Cash Flows - For purposes of reporting cash flows, cash and cash equivalents include cash on hand and certificates of deposit with a maturity at time of purchase of three months or less. PAGE 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Guest Supply, Inc. and Subsidiaries Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of - The Company adopted the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of October 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the cost to sell. Adoption of this Statement did not have an impact on the Company's financial position or results of operations as the Company previously followed the basic tenets of this Statement. Stock-Based Compensation - Effective as of October 1, 1996, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting For Stock-Based Compensation." SFAS No. 123 encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price at the date of the grant over the amount an employee must pay to acquire the stock. Because the Company grants options at a price equal to the market price of the stock at the date of grant, no compensation expense is recorded. The Company, as required, has provided pro forma disclosures of compensation expense as determined under the provisions of SFAS No. 123. Stock Split - On October 24, 1995, the Company effected a three-for-two stock split of its common stock in the form of a stock dividend. All share and per share data included in this annual report have been restated to reflect the stock split. Inventories 1997 1996 - --------------------------------------------------------------------------- Raw material $ 7,706 $ 10,441 Finished goods 26,970 22,921 - --------------------------------------------------------------------------- $ 34,676 $ 33,362 =========================================================================== Costs included in inventories are comprised of raw materials, direct labor and overhead related to the manufacturing process. Property and Equipment 1997 1996 - --------------------------------------------------------------------------- Building, land and leasehold improvements $ 5,880 $ 3,608 Machinery and equipment 44,103 39,309 Furniture and fixtures 2,047 1,580 Computers 2,249 2,032 Construction in progress 726 1,774 - --------------------------------------------------------------------------- 55,005 48,303 Less accumulated depreciation and amortization 21,864 18,493 - --------------------------------------------------------------------------- $ 33,141 $ 29,810 =========================================================================== Depreciation and amortization of equipment and leasehold improvements charged to income was $3,520, $2,977 and $2,432 for the years ended September 30, 1997, 1996 and 1995, respectively. PAGE 30 Income Taxes Income tax expense is comprised of the following: 1997 1996 1995 - --------------------------------------------------------------------------- Federal - Current $1,229 $ 828 $1,981 - Deferred 1,133 960 356 - --------------------------------------------------------------------------- Total Federal income taxes 2,362 1,788 2,337 - --------------------------------------------------------------------------- State - Current 297 245 344 - Deferred 158 184 86 - --------------------------------------------------------------------------- Total State income taxes 455 429 430 Foreign 84 - --------------------------------------------------------------------------- Total income tax provision $2,901 $2,217 $2,767 =========================================================================== The following is a reconciliation of Federal income tax expense computed using the statutory rate of 34% to the Company's effective income tax rate: 1997 1996 - --------------------------------------------------------------------------- Computed "expected" income tax expense $2,284 $1,825 Increase (reduction) in tax expense resulting from: State income taxes, net of Federal income tax benefit 300 283 Amortization of goodwill 125 125 Foreign 84 Other, net 108 (16) - --------------------------------------------------------------------------- $2,901 $2,217 =========================================================================== The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at September 30, 1997 and 1996 are as follows: 1997 1996 - --------------------------------------------------------------------------- Deferred tax assets: Allowance for doubtful accounts $ 409 $ 350 Inventory obsolescence reserve and uniform capitalization 1,206 1,040 Net operating loss carryforwards - states 260 137 Alternative minimum tax credit carryforwards 163 500 Other 192 167 - --------------------------------------------------------------------------- Net deferred tax asset 2,230 2,194 Deferred tax liability - principally excess of tax over financial statement depreciation (5,188) (3,957) - --------------------------------------------------------------------------- Net deferred taxes $(2,958) $(1,763) =========================================================================== At September 30, 1997, the Company has net operating loss carryforwards for state income tax purposes of approximately $4,328 which are available to reduce future state income taxes, if any, through the year 2004. In addition, the Company has alternative minimum tax credit carryforwards of approximately $163 which are available to reduce future Federal regular income taxes, if any, over an indefinite period. PAGE 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Guest Supply, Inc. and Subsidiaries LONG TERM DEBT At September 30, 1997, the Company had a $22,000 revolving credit facility which bears interest at a rate equal to LIBOR plus 1.5%, the bank's prime rate or a fixed rate, as selected by the Company. At September 30, 1997, the revolving credit facility carried an interest rate ranging from 6.97% to 8.5%. The unused amount available to the Company at September 30, 1997 was $4,384. 1997 1996 - --------------------------------------------------------------------------- Revolving credit facility $17,616 $14,034 $5,000 five-year term note payable, due in equal monthly payments of $83 through February 1999, interest at 6.45% 1,417 2,417 $5,000 four-year term note payable, due in equal monthly payments of $104 through February 1999, interest at 8.25% 1,771 3,021 $10,500 seven-year term note payable, due in equal monthly payments of $125 through November 2002, interest at 7.0% 7,750 9,250 Capital lease obligations 123 - --------------------------------------------------------------------------- 28,554 28,845 Less: Current maturities 937 3,873 - --------------------------------------------------------------------------- $27,617 $24,972 =========================================================================== All of the Company's loans with the banks are secured by substantially all of its assets and are subject to certain financial covenants. On December 3, 1997, the Company completed a Private Placement in the amount of $25.0 million of unsecured senior notes with fixed interest rates ranging from 6.70% to 7.06%. These notes have maturities ranging from 2003 to 2009. Concurrently with the issuance of the notes, the Company entered into a credit agreement with two banks for a five-year $15.0 million unsecured revolving credit facility. Availability under the new facility is based upon agreed levels of eligible accounts receivable and bears interest at a rate equal to LIBOR plus .85% or the bank's prime rate, as selected by the Company. These loans are subject to certain financial covenants. The proceeds from the notes and credit facility were used to repay the outstanding balance under the existing credit facility and term notes. After giving effect to the new financing arrangement, long-term debt at September 30, 1997 matures as follows: 1998 $ 937 1999 - 2000 1,111 2001 1,486 2002 3,376 Thereafter 21,644 ========================================================================== PAGE 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Guest Supply, Inc. and Subsidiaries LEASES The Company leases its office, warehouse facilities and vehicles under long-term lease agreements. These leases are classified as operating leases and expire in various years through fiscal 2007. Future minimum lease payments under non-cancelable operating leases as of September 30, 1997 are: September 30, Operating Leases - --------------------------------------------------------------------------- 1998 $ 3,666 1999 2,973 2000 2,440 2001 1,860 2002 1,681 Thereafter 6,226 - --------------------------------------------------------------------------- Total minimum lease payments $ 18,846 - --------------------------------------------------------------------------- Rent expense under operating leases was $4,820, $4,079 and $3,421 for the years ended September 30, 1997, 1996 and 1995, respectively. LITIGATION From time to time, the Company is a party to legal actions arising in the ordinary course of business. Management believes that such litigation and claims will be resolved without material effects on the Company's financial statements taken as a whole. EARNINGS PER COMMON SHARE Primary and fully diluted earnings per common share are based on the weighted average number of common and common share equivalents outstanding during each year. When stock options and warrants are dilutive, they are included as share equivalents using the modified treasury stock method. Where the effect of the assumed exercise on net income would be anti-dilutive, primary and fully diluted earnings per common share are stated the same. Weighted average shares for computing primary earnings per share were 6,990,000, 7,074,000 and 7,293,000 for the years ended September 30, 1997, 1996 and 1995, respectively. Weighted average shares for computing fully diluted earnings per share were 7,049,000, 7,074,000 and 7,433,000 for the years ended September 30, 1997, 1996 and 1995, respectively. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements, primary earnings per share is replaced by a new measure called basic earnings per share which excludes common stock equivalents. The impact of the new statement would result in a basic earnings per share which is $.07, $.06 and $.14 higher than primary earnings per share for the years ended September 30, 1997, 1996 and 1995, respectively. The impact of SFAS No. 128 on the calculation of fully diluted earnings per share is not material. PAGE 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Guest Supply, Inc. and Subsidiaries STOCK INCENTIVE PLANS Under the stock option plans approved by the Company's stockholders, key employees may be granted options to purchase shares of common stock exercisable at prices not less than fair market value at the date of grant. Options generally become exercisable 20% one year from the date of grant, with an additional 20% exercisable each succeeding year. The options generally expire ten years from the date of grant. In March 1996, the shareholders of the Company adopted the 1996 Long-Term Incentive Plan. Under the plan, 400,000 shares of Common Stock will be available for issuance of awards. The Stock Option Committee is authorized to grant a wide range of awards, including options, stock appreciation rights, restricted stock, performance awards and other stock-based awards to any employee or director. Transactions relating to these stock option plans are summarized as follows: 1997 1996 1995 ------------------ ---------------- ---------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------------------ ---------------- ---------------- Outstanding at beginning of year 1,171,300 $ 7.25 934,800 $5.26 967,425 $5.20 Granted 48,000 11.38 241,000 15.03 Exercised (21,300) 6.27 (1,500) 2.67 (32,625) 3.44 Forfeited (155,700) 14.95 (3,000) 15.25 - --------------------------------------------------------------------------- Outstanding at end of year 1,042,300 $ 6.31 1,171,300 $7.25 934,800 $5.26 - --------------------------------------------------------------------------- Options exercisable at year end 798,530 $5.06 742,380 $4.86 382,500 $5.83 =========================================================================== Weighted average fair value of options granted during the year $6.51 $8.60 ===== ===== The fair value of each stock option granted during 1997 and 1996 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for 1997 and 1996: expected life of 7.0 years; expected volatility of 45%; expected dividend yield of 0% and risk-free interest rate of 6.5%. Options Outstanding Options Exercisable ------------------- ------------------- Weighted Average Weighted Weighted Remaining Average Average Number Contractual Exercise Number Exercise Outstanding Life Price Exercisable Price - --------------------------------------------------------------------------- $ 2.67 - $ 3.75 407,550 2.04 years $ 2.99 407,550 $ 2.99 4.67 - 5.75 269,250 5.37 years 4.68 214,800 4.68 9.75 - 11.50 279,500 7.08 years 9.91 161,580 9.86 15.25 - 16.25 86,000 8.69 years 15.36 14,600 15.29 - --------------------------------------------------------------------------- 1,042,300 4.80 years $6.31 798,530 $5.06 =========================================================================== The Company maintains an Employee Stock Purchase Plan in which eligible employees may purchase a limited amount of shares over successive six-month offering periods at 85% of fair market value on either the first or last day of each six-month period, whichever is less. During the years ended September 30, 1997, 1996 and 1995, there were 11,432, 8,240 and 7,910 shares purchased under this plan, respectively. At September 30, 1997, 80,592 shares are reserved for future issuance under this plan. Under SFAS No. 123, compensation cost is recognized for the fair value of the employees' purchase rights, which was estimated using the Black-Scholes model with the following assumptions: an expected life of 6 months; expected volatility of 45%; expected dividend yield of 0% and risk-free interest rate of 6.5%. The weighted-average fair value of those purchase rights granted in 1997 and 1996 was $4.34 and $5.89, respectively. PAGE 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Guest Supply, Inc. and Subsidiaries The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," and applies APB Opinion No. 25 in accounting for its plans and, accordingly, has not recognized compensation cost for stock option plans and stock purchase plans in its financial statements. Had the Company determined compensation cost based on the fair value at the grant date consistent with the provisions of SFAS No. 123, the Company's net income would have been changed to the pro forma amounts indicated below: Years Ended September 30, 1997 1996 - --------------------------------------------------------------------------- Net income: As reported $3,816 $3,151 Pro forma 3,678 3,002 Primary earnings per share: As reported $ 0.55 $ 0.45 Pro forma 0.53 0.42 Fully diluted earnings per share: As reported $ 0.54 $ 0.45 Pro forma 0.52 0.42 The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. SFAS No. 123 does not apply for awards prior to 1996, and the Company anticipates granting additional awards in future years. COMMON STOCK WARRANTS The Board of Directors may grant common stock warrants to directors and officers of the Company at exercise prices not less than market value at the date of grant. All outstanding warrants expire during the fiscal years 1998 through 2000. Transactions relating to common stock warrants as summarized as follows: 1997 1996 1995 Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ---------------- ---------------- ---------------- Outstanding at beginning of year 743,250 $3.11 743,250 $3.11 765,750 $3.17 Exercised (1,500) 3.17 (22,500) 5.17 ---------------- ---------------- ---------------- Outstanding at end of year 741,750 $3.11 743,250 $3.11 743,250 $3.11 ---------------- ---------------- ---------------- Options exercisable at year end 741,750 $3.11 743,250 $3.11 743,250 $3.11 ================ ================ ================ EMPLOYEE BENEFIT PLAN The Company has a 401(k) Salary Reduction Plan under which the Company annually matches a portion of the amount of contributions made by the employee. All domestic employees with one year of continuous service are eligible for the plan. Company matching contributions are 100% vested, as are any contributions made by the employee. The Company may also make, at its sole discretion, annual discretionary contributions, which vest over a six-year period. The Company has not made any discretionary contributions. Employer contributions relating to these plans were $174, $138 and $130 for the years ended September 30, 1997, 1996 and 1995, respectively. SHAREHOLDERS' PREFERRED PURCHASE RIGHTS On July 14, 1988, as amended on August 6, 1997, the Board of Directors of the Company declared a dividend of one preferred share purchase right for each outstanding share of Common Stock of the Company. The dividend was payable on July 26, 1988 to the shareholders of record on that date. Each right entitles the registered holder to purchase from the Company one one-hundredth of a Preferred Share at a price of $30.00, subject to adjustment. The rights agreement provides that, until the earlier to occur of (i) 10 days following a public announcement that a person or group of affiliated or associated persons have acquired beneficial ownership of 20% or more of the outstanding Common Stock, or (ii) 10 days following the commencement of, or announcement of an intention to make a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 20% or more of such outstanding Common Stock, the rights will be transferred with and only with the Common Stock. The rights are not exercisable until the earlier of such date described above and will expire on July 15, 2008, unless the final expiration date is extended or the rights are earlier redeemed by the Company at $.01 per right. PAGE 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Guest Supply, Inc. and Subsidiaries QUARTERLY FINANCIAL DATA The following table sets forth certain unaudited quarterly financial information. First Second Third Fourth Year ended September 30, 1997 Quarter Quarter Quarter Quarter - --------------------------------------------------------------------------- Sales $47,656 $44,287 $52,571 $56,403 Gross profit 11,071 6,923 11,744 13,087 Net income (loss) 1,219 (1,319) 1,618 2,298 Earnings (loss) per common share $0.17 $(0.21) $0.23 $0.32 Year ended September 30, 1996 - --------------------------------------------------------------------------- Sales $41,714 $37,281 $47,863 $52,184 Gross profit 9,495 6,634 10,752 11,117 Net income (loss) 944 (824) 1,440 1,591 Earnings (loss) per common share $0.13 $(0.13) $0.20 $0.22 PAGE 36 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Guest Supply, Inc. and Subsidiaries COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E Additions ------------------- Balance Charged Charged Balance at to to at Beginning Costs and Other End of Description Period Expenses Accounts Deductions Period - ----------------------- ---------- ---------- -------- ---------- ----------- Reserves and allowances deducted from asset accounts: Allowance for Uncollectible Accounts - ----------------------- Year ended September 30, 1997 $898,000 $880,000 $0 $746,000 $1,032,000 Year ended September 30, 1996 $692,000 $316,000 $0 $110,000 $898,000 Year ended September 30, 1995 $852,000 $223,000 $0 $383,000 $692,000 Allowance for Obsolescence and Inventory Chargebacks - ---------------------------------------------------- Year ended September 30, 1997 $1,606,000 $1,858,000 $0 $1,530,000 $1,934,000 Year ended September 30, 1996 $1,344,000 $828,000 $0 $566,000 $1,606,000 Year ended September 30, 1995 $1,368,000 $328,000 $0 $352,000 $1,344,000 PAGE 37 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PAGE 38 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. For information concerning this item, see "Item 1. - Business - Executive Officers" and the table and text under the caption "Certain Information Concerning Nominees and Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" of the Proxy Statement to be filed with respect to the 1998 Annual Meeting of Shareholders to be held on January 15, 1998 (the "Proxy Statement"), which information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. For information concerning this item, see the table and text under the captions "Executive Compensation," "Compensation of Directors," "Personnel and Compensation Committee Interlocks and Insider Participation" and "Employment Agreements" of the Proxy Statement, which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. For information concerning this item, see the table and text under the caption "Information Concerning Certain Shareholders" of the Proxy Statement, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. For information concerning this item, see the text under the caption "Personnel and Compensation Committee Interlocks and Insider Participation" of the Proxy Statement, which information is incorporated herein by reference. PAGE 39 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. Financial Statements: Included in Part II of this report: Page Number Independent Auditors' Report . . . . . . . . . . . . . . 23 Consolidated Balance Sheets -- September 30 1997 and 1996. . . . . . . . . . . . . . . . . . . . . . 24 Consolidated Statements of Operations -- Years Ended September 30, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . 25 Consolidated Statements of Cash Flows - -- Years Ended September 30, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . 26 Consolidated Statements of Shareholders' Equity -- Years Ended September 30, 1997, 1996 and 1995. . . . . . . . . . . . . . . . . . . 27 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 28 2. Financial Statement Schedule: Included in Part II of this report: II - Valuation and Qualifying Accounts. . . . . . . . . . . . . . . . . . . . 36 All other schedules have been omitted because they are inapplicable or the information is provided in the financial statements, including the notes thereto. 3. Exhibits: The exhibits required to be filed as part of this Annual Report on Form 10-K are listed in the attached Index to Exhibits. (b) Current Reports on Form 8-K: The Company filed a report on Form 8-K on September 8, 1997. PAGE 40 POWER OF ATTORNEY The registrant and each person whose signature appears below hereby appoint Clifford W. Stanley and Thomas M. Haythe as attorneys-in-fact with full power of substitution, severally, to execute in the name and on behalf of the registrant and each such person, individually and in each capacity stated below, one or more amendments to the annual report which amendments may make such changes in the report as the attorney-in-fact acting in the premises deems appropriate and to file any such amendment to the report with the Securities and Exchange Commission. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: December 5, 1997 GUEST SUPPLY, INC. By /s/ Clifford W. Stanley Clifford W. Stanley President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Dated: December 5, 1997 By /s/ Clifford W. Stanley ----------------------- Clifford W. Stanley President, Principal Executive Officer and Director Dated: December 5, 1997 By /s/ Thomas M. Haythe ----------------------- Thomas M. Haythe Director PAGE 41 Dated: December 5, 1997 By /s/ Peter L. Richard ----------------------- Peter L. Richard Director Dated: December 5, 1997 By /s/ Teri E. Unsworth ----------------------- Teri E. Unsworth Vice President - Market Development and Director Dated: December 5, 1997 By /s/ Edward J. Walsh ----------------------- Edward J. Walsh Director Dated: December 5, 1997 By /s/ George S. Zabrycki ----------------------- George S. Zabrycki Director Dated: December 5, 1997 By /s/ Paul T. Xenis ----------------------- Paul T. Xenis Vice President - Finance and Principal Financial and Accounting Officer PAGE 42 Index to Exhibits Page 3(a) Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996). -- 3(b) Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996). -- 3(c) Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996). -- 3(d) Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996). -- 3(e) Certificate of Correction to the Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company, (incorporated by reference to Exhibit 3(d) to the Company's Annual Report on Form 10-K for the year ended September 30, 1993). -- 3(f) Certificate of Merger of Miraflores Designs, Inc. into the Company (incorporated by reference to Exhibit 3(e) to the Company's Annual Report on Form 10-K for the year ended September 30, 1993). -- PAGE 43 3(g) Amended and Restated By-Laws of the Company . . . . . . . . . . . . . . . . . . . . 47 4(a) Article THIRD of Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3(a) to Registration Statement on Form S-1 No. 33-7246). -- 4(b) Form of Series W Warrant Certificate to purchase Common Stock of the Company (incorporated by reference to Exhibit 4(b) to the Company's Annual Report on Form 10-K for the year ended September 30, 1994). -- 4(c) Form of Series A Warrant Certificate to purchase Common Stock of the Company (incorporated by reference to Exhibit 4(c) to the Company's Annual Report on Form 10-K for the year ended September 30, 1994). -- 4(d) Form of Series B Warrant Certificate to purchase Common Stock of the Company (incorporated by reference to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the year ended September 30, 1994). -- 4(e) Rights Agreement dated as of July 15, 1988 between the Company and First Fidelity Bank (incorporated by reference to Exhibit 4(e) to the Company's Annual Report on Form 10-K for the year ended September 30, 1993). -- 4(f) Amendment No. 1 dated as of August 15, 1997 by and among the Company, First Fidelity Bank and ChaseMellon Shareholder Services, L.L.C. to the Rights Agreement (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated September 8, 1997). -- 10(a) 1983 Stock Option Plan of the Company, as amended (incorporated by reference to Exhibit 10(a) to Company's Annual Report on Form 10-K for the year ended September 30, 1993). -- PAGE 44 10(b) 1993 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-8 No. 33-63352). -- 10(c) 1993 Stock Option Plan of the Company (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 No. 33-63352). -- 10(d) Lease dated February 28, 1985 between the Company and The Benenson Capital Company (incorporated by reference to Exhibit 10(l) to Registration Statement on Form S-1 No. 2-98274). -- 10(e) Lease dated October 28, 1985 between the Company and Shore Point Distributors (incorporated by reference to Exhibit 10(y) to Registration Statement on Form S-1 No. 33-7246). -- 10(f) Guest Supply, Inc. 401(k) Plan & Trust (incorporated by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the year ended September 30, 1996). -- 10(g) Guest Supply, Inc. 1996 Long Term Incentive Plan (incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K for the year ended September 30, 1996). -- 10(h) Lease dated March 16, 1995 between the Company and The Morris Company (incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995). -- 10(i) Employment Agreement dated as of August 6, 1997 between the Company and Clifford W. Stanley. . . . . . . . . . . . . . . . . 82 10(j) Employment Agreement dated as of August 6, 1997 between the Company and Teri E. Unsworth . . . . . . . . . . . . . . . . . . 100 10(k) Employment Agreement dated as of August 6, 1997 between the Company and Paul T. Xenis. . . . . . . . . . . . . . . . . . . . 118 PAGE 45 10(l) Employment Agreement dated as of August 6, 1997 between the Company and R. Eugene Biber . . . . . . . . . . . . . . . . . . . 136 10(m) General Counsel Agreement dated as of August 6, 1997 between the Company and Thomas M. Haythe . . . . . . . . . . . . . . . . . . 153 10(n) Revolving Credit Agreement by and among the Company, Guest Packaging, Inc., Breckenridge-Remy Co., and Guest Distribution Services, Inc., all as the Borrower, PNC Bank, National Association, First Union National Bank, both as Lenders and PNC Bank, National Association, as agent, dated as of December 3, 1997. . . . . . . . . . . . . . . . . . . . . 164 10(o) Revolving Credit Note dated December 3, 1997 made by the Company, Guest Packaging, Inc., Breckenridge-Remy Co. and Guest Distribution Services, Inc., as joint and several obligors to First Union National Bank . . . . . . . . . . . . . . . . . . . 242 10(p) Revolving Credit Note dated December 3, 1997 made by the Company, Guest Packaging, Inc., Breckenridge-Remy Co. and Guest Distribution Services, Inc., as joint and several obligors to PNC Bank, National Association. . . . . . . . . . . . . . . . 244 10(q) Form of Note Purchase Agreement dated as of December 3, 1997 by and among the Company, Breckenridge-Remy Co., Guest Distribution Services, Inc., Guest Packaging, Inc. and each of The Mutual Life Insurance Company of New York, AUSA Life Insurance Company, Inc., Great-West Life & Annuity Insurance Company and Nationwide Life and Annuity Insurance Company . . . . . . . . . . . . . . . . . . . . 246 10(r) 7.06% Series A Senior Note due November 15, 2009 made by the Company, Guest Packaging, Inc., Breckenridge- Remy Co. and Guest Distribution Services, Inc. for the benefit of the Mutual Life Insurance Company of New York. . . . . . . . . . . . . . . . . . . . . . . . . . . 359 PAGE 46 10(s) 7.06% Series A Senior Note due November 15, 2009 made by the Company, Guest Packaging, Inc., Breckenridge- Remy Co. and Guest Distribution Services, Inc. for the benefit of AUSA Life Insurance Company, Inc.. . . . . . . . . . . . . . . 362 10(t) 6.95% Series B Senior Note due November 15, 2007 made by the Company, Guest Packaging, Inc., Breckenridge- Remy Co. and Guest Distribution Services, Inc. for the benefit of Great-West Life & Annuity Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . 365 10(u) 6.70% Series C Senior Note due November 15, 2003 made by the Company, Guest Packaging, Inc., Breckenridge- Remy Co. and Guest Distribution Services, Inc. for the benefit of Nationwide Life and Annuity Insurance Company.. . . . . . . . . . . . . . . . . . . . . . . . . 368 21 Subsidiaries of the Registrant . . . . . . . . . . . . . . . . 371 23 Consent of KPMG Peat Marwick LLP . . . . . . . . . . . . . . . 372 24 Power of Attorney (see "Power of Attorney" in Form 10-K). . . . . . . . . . . . . . . . . . . . 40 27 Financial Data Schedule. . . . . . . . . . . . . . . . . . . . 373 Copies of the exhibits filed with this Annual Report on Form 10-K or incorporated by reference herein do not accompany copies hereof for distribution to shareholders of the Company. The Company will furnish a copy of any of such exhibits to any shareholder requesting the same. EX-3.(G) 2 EXHIBIT 3(g) GUEST SUPPLY, INC. BY LAWS As Amended, November 5, 1997 ARTICLE I Offices The registered office of the Corporation shall be located at 4301 U.S. Highway One in the City of Monmouth Junction, County of Middlesex, State of New Jersey. The Corporation may also have offices at such other places, both within and without the State of New Jersey, as may from time to time be designated by the Board of Directors. ARTICLE II Books The books and records of the Corporation may be kept (except as otherwise provided by the laws of the State of New Jersey) outside of the State of New Jersey and at such place or places as may from time to time be designated by the Board of Directors. ARTICLE III Shareholders Section 1. Annual Meetings. The annual meeting of the shareholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the State of New Jersey as may be designated by the Board of Directors and stated in the notice of the meeting, on the third Thursday of January in each year, if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or on such other day as shall be determined by the Board of Directors. Written notice of the place designated for the annual meeting of the shareholders of the Corporation shall be delivered personally or mailed to each shareholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days prior to said meeting, but at any meeting at which all shareholders shall be present, or of which all shareholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. If mailed, said notice shall be directed to each shareholder at his address as the same appears on the stock ledger of the Corporation unless he shall have 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. Section 2. Special Meetings. Special meetings of the shareholders of the Corporation may not be called by the shareholders without the approval of the Board of Directors, except as may be required by New Jersey law. Such meetings shall be held whenever called in the manner required by the laws of the State of New Jersey for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, by the Chairman of the Board of Directors, by the President, or by the holders of a majority of the outstanding shares of capital stock of the Corporation the holders of which are entitled to vote on matters that are to be voted on at such meeting. Any such special meeting of shareholders may be held at the principal business office of the Corporation or at such other place or places, either within or without the State of New Jersey, as may be specified in the notice thereof. Business transacted at any special meeting of shareholders of the Corporation shall be limited to the purposes stated in the notice thereof. Except as otherwise expressly required by the laws of the State of New Jersey, written notice of each special meeting, stating the day, hour and place, and in general terms the business to be transacted thereat, shall be delivered personally or mailed to each shareholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days before the meeting. If mailed, said notice shall be directed to each shareholder at his address as the same appears on the stock ledger of the Corporation unless he shall have 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 said request. At any special meeting at which all shareholders shall be present, or of which all shareholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. Section 3. List of Shareholders. The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of shareholders, a complete list of the shareholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present. Section 4. Quorum. At any meeting of the shareholders of the Corporation, except as otherwise expressly provided by the laws of the State of New Jersey, the Certificate of Incorporation or these By-Laws, there must be present, either in person or by proxy, in order to constitute a quorum, shareholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. The shareholders present in person or by proxy at a duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of sufficient stockholders to leave less than a quorum. At any meeting of shareholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock which is represented at such meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. Section 5. Organization. The Chairman of the Board of Directors, or in his absence, the President, or in their absence any Vice President, shall call to order meetings of the shareholders and shall act as chairman of such meetings. The Board of Directors or the shareholders may appoint any shareholder or any Director or officer of the Corporation to act as chairman of any meeting in the absence of the Chairman of the Board of Directors, the President and all of the Vice Presidents. The Secretary of the Corporation shall act as secretary of all meetings of the shareholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. Voting. Except as otherwise provided in the Certificate of Incorporation or these By-Laws, each shareholder of record of the Corporation shall, at every meeting of the shareholders of the Corporation, be entitled to one (1) vote for each share of stock standing in his name on the books of the Corporation on any matter on which he is entitled to vote, and such votes may be cast either in person or by proxy, appointed by an instrument in writing, subscribed by such shareholder or by his duly authorized attorney, and filed with the Secretary before being voted on. No proxy shall be voted after eleven (11) months from its date, unless said proxy provides for a longer period, but in no event shall a proxy be valid after three (3) years from its date. A proxy shall not be revoked by the death or incapacity of the shareholder who executed the proxy but shall continue in force until revoked by the personal representative or guardian of such shareholder. If the Certificate of Incorporation provides for more or less than one (1) vote for any share of capital stock of the Corporation, on any matter, then any and every reference in these By-Laws to a majority or other proportion of capital stock shall refer to such majority or other proportion of the votes of such stock. The vote on all elections of Directors and on any other questions before the meeting need not be by ballot, except upon demand of any shareholder. When a quorum is present at any meeting of the shareholders of the Corporation, the vote of the holders of a majority of the capital stock entitled to vote at such meeting and present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, under any provision of the laws of the State of New Jersey or of the Certificate of Incorporation, a different vote is required in which case such provision shall govern and control the decision of such question. Section 7. Consent. Except as otherwise required by the laws of the State of New Jersey or in the Certificate of Incorporation or unless otherwise approved by a vote of not less than a majority of the Directors then holding office (or, in the event that the Corporation at the time has a Related Person [as defined in the Certificate of Incorporation], then by a vote of not less than a majority of the Continuing Directors [as defined in the Certificate of Incorporation]), no action shall be taken by the shareholders except at an annual or special meeting of the shareholders actually held, pursuant to Section 1 or 2 of this Article, upon prior notice and pursuant to a vote. Except as otherwise provided hereinabove, no action shall be taken by the shareholders by written consent unless such consent is in writing, setting forth the action taken, and is signed by all of the holders of outstanding capital stock of the Corporation entitled to vote on such matters. Section 8. Judges. At every meeting of the shareholders of the Corporation at which a vote by ballot is taken, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualifications of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by two (2) judges. Said judges shall be appointed by the Board of Directors before the meeting, or, if no such appointment shall have been made, by the presiding officer of the meeting. If for any reason any of the judges previously appointed shall fail to attend or refuse or be unable to serve, judges in place of any so failing to attend, or refusing or unable to serve, shall be appointed in like manner. Section 9. Notice of Business. No business may be transacted at an annual meeting of shareholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any shareholder of the Corporation (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 9 of this Article III and on the record date for the determination of shareholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 9 of this Article III. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty days nor more than ninety days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. To be in proper written form, a shareholder's notice to the Secretary must set forth as to each matter such shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such shareholder, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such shareholder, (iv) a description of all arrangements or understandings between such shareholder and any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder in such business and (v) a representation that such shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. No business shall be conducted at the annual meeting of shareholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 9 of this Article III; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 9 of this Article III shall be deemed to preclude discussion by any shareholder of any such business. If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. ARTICLE IV Directors Section 1. Number, Election and Term of Office. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be not less than three (3) nor more than nine (9). Within such limits, the number of Directors may be fixed from time to time by vote of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders except as provided in Section 2 of this Article, to serve for terms in accordance with the Certificate of Incorporation and until their respective successors are elected and have duly qualified. In addition to the powers by these By-Laws expressly conferred upon them, the Board may exercise all such powers of the Corporation as are not by the laws of the State of New Jersey, the Certificate of Incorporation or these By-Laws required to be exercised or done by the shareholders. Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation of the Corporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of Directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of shareholders, or at any special meeting of shareholders called for the purpose of electing Directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any shareholder of the Corporation (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 1 of this Article IV and on the record date for the determination of shareholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 1 of this Article IV. In addition to any other applicable requirements, for a nomination to be made by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than sixty days nor more than ninety days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of shareholders called for the purpose of electing Directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. To be in proper written form, a shareholder's notice to the Secretary must set forth (a) as to each person whom the shareholder proposes to nominate for election as a Director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of Directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the shareholder giving the notice (i) the name and record address of such shareholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such shareholder, (iii) a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such shareholder, (iv) a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of Directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a Director if elected. Subject to Section 2 of this Article IV, no person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in this Section 1 of this Article IV. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. Section 2. Vacancies and Newly Created Directorships. Except as hereinafter provided and subject to the provisions of the Certificate of Incorporation, any vacancy in the office of a Director occurring for any reason other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office, though less than a quorum, or by the sole remaining Director. In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event that vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by a vote of the shareholders of the Corporation at the next annual or special meeting of the shareholders. Directors chosen or elected as aforesaid shall hold office for a term in accordance with the Certificate of Incorporation and until their respective successors are elected and duly qualified or until their earlier resignation or removal. Any Director of any class elected to fill a vacancy resulting from an increase in the number of Directors in such class shall hold office for a term that shall coincide with the remaining term of that class. Any Director elected to fill a vacancy not resulting from an increase in the number of Directors shall have the same remaining term as that of his predecessor. Section 3. Removals. Directors of the Corporation may be removed by the shareholders of the Corporation only for cause and only by the affirmative vote of a majority of the combined voting power of the then outstanding shares of voting stock, voting together as a single class. For the purposes hereof, "cause" shall mean (i) the willful, continuous and material failure of a Director to perform such Director's duties to the Corporation (including any such failure resulting from incapacity due to physical or mental illness), (ii) the willful engaging by a Director in gross misconduct or malfeasance materially and demonstrably injurious to the Corporation or (iii) a Director's conviction of a crime involving moral turpitude. The Board of Directors shall have the power to remove directors for cause and to suspend directors pending a final determination that cause exists for removal. Section 4. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of New Jersey, as shall from time to time be determined by resolution of the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by any three Directors, by the Chairman of the Board of Directors or, if the office of the Chairman of the Board of Directors is vacant or if the Chairman of the Board of Directors is incapacitated, then by the President or, if the office of the President is vacant or if the President is incapacitated, then by any Vice President on notice given to each Director, and such meetings shall be held at the principal business office of the Corporation or at such other place or places, either within or without the State of New Jersey, as shall be specified in the notices thereof. Section 6. Annual Meetings. The first meeting of each newly elected Board of Directors shall be held as soon as practicable after each annual election of Directors and on the same day, at the same place at which regular meetings of the Board of Directors are held, or at such other time and place as may be provided by resolution of the Board. Such meeting may be held at any other time or place which shall be specified in a notice given, as hereinafter provided, for special meetings of the Board of Directors. Section 7. Notice. Notice of any meeting of the Board of Directors requiring notice shall be given to each Director by mailing the same, addressed to him at his principal address as it appears on the books and records of the Corporation, at least forty-eight (48) hours, or shall be sent to him at such place by facsimile transmission, courier, telegraph, cable or wireless, or shall be delivered personally or by telephone, at least twelve (12) hours, before the time fixed for the meeting. At any meeting at which every Director shall be present or at which all Directors not present shall waive notice in writing, any and all business may be transacted even though no notice shall have been given. Section 8. Quorum. At all meetings of the Board of Directors, the presence of a majority or more of the Directors constituting the Board (but in no event less than two Directors) shall constitute a quorum for the transaction of business. Except as may be otherwise specifically provided by the laws of the State of New Jersey, the Certificate of Incorporation or these By-Laws, the affirmative vote of a majority of the Directors present at the time of such vote shall be the act of the Board of Directors if a quorum is present. If a quorum shall not be present at any meeting of the Board of Directors the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Consent. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors. Section 10. Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. Compensation of Directors. Directors, as such, shall not receive any stated salary 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 of Directors; provided 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. Interested Directors. No contract or other transaction between the Corporation and one or more of its Directors, or between the Corporation and any other corporation, firm, association or other entity in which one or more of the Corporation's Directors are directors or officers, or are financially interested, shall be either void or voidable for this reason alone or by reason alone that such Director or Directors are present at a meeting of the Board of Directors which approves such contract or transaction, or that his or their votes are counted for such purpose: (a) if the fact of such common directorship, officership or financial interest is disclosed or known to the Board of Directors and the Board of Directors authorizes, approves or ratifies such contract or transaction by unanimous written consent, provided at least one Director so consenting is disinterested, or by affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors are less than a quorum; (b) if such common directorship, officership or financial interest is disclosed or known to the shareholders, and such contract or transaction is authorized, approved or ratified by vote of the shareholders; or (c) if the contract or transaction is fair and reasonable as to the Corporation at the time it is authorized, approved or ratified by the Board of Directors or the shareholders. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors which approves such contract or transaction. Section 13. Resignations. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors, to the Chairman of the Board of Directors, to the President or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. Section 14. Chairman of the Board of Directors. The Board of Directors shall designate one of their number to act as Chairman of the Board of Directors of the Corporation. A Director shall not be deemed to be an officer as a result of his being designated as Chairman of the Board of Directors. The Chairman of the Board of Directors shall preside at all meetings of the Board of Directors and at all meetings of the shareholders of the Corporation. He shall cause to be called regular and special meetings of the shareholders of the Corporation and of the Board of Directors in accordance with these By-Laws. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of New Jersey, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. ARTICLE V Committees Section 1. Executive Committee. The Board, by resolution adopted by the affirmative vote of a majority of all the directors then in office, may designate three (3) or more of its members to constitute an Executive Committee, which, during the intervals between the meetings of the Board, shall have, and may exercise, all the powers of the Board in the management of the business, affairs and property of the Company. At all meetings of the Executive Committee, the presence of the lesser of a majority or three (3) of the members thereof shall be necessary to constitute a quorum and to transact business. Meetings of the Executive Committee may be called by any member thereof, by the Chairman of the Board of Directors, by the President or by the Secretary of the Corporation. Written or oral notice of each such meeting shall be given to each member of the Executive Committee not later than the close of the business day next preceding the date of such meeting. The Board shall have the power, by resolution adopted by the affirmative vote of a majority of all of the directors then in office, at any time to change the members of the Executive Committee, to fill vacancies thereon, and to discharge the Executive Committee or any member thereof. The Board may, by ordinary resolution, designate one of the members of the Executive Committee as Chairman of the Executive Committee. Section 2. Committees Generally. The Board, by resolution, may from time to time designate members of the Board to constitute other committees, which shall consist of such persons and shall have such powers as the Board may determine and specify in the respective resolutions effecting such designations. The Board shall have the power, by resolution, at any time, with respect to any committee created pursuant to Section 2 to change the members of any such committee, to fill vacancies on any such committee and to discharge any such committee. Section 3. Meetings. A majority of the members of each committee shall determine its acts. Each committee may adopt such rules and regulations for the conduct of its meetings as it deems proper and as are not inconsistent with any statute or the Certificate of Incorporation or the By-Laws of this Corporation. ARTICLE VI Officers Section 1. Number, Election and Term of Office . The officers of the Corporation shall be a President, an Executive Vice President, one or more Vice Presidents, a Secretary and a Treasurer, and may at the discretion of the Board of Directors include one or more Vice Presidents, Assistant Treasurers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of the shareholders, and shall hold their respective offices until their successors are duly elected and have qualified. Any number of offices may be held by the same person but no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law to be executed, acknowledged or verified by two or more officers. The Board of Directors may from time to time appoint such other officers as the interest of the Corporation may require and may fix their duties, subject to the control of the Board of Directors, and terms of office. Section 2. President. The President shall be a Director, and shall be the chief executive officer of the Corporation and shall have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the laws of the State of New Jersey. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation other than the duly elected or appointed officers, subject to the approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of New Jersey, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. He shall, during the absence or incapacity of the Chairman of the Board of Directors, assume his powers and perform his duties. Section 3. Vice Presidents. The Vice Presidents shall perform such duties as the President or the Board of Directors shall require. Any Vice President shall, during the absence or incapacity of the President, assume and perform his duties. Section 4. Secretary. The Secretary may sign all certificates of stock of the Corporation. He shall record all the proceedings of the meetings of the Board of Directors and of the shareholders of the Corporation in books to be kept for that purpose. He shall have custody of the seal of the Corporation and may affix the same to any instrument requiring such seal when authorized by the Board of Directors, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each; and he shall keep such stock and transfer books open daily during business hours to the inspection of every shareholder and for transfer of stock. He shall notify the Directors and shareholders of their respective meetings as required by law or by these By-Laws, and shall perform such other duties as may be required by law or by these By-Laws, or which may be assigned to him from time to time by the Board of Directors. Section 5. Assistant Secretaries. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity. Section 6. Treasurer. The Treasurer shall have charge of the funds and securities of the Corporation. He may sign all certificates of stock. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, and shall render to the President or the Directors, whenever they may require it, an account of all his transactions as Treasurer and an account of the business and financial position of the Corporation. Section 7. Assistant Treasurers. The Assistant Treasurers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity. Section 8. Treasurer's Bond. The Treasurer and Assistant Treasurers shall, if required so to do by the Board of Directors, each give a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as the Board of Directors may require. Section 9. Transfer of Duties. The Board of Directors in its absolute discretion may transfer the power and duties, in whole or in part, of any officer to any other officer, or persons, notwithstanding the provisions of these By-Laws, except as otherwise provided by the laws of the State of New Jersey. Section 10. Vacancies. If the office of President, Executive Vice President, Vice President, Secretary or Treasurer, or any other officer or agent becomes vacant for any reason, the Board of Directors may choose a successor to hold office for the unexpired term. Section 11. Removals. Any officer or agent of the Corporation may be removed from office, with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Section 12. Compensation of Officers. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 13. Resignations. Any officer or agent of the Corporation may resign at any time by giving written notice to the Board of Directors, to the Chairman of the Board of Directors, to the President or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. Section 14. Executive Vice President. The Executive Vice President shall have such powers and duties as may be assigned to him by the Board of Directors or the President, or as may be provided in these By-Laws. The Executive Vice President shall, during the absence or incapacity of the President, assume his powers and perform his duties. The Executive Vice President shall also be the Chief Financial Officer of the Corporation. ARTICLE VII Contracts, Checks and Notes Section 1. Contracts. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the name of the Corporation by the President, the Executive Vice President or a Vice President. Section 2. Checks and Notes. All checks, drafts, bills of exchange and promissory notes and other negotiable instruments of the Corporation shall be signed by such officers or agents of the Corporation as may be designated by the Board of Directors. ARTICLE VIII Stock Section 1. Certificates of Stock. The certificates for shares of the stock of the Corporation shall state upon the face thereof (1) that the Corporation is organized under the laws of the State of New Jersey, (2) the name of the person to whom issued and (3) the number of shares represented thereby and shall otherwise be in such form, not inconsistent with the Certificate of Incorporation, as shall be prepared or approved by the Board of Directors. Every holder of stock in the Corporation shall be entitled to have a certificate of stock signed by, or in the name of the Corporation by, the President, the Executive Vice President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certifying the number of shares owned by him and the date of issue and may be sealed with the seal of the Corporation or a facsimile thereof; and no certificate shall be valid unless so signed and sealed. All certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Where a certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates surrendered to the Corporation shall be cancelled and, except in the case of lost or destroyed certificates, no new certificates shall be issued until the former certificates for the same number of shares of the same class of stock shall have been surrendered and cancelled. Section 2. Transfer of Stock. Stock of the Corporation shall be transferable in the manner prescribed by the laws of the State of New Jersey. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE IX Registered Shareholders The Corporation shall be entitled (i) to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and (ii) to hold liable for calls and assessments a person registered on its books as the owner of shares, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by law. ARTICLE X Lost Certificates Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in a sum sufficient, in the opinion of the Board of Directors, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed may be issued without requiring any bond when, in the judgment of the Directors, it is proper so to do. ARTICLE XI Fixing of Record Date In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to 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 any meeting of shareholders shall be the close of business on the day next preceding the day on which notice of such meeting is given, or, if no notice is given, the day next preceding the day on which the meeting is held, and the record date for determining shareholders for any other purpose shall be the close of business on the day on which the resolution of the Board of Directors relating thereto is adopted. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE XII Dividends Subject to the relevant provisions of the Certificate of Incorporation, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE XIII Waiver of Notice Whenever any notice whatever is required to be given by statute or under the provisions of the Certificate of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent thereto. ARTICLE XIV Seal The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, New Jersey." ARTICLE XV Amendments Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the shareholders or by the Board of Directors, at any regular meeting of the shareholders or of the Board of Directors or at any special meeting of the shareholders or of the Board of Directors. Any amendment of these By-Laws by the shareholders of the Corporation shall be made by a vote of the holders of not less than eighty percent (80%) of the outstanding capital stock of the Corporation entitled to vote thereon. EX-10.(I) 3 EXHIBIT 10(i) EMPLOYMENT AGREEMENT AMENDED AND RESTATED AGREEMENT dated the 6th day of August, 1997, by and between GUEST SUPPLY, INC., a New Jersey corporation (the "Company"), and CLIFFORD W. STANLEY (the "Employee"). W I T N E S E T H: WHEREAS, the parties desire to amend and restate in its entirety the Employment Agreement dated January 11, 1988 between the Company and the Employee; WHEREAS, the Company wishes to retain the services of the Employee, and the Employee wishes to serve in the employ of the Company, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereto hereby agree as follows: 1. Employment. 1.1 The Company agrees to employ the Employee, and the Employee agrees to serve in the employ of the Company, for the term set forth in Section 1.2, in the position and with the responsibilities, duties and authority set forth in Section 2 and on the other terms and conditions set forth in this Agreement. 1.2 The term of the Employee's employment under this Agreement shall commence as of August 1, 1997 and shall terminate on July 31, 2000, unless extended or sooner terminated in accordance with this Agreement. 1.3 As of July 31, 1998 and each subsequent July 31 during the term of this Agreement (each, an "Automatic Renewal Date"), unless either party shall have given a notice of non-extension not less than two (2) months prior to such Automatic Renewal Date, the term of this Agreement shall be extended automatically for a period of one (1) year to the first anniversary of the expiration date of the then-current term of this Agreement. Once a notice of non-extension shall have been given by either party, there shall be no further automatic extension of this Agreement. 2. Position, Duties. The Employee shall serve in the position of Chairman of the Board, President and Chief Executive Officer of the Company. The Employee shall perform, faithfully and diligently, such duties, and shall have such responsibilities, appropriate to said positions, as shall be assigned to him from time to time by the Board of Directors of the Company. The Employee shall report directly to the Board of Directors of the Company. The Employee shall devote his complete and undivided attention to the performance of his duties and responsibilities hereunder during the normal working hours of executive employees of the Company. Nothing in this Agreement shall preclude the Employee from devoting reasonable periods required for serving as a director, officer or member of an advisory committee of any organization, or from engaging in charitable or community activities, or from managing his personal investments, provided that such activities do not involve a conflict of interest with the Company or interfere with the performance by the Employee of his duties and responsibilities under this Agreement. 3. Salary. During the term of this Agreement, in consideration of the performance by the Employee of the services set forth in Section 2 and his observance of the other covenants set forth herein, the Company shall pay the Employee, and the employee shall accept, a base salary at the rate of $241,845 per annum, payable in accordance with the standard payroll practices of the Company. The Employee shall be entitled to such increases in base salary during the term hereof as shall be determined by the Board of Directors of the Company in its sole discretion based on the performance of the Company, the performance of the Employee and increases in the cost of living. 4. Expense Reimbursement and Perquisites. During the term of this Agreement, (a) the Company shall reimburse the Employee for all reasonable and necessary out-of-pocket expenses incurred by him in connection with the performance of his duties hereunder, upon the presentation of proper accounts therefor in accordance with the Company's policies; (b) the Employee shall be entitled to use of a Company automobile which is at least comparable in value to the Company automobile presently used by the Employee; (c) the Company shall reimburse the Employee for annual club dues for one country club selected by the Employee; and (d) the Employee shall be entitled to such other perquisites as may be made available from time to time to senior executive employees of the Company. 5. Benefits. During the term of this Agreement, the Employee will be eligible to participate in all employee benefit plans and programs offered by the Company from time to time to its employees of comparable seniority, including but not limited to group hospitalization, surgical and major medical insurance plans, subject to the provisions of such plans and programs as in effect from time to time. 6. Termination of Employment. 6.1 Death. In the event of the death of the Employee during the term of this Agreement, the Company shall continue to pay to the estate or other legal representative of the Employee the base salary provided for in Section 3 (at the annual rate then in effect) until the expiration of a period of three (3) months from the date of the Employee's death. Rights and benefits of the estate or other legal representative of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the estate or other legal representative of the Employee nor the Company shall have any further rights or obligations under this Agreement. 6.2 Disability. If the Employee shall become incapacitated by reason of sickness, accident or other physical or mental disability and shall be unable to perform his normal duties hereunder for a cumulative period of two (2) months in any period of four (4) consecutive months, the employment of the Employee hereunder may be terminated by the Company or the Employee. In the event of such termination, the Company shall continue to pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) until the first to occur of (i) the expiration of a period of six (6) months from the date of such termination, (ii) the commencement of payment of benefits to the Employee under any disability plan or policy maintained by the Company or (iii) the expiration of a period of three (3) months from the date of death of the Employee. The Company shall continue to carry the group life, hospitalization, surgical and major medical insurance coverage for the Employee for a one (1) year period following termination of employment. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.3 Due Cause. The employment of the Employee hereunder may be terminated by the Company at any time for Due Cause (as hereinafter defined). In the event of such termination, the Company shall pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) accrued to the date of such termination and not theretofore paid to the Employee. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. For purposes hereof, "Due Cause" shall mean (i) willful, gross neglect or willful, gross misconduct in the Employee's discharge of his duties and responsibilities under this Agreement, or (ii) the Employee's commission of (x) a felony or (y) any crime or offense involving moral turpitude; provided, however, the Employee shall be given written notice by a majority of the Board of Directors of the Company that it intends to terminate the Employee's employment for Due Cause, which written notice shall specify the act or acts upon the basis of which the majority of the Board of Directors of the Company intends so to terminate the Employee's employment, and the Employee shall then be given the opportunity, within fifteen (15) days of his receipt of such notice, to have a meeting with the Board of Directors of the Company to discuss such act or acts. If the basis of such written notice is other than an act described in clause (ii), the Employee shall be given seven (7) days after such meeting within which to cease or correct the performance (or nonperformance) giving rise to such written notice and, upon failure of the Employee within such seven (7) days to cease or correct such performance (or nonperformance), the Employee's employment by the Company shall automatically be terminated hereunder for Due Cause. After the satisfaction of any claim of the Company against the Employee incidental to such Due Cause, neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.4 Other Termination by the Company. The Company may terminate the Employee's employment at any time for whatever reason it deems appropriate; provided, however, that in the event that such termination is not pursuant to Sections 6.1, 6.2 or 6.3: (A) The Company shall pay to the Employee within thirty (30) days of the date of such termination, a lump sum amount in cash equal to three (3) times the Employee's average annualized cash compensation (base salary and bonus) during the most recent five (5) taxable years of the Company ending before the date of such termination (or during such portion of such period as the Employee was employed by, or rendered services for, the Company), less $1,000. The Employee shall be under no obligation to seek subsequent employment and upon obtaining subsequent employment shall be under no obligation to offset any amounts earned from such subsequent employment (whether as an employee, a consultant or otherwise) against such lump sum payment. (B) The Company shall continue to carry the group life, hospitalization, surgical and major medical insurance coverage for the Employee for a two (2) year period following termination of employment. (C) The Company shall continue to provide the Employee with the Company automobile theretofore provided to him, and shall pay the expenses of maintaining such automobile (other than fuel), for a one (1) year period following termination of employment. (D) Other rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. (E) For a period of five years following termination of the employment of the Employee under Section 6.4 (the "Consulting Period"), the Company shall retain the Employee to provide such consulting services, on such projects, at such compensation and at such times as are mutually agreed to from time to time by the Employee and the Company. During the Consulting Period, the Employee shall be deemed an employee of the Company for purposes of the stock option plans and incentive plans of the Company (the "Plans"). Any options to purchase common stock, no par value (the "Common Stock"), of the Company (the "Options") heretofore or hereafter granted to the Employee pursuant to the Plans shall become fully exercisable and shall remain exercisable upon the termination of employment of the Employee until the first to occur of (a) the expiration of the term of such Options or (b) the expiration of the Consulting Period. In the event the Company terminates the Employee's services as a consultant hereunder prior to the expiration of the Consulting Period, the Employee shall be entitled to receive payment from the Company of liquidated damages in an amount equal to the aggregate Adjusted Option Spread (as hereinafter defined), it being agreed that the Employee's damages might be impossible to ascertain and that such amount constitutes a fair and reasonable amount of damages under the circumstances and is not a penalty. Any damages payable to the Employee hereunder shall be paid by the Company to the Employee within fifteen (15) days following the original expiration date of the Consulting Period. For purposes hereof, the Adjusted Option Spread with respect to each Option held by the Employee on the date of termination of the Employee's services as a consultant hereunder shall be equal to the product of (a) the number of shares of Common Stock which are subject to such Option multiplied by (b) the excess of (i) the highest Market Price (as hereinafter defined) of the Common Stock during the period commencing on the date on which such Option ceases to be exercisable as a result of the termination of the Employee's services as a consultant hereunder and terminating on the original expiration date of the Consulting Period over (ii) the greater of (x) the option exercise price per share of Common Stock under such Option or (y) the highest Market Price of the Common Stock during the period commencing on the date of termination of the Employee's services as a consultant hereunder and terminating on the date on which such Option ceases to be exercisable as a result of such termination. For purposes hereof, Market Price on any date shall mean the closing price per share of Common Stock on the New York Stock Exchange (or such other national securities exchange on which the Common Stock may be listed, if not listed on the New York Stock Exchange, or in the over-the-counter market, if not listed on a national securities exchange). Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.5 Voluntary Termination. The Employee may terminate his employment with the Company at any time upon 30 days' prior written notice to the Company. In the event of such termination, the Company shall pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) accrued to the date of such termination and not theretofore paid to the Employee. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.6 Constructive Termination Subsequent to a Change in Control. Anything herein to the contrary notwithstanding, if, subsequent to a Change in Control, the Company: (A) demotes the Employee to a lesser position than provided in Section 2; (B) causes a material change in the nature or scope of the authorities, powers, functions, duties, or responsibilities attached to the Employee's position as described in Section 2; (C) decreases the Employee's salary below the level provided for in Section 3 (taking into account increases made from time to time in accordance with Section 3); (D) fails to agree in writing (within ten (10) days of such Change in Control) to employ the Employee for a period of not less than one year commencing with such Change in Control on the terms and conditions set forth in this Agreement; (E) fails to obtain the agreement of a successor company to assume the obligation of the Company under this Agreement as required by Section 11.1; or (F) requires the Employee to render the services required under this Agreement at a location other than the Company's offices located at Monmouth Junction, New Jersey; then such action (or inaction) by the Company, unless consented to in writing by the Employee, shall constitute a termination of the Employee's employment by the Company pursuant to Section 6.4. Notwithstanding the preceding sentence, within thirty (30) days after learning of the action (or inaction) constituting the basis for a Constructive Termination of Employment, the Employee shall (unless he gives written consent thereto) advise the Company in writing that the action (or inaction) constitutes a termination of his employment pursuant to Section 6.4. In such event, the Company shall have thirty (30) days in which to correct such action (or inaction) and if the Company does so correct such action (or inaction) the Employee shall not be entitled to terminate his employment under this Section as a result of such action (or inaction) (the notice provided by the Employee to the Company of the action or inaction and the Company's correction of the action or inaction, being hereinafter referred to as the "Correction Process"); provided, however, that if the Employee and the Company engage in the Correction Process three (3) times subsequent to a Change in Control, the Employee shall not thereafter be required to engage in the Correction Process and shall be entitled to treat any such subsequent action or inaction by the Company as a termination of the Employee's employment pursuant to Section 6.4. 6.7 Termination of Employment Following Change in Control. The Employee may terminate his employment with the Company during the one (1) year period following a Change in Control, and such termination of employment shall be deemed to constitute a termination of the Employee's employment by the Company pursuant to Section 6.4. For purposes of this Agreement, a Change in Control shall be deemed to have occurred if: (A) a "person" (meaning an individual, a partnership, or other group or association as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, other than the Employee or a group including the Employee), acquires twenty percent (20%) or more of the combined voting power of the outstanding securities of the Company having a right to vote in elections of directors; or (B) Continuing Directors shall for any reason cease to constitute two-thirds of the Board of Directors of the Company; or (C) the business of the Company is disposed of by the Company to a party or parties other than a subsidiary or other affiliate of the Company, in which the Company owns less than a majority of the equity, pursuant to a partial or complete liquidation of the Company, sale of assets (including stock of a subsidiary of the Company) or otherwise. For purposes of this Agreement, the term "Continuing Director" shall mean a member of the Board of Directors of the Company who either was a member of the Board of Directors on the date hereof or who subsequently became a Director and whose election, or nomination for election, was approved by a vote of at least two-thirds of the Continuing Directors then in office, other than an approval in connection with an event specified in clauses (A) or (C) above. 7. Confidential Information. 7.1 The Employee shall, during the Employee's employment with the Company and thereafter, treat all confidential material confidentially and, except in accordance with the terms of this Agreement, shall not, without the prior written consent of a majority of the Board of Directors of the Company, disclose such material, directly or indirectly, to any party not at the time of such disclosure an employee or agent of the Company, or remove from the Company's premises any notes or records relating thereto, copies or facsimiles thereof (whether made by electronic, electrical, magnetic, optical, laser, acoustic or other means), or any other property of the Company. The Employee agrees that all confidential material, together with all notes and records of the Employee relating thereto, and all copies or facsimiles thereof in the possession of the Employee (whether made by the foregoing or other means) are the exclusive property of the Company. The Employee shall not in any manner use any confidential material, or any other property of the Company, in any manner not specifically directed by the Company or in any way which is detrimental to the Company, as determined by a majority of the Board of Directors of the Company in its sole discretion. 7.2 For the purposes hereof, the term "confidential material" shall mean all information in any way concerning the activities, business or affairs of the Company or the Company's customers and clients, including, without limitation, information concerning trade secrets and the preparation of raw material for, manufacture of, and/or finishing processes utilized in the production of, the products or projects of the Company and/or any improvements therein, together with all sales and financial information concerning the Company and any and all information concerning projects in research and development or marketing plans for any such products or projects, and all information concerning the practices, customers and clients of the Company, and all information in any way concerning the activities, business or affairs of any of such customers or clients, as such, which is furnished to the Employee by the Company or any of its agents, customers or clients, as such, or otherwise acquired by the Employee in the course of the Employee's employment with the Company; provided, however, that the term "confidential material" shall not include information which (i) becomes generally available to the public other than as a result of a disclosure by the Employee, (ii) was available to the Employee on a non-confidential basis prior to his employment with the Company or (iii) becomes available to the Employee on a non-confidential basis from a source other than the Company or any of its agents, customers or clients, as such, provided that such source is not bound by a confidentiality agreement with the Company or any of such agents, customers or clients. 7.3 Promptly upon the request of the Company, the Employee shall deliver to the Company all confidential material in the possession of the Employee without retaining a copy thereof, unless, in the opinion of counsel for the Company, either returning such confidential material or failing to retain a copy thereof would violate any applicable Federal, state, local or foreign law, in which event such confidential material shall be returned without retaining any copies thereof as soon as practicable after such counsel advises that the same may be lawfully done. 7.4 In the event that the Employee is required, by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process, to disclose any confidential material, the Employee shall provide the Company with prompt notice thereof so that the Company may seek an appropriate protective order and/or waive compliance by the Employee with the provisions hereof; provided, however, that if in the absence of a protective order or the receipt of such a waiver, the Employee is, in the opinion of counsel for the Company, compelled to disclose confidential material not otherwise disclosable hereunder to any legislative, judicial or regulatory body, agency or authority, or else be exposed to liability for contempt, fine or penalty or to other censure, such confidential material may be so disclosed. 8. Intellectual Property. Any and all inventions made, developed or created by the Employee (whether at the request or suggestion of the Company or otherwise, whether alone or in conjunction with others, and whether during regular hours of work or otherwise) (a) during the term of this Agreement, or (b) within a period of one (l) year after the date of termination of employment hereunder, which may be directly or indirectly useful in, or relate to, the business of or tests being carried out by the Company, shall be promptly and fully disclosed by the Employee to the Board of Directors of the Company and shall be the Company's exclusive property as against the Employee, and the Employee shall promptly deliver to an appropriate representative of the Company as designated by the Board of Directors all papers, drawings, models, data and other material relating to any invention made, developed or created by him as aforesaid. The Employee shall, at the request of the Company and without any payment therefor, execute any documents necessary or advisable in the opinion of the Company's counsel to direct issuance of patents or copyrights to the Company with respect to such inventions as are to be the Company's exclusive property as against the Employee or to vest in the Company title to such inventions as against the Employee. The expense of securing any such patent or copyright shall be borne by the Company. 9. Non-Competition. The Employee acknowledges that the services to be rendered by him to the Company are of a special and unique character. The Employee agrees that, in consideration of his employment hereunder, the Employee will not (a) during the term of this Agreement and thereafter for a period of one (l) year commencing on the date of termination of his employment with the Company (i) engage, directly or indirectly, whether as principal, agent, distributor, representative, consultant, stockholder (other than an investment of not more than 5% of the stock of equity of any corporation the capital stock of which is publicly traded), employee or otherwise, in any activity or business venture which is competitive with the business conducted or proposed to be conducted by the Company as of the date of termination of his employment with the Company or (ii) solicit or entice or endeavor to solicit or entice away from the Company any person who was an officer, employee or consultant of the Company, either on his own account or for any person, firm, corporation or other organization, whether or not such person would commit any breach of his contract of employment by reason of leaving the service of the Company, and the Employee agrees not to employ, directly or indirectly, any person who was an officer or employee of the Company or who by reason of such position at any time is or may be likely to be in possession of any confidential information or trade secrets relating to the businesses or products of the Company, or (b) at any time, take any action or make any statement the effect of which would be, directly or indirectly, to impair the good will of the Company or the business reputation or good name of the Company, or be otherwise detrimental to the interests of the Company, including any action or statement intended, directly or indirectly, to benefit a competitor of the Company. 10. Equitable Relief. In the event of a breach or threatened breach by the Employee of any of the provisions of Sections 7, 8 or 9 of this Agreement, the Employee hereby consents and agrees that the Company shall be entitled to an injunction or similar equitable relief from any court of competent jurisdiction restraining the Employee from committing or continuing any such breach or threatened breach or granting specific performance of any act required to be performed by the Employee under any of such provisions, without the necessity of showing any actual damage or that money damages would not afford an adequate remedy and without the necessity of posting any bond or other security. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity which it may have. 11. Successors and Assigns. 11.1 Assignment by the Company. The Company shall require any successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Section, the "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law and this Agreement shall be binding upon, and inure to the benefit of, the Company, as so defined. 11.2 Assignment by the Employee. The Employee may not assign this Agreement or any part thereof without the prior written consent of a majority of the Board of Directors of the Company; provided, however, that nothing herein shall preclude one or more beneficiaries of the Employee from receiving any amount that may be payable following the occurrence of his legal incompetency or his death and shall not preclude the legal representative of his estate from receiving such amount or from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiaries", as used in this Agreement, shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of the Employee (in the event of his incompetency) or the Employee's estate. 12. Governing Law. This Agreement shall be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of New Jersey applicable to contracts to be performed entirely within such State. 13. Entire Agreement. This Agreement contains all the understandings and representations between the parties hereto pertaining to the subject matter hereof and supersedes all undertakings and agreements, whether oral or in writing, if any there be, previously entered into by them with respect thereto. 14. Amendment, Modification, Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Employee and by a duly authorized representative of the Company other than the Employee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either party hereto in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege. 15. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall, except as provided in Section 10, be settled by binding arbitration in accordance with the rules of the American Arbitration Association then in effect and judgment upon such award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitration shall be held in the area where the Company then has its principal place of business. 16. Attorneys' Fees and Costs. All attorneys' fees, costs and expenses incurred by the prevailing party in connection with any litigation pursuant to Section 10 or any arbitration pursuant to Section 15 shall be borne by the non-prevailing party. 17. Notices. Any notice to be given hereunder shall be in writing and delivered personally or sent by certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or at such other address as such party may subsequently designate by like notice: If to the Company: Guest Supply, Inc. 4301 U.S. Highway One South Post Office Box 902 Monmouth Junction, New Jersey 08852-0902 If to the Employee: Clifford W. Stanley One Hart Court Titusville, New Jersey 08560 18. Severability. Should any provision of this Agreement be held by a court or arbitration panel of competent jurisdiction to be enforceable only if modified, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification to become a part hereof and treated as though originally set forth in this Agreement. The parties further agree that any such court or arbitration panel is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The parties expressly agree that this Agreement as so modified by the court or arbitration panel shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been set forth herein. 19. Withholding. Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Employee or his beneficiaries, including his estate, shall be subject to withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company, may, in its sole discretion, accept other provision for payment of taxes as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 20. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 21. Titles. Titles of the sections of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GUEST SUPPLY, INC. By /s/ R. Eugene Biber Name: R. Eugene Biber Title: Vice President-Operations /s/ Clifford W. Stanley Clifford W. Stanley EX-10.(J) 4 EXHIBIT 10(j) EMPLOYMENT AGREEMENT AMENDED AND RESTATED AGREEMENT dated the 6th day of August, 1997, by and between GUEST SUPPLY, INC., a New Jersey corporation (the "Company"), and TERI E. UNSWORTH (the "Employee"). W I T N E S S E T H : WHEREAS, the parties desire to amend and restate in its entirety the Employment Agreement dated January 11, 1988 between the Company and the Employee; WHEREAS, the Company wishes to retain the services of the Employee, and the Employee wishes to serve in the employ of the Company, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereto hereby agree as follows: 1. Employment. 1.1 The Company agrees to employ the Employee, and the Employee agrees to serve in the employ of the Company, for the term set forth in Section 1.2, in the position and with the responsibilities, duties and authority set forth in Section 2 and on the other terms and conditions set forth in this Agreement. 1.2 The term of the Employee's employment under this Agreement shall commence as of August 1, 1997 and shall terminate on July 31, 2000, unless extended or sooner terminated in accordance with this Agreement. 1.3 As of July 31, 1998 and each subsequent July 31 during the term of this Agreement (each, an "Automatic Renewal Date"), unless either party shall have given a notice of non-extension not less than two (2) months prior to such Automatic Renewal Date, the term of this Agreement shall be extended automatically for a period of one (1) year to the first anniversary of the expiration date of the then-current term of this Agreement. Once a notice of non-extension shall have been given by either party, there shall be no further automatic extension of this Agreement. 2. Position, Duties. The Employee shall serve in the position of Vice President - Marketing of the Company. The Employee shall perform, faithfully and diligently, such duties, and shall have such responsibilities, appropriate to said position, as shall be assigned to her from time to time by the President of the Company. The Employee shall report directly to the President of the Company. The Employee shall devote her complete and undivided attention to the performance of her duties and responsibilities hereunder during the normal working hours of executive employees of the Company. The Employee will work from her residence in Los Angeles, California, and travel to the Company's corporate office and clients as required to effectively execute her duties and responsibilities. 3. Salary. During the term of this Agreement, in consideration of the performance by the Employee of the services set forth in Section 2 and her observance of the other covenants set forth herein, the Company shall pay the Employee, and the Employee shall accept, a base salary at the rate of $168,729 per annum, payable in accordance with the standard payroll practices of the Company. The Employee shall be entitled to such increases in base salary during the term hereof as shall be determined by the Board of Directors of the Company in its sole discretion based on the performance of the Company, the performance of the Employee and increases in the cost of living. 4. Expense Reimbursement and Perquisites. During the term of this Agreement, (a) the Company shall reimburse the Employee for all reasonable and necessary out-of-pocket expenses incurred by her in connection with the performance of her duties hereunder, upon the presentation of proper accounts therefor in accordance with the Company's policies and (b) the Employee shall be entitled to such perquisites as may be made available from time to time to senior executive employees of the Company. 5. Benefits. During the term of this Agreement, the Employee will be eligible to participate in all employee benefit plans and programs offered by the Company from time to time to its employees of comparable seniority, including but not limited to group hospitalization, surgical and major medical insurance plans, subject to the provisions of such plans and programs as in effect from time to time. 6. Termination of Employment. 6.1 Death. In the event of the death of the Employee during the term of this Agreement, the Company shall continue to pay to the estate or other legal representative of the Employee the base salary provided for in Section 3 (at the annual rate then in effect) until the expiration of a period of three (3) months from the date of the Employee's death. Rights and benefits of the estate or other legal representative of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the estate or other legal representative of the Employee nor the Company shall have any further rights or obligations under this Agreement. 6.2 Disability. If the Employee shall become incapacitated by reason of sickness, accident or other physical or mental disability and shall be unable to perform her normal duties hereunder for a cumulative period of two (2) months in any period of four (4) consecutive months, the employment of the Employee hereunder may be terminated by the Company or the Employee. In the event of such termination, the Company shall continue to pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) until the first to occur of (i) the expiration of a period of six (6) months from the date of such termination, (ii) the commencement of payment of benefits to the Employee under any disability plan or policy maintained by the Company or (iii) the expiration of a period of three (3) months from the date of death of the Employee. The Company shall continue to carry the group life, hospitalization, surgical and major medical insurance coverage for the Employee for a one (1) year period following termination of employment. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.3 Due Cause. The employment of the Employee hereunder may be terminated by the Company at any time for Due Cause (as hereinafter defined). In the event of such termination, the Company shall pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) accrued to the date of such termination and not theretofore paid to the Employee. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. For purposes hereof, "Due Cause" shall mean (i) willful, gross neglect or willful, gross misconduct in the Employee's discharge of her duties and responsibilities under this Agreement, or (ii) the Employee's commission of (x) a felony or (y) any crime or offense involving moral turpitude; provided, however, the Employee shall be given written notice by a majority of the Board of Directors of the Company that it intends to terminate the Employee's employment for Due Cause, which written notice shall specify the act or acts upon the basis of which the majority of the Board of Directors of the Company intends so to terminate the Employee's employment, and the Employee shall then be given the opportunity, within fifteen (15) days of her receipt of such notice, to have a meeting with the Board of Directors of the Company to discuss such act or acts. If the basis of such written notice is other than an act described in clause (ii), the Employee shall be given seven (7) days after such meeting within which to cease or correct the performance (or nonperformance) giving rise to such written notice and, upon failure of the Employee within such seven (7) days to cease or correct such performance (or nonperformance), the Employee's employment by the Company shall automatically be terminated hereunder for Due Cause. After the satisfaction of any claim of the Company against the Employee incidental to such Due Cause, neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.4 Other Termination by the Company. The Company may terminate the Employee's employment at any time for whatever reason it deems appropriate; provided, however, that in the event that such termination is not pursuant to Sections 6.1, 6.2 or 6.3: (A) The Company shall pay to the Employee, within thirty (30) days of the date of such termination, a lump sum amount in cash equal to (a) if such termination shall take place prior to a Change in Control (as hereinafter defined), the lesser of (i) the product of one (1) month's base salary (at the highest monthly rate in effect during the six (6) month period immediately preceding such termination) multiplied by a fraction, the numerator of which shall be the Employee's annual base salary at a rate equal to the highest annual rate in effect, pursuant to Section 3, during the six (6) month period immediately preceding such termination, and the denominator of which shall be 10,000, or (ii) three (3) times the Employee's average annualized cash compensation (base salary and bonus) during the most recent five (5) taxable years of the Company ending before the date of such termination (or during such portion of such period as the Employee was employed by, or rendered services for, the Company), less $1,000, or (b) if such termination shall take place subsequent to a Change in Control, the lesser of (i) the product of two (2) months' base salary (at the highest monthly rate in effect during the six (6) month period immediately preceding such termination) multiplied by a fraction, the numerator of which shall be the Employee's annual base salary at a rate equal to the highest annual rate in effect, pursuant to Section 3, during the six (6) month period immediately preceding such termination, and the denominator of which shall be 10,000, or (ii) three (3) times the Employee's average annualized cash compensation (base salary and bonus) during the most recent five (5) taxable years of the Company ending before the date of such termination (or during such portion of such period as the Employee was employed by, or rendered services for, the Company), less $1,000. The Employee shall be under no obligation to seek subsequent employment and upon obtaining subsequent employment shall be under no obligation to offset any amounts earned from such subsequent employment (whether as an employee, a consultant or otherwise) against such lump sum payment. (B) The Company shall continue to carry the group life, hospitalization, surgical and major medical insurance coverage for the Employee for a two (2) year period following termination of employment. (C) Other rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. (D) For a period of five years following termination of the employment of the Employee under Section 6.4 (the "Consulting Period"), the Company shall retain the Employee to provide such consulting services, on such projects, at such compensation and at such times as are mutually agreed to from time to time by the Employee and the Company. During the Consulting Period, the Employee shall be deemed an employee of the Company for purposes of the stock option plans and incentive plans of the Company (the "Plans"). Any options to purchase common stock, no par value (the "Common Stock"), of the Company (the "Options") heretofore or hereafter granted to the Employee pursuant to the Plans shall become fully exercisable and shall remain exercisable upon the termination of employment of the Employee until the first to occur of (a) the expiration of the term of such Options or (b) the expiration of the Consulting Period. In the event the Company terminates the Employee's services as a consultant hereunder prior to the expiration of the Consulting Period, the Employee shall be entitled to receive payment from the Company of liquidated damages in an amount equal to the aggregate Adjusted Option Spread (as hereinafter defined), it being agreed that the Employee's damages might be impossible to ascertain and that such amount constitutes a fair and reasonable amount of damages under the circumstances and is not a penalty. Any damages payable to the Employee hereunder shall be paid by the Company to the Employee within fifteen (15) days following the original expiration date of the Consulting Period. For purposes hereof, the Adjusted Option Spread with respect to each Option held by the Employee on the date of termination of the Employee's services as a consultant hereunder shall be equal to the product of (a) the number of shares of Common Stock which are subject to such Option multiplied by (b) the excess of (i) the highest Market Price (as hereinafter defined) of the Common Stock during the period commencing on the date on which such Option ceases to be exercisable as a result of the termination of the Employee's services as a consultant hereunder and terminating on the original expiration date of the Consulting Period over (ii) the greater of (x) the option exercise price per share of Common Stock under such Option or (y) the highest Market Price of the Common Stock during the period commencing on the date of termination of the Employee's services as a consultant hereunder and terminating on the date on which such Option ceases to be exercisable as a result of such termination. For purposes hereof, Market Price on any date shall mean the closing price per share of Common Stock on the New York Stock Exchange (or such other national securities exchange on which the Common Stock may be listed, if not listed on the New York Stock Exchange, or in the over-the-counter market, if not listed on a national securities exchange). Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.5 Voluntary Termination. The Employee may terminate her employment with the Company at any time upon 30 days' prior written notice to the Company. In the event of such termination, the Company shall pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) accrued to the date of such termination and not theretofore paid to the Employee. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.6 Constructive Termination Subsequent to a Change in Control. Anything herein to the contrary notwithstanding, if, subsequent to a Change in Control, the Company: (A) demotes the Employee to a lesser position than provided in Section 2; (B) causes a material change in the nature or scope of the authorities, powers, functions, duties, or responsibilities attached to the Employee's position as described in Section 2; (C) decreases the Employee's salary below the level provided for in Section 3 (taking into account increases made from time to time in accordance with Section 3); (D) fails to agree in writing (within ten (10) days of such Change in Control) to employ the Employee for a period of not less than one year commencing with such Change in Control on the terms and conditions set forth in this Agreement; or (E) fails to obtain the agreement of a successor company to assume the obligation of the Company under this Agreement as required by Section 11.1; then such action (or inaction) by the Company, unless consented to in writing by the Employee, shall constitute a termination of the Employee's employment by the Company pursuant to Section 6.4 (subsequent to a change in control for purposes of Section 6.4(A)). Notwithstanding the preceding sentence, within thirty (30) days after learning of the action (or inaction) constituting the basis for a Constructive Termination of Employment, the Employee shall (unless she gives written consent thereto) advise the Company in writing, that the action (or inaction) constitutes a termination of her employment pursuant to Section 6.4. In such event, the Company shall have thirty (30) days in which to correct such action (or inaction) and if the Company does so correct such action (or inaction) the Employee shall not be entitled to terminate her employment under this Section as a result of such action (or inaction) (the notice provided by the Employee to the Company of the action or inaction and the Company's correction of the action or inaction, being hereinafter referred to as the "Correction Process"); provided, however, that if the Employee and the Company engage in the Correction Process three (3) times subsequent to a Change in Control, the Employee shall not thereafter be required to engage in the Correction Process and shall be entitled to treat any such subsequent action or inaction by the Company as a termination of the Employee's employment pursuant to Section 6.4 (subsequent to a change in control for purposes of Section 6.4(A)). 6.7 Termination of Employment Following a Change in Control. The Employee may terminate her employment with the Company during the one (1) year period following a Change in Control, and such termination of employment shall be deemed to constitute a termination of the Employee's employment by the Company pursuant to Section 6.4 (subsequent to a change in control for purposes of Section 6.4(A)). For purposes of this Agreement, a Change in Control shall be deemed to have occurred if: (A) a "person" (meaning an individual, a partnership, or other group or association as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, other than the Employee or a group including the Employee) acquires twenty percent (20%) or more of the combined voting power of the outstanding securities of the Company having a right to vote in elections of directors and such acquisition shall not have been approved by a majority of the Continuing Directors (as hereinafter defined) then in office not later than sixty (60) days after completion of such acquisition; or (B) Continuing Directors shall for any reason cease to constitute a majority of the Board of Directors of the Company; or (C) the business of the Company is disposed of by the Company to a party or parties other than a subsidiary or other affiliate of the Company, in which the Company owns less than a majority of the equity, pursuant to a partial or complete liquidation of the Company, sale of assets (including stock of a subsidiary of the Company) or otherwise, and such disposition shall not have been approved in advance by a majority of the Continuing Directors then in office. For purposes of this Agreement, the term "Continuing Director" shall mean a member of the Board of Directors of the Company who either was a member of the Board of Directors on the date hereof or who subsequently became a Director and whose election, or nomination for election, was approved by a vote of at least two-thirds of the Continuing Directors then in office. 7. Confidential Information. 7.1 The Employee shall, during the Employee's employment with the Company and thereafter, treat all confidential material confidentially and, except in accordance with the terms of this Agreement, shall not, without the prior written consent of a majority of the Board of Directors of the Company, disclose such material, directly or indirectly, to any party not at the time of such disclosure an employee or agent of the Company, or remove from the Company's premises any notes or records relating thereto, copies or facsimiles thereof (whether made by electronic, electrical, magnetic, optical, laser, acoustic or other means), or any other property of the Company. The Employee agrees that all confidential material, together with all notes and records of the Employee relating thereto, and all copies or facsimiles thereof in the possession of the Employee (whether made by the foregoing or other means) are the exclusive property of the Company. The Employee shall not in any manner use any confidential material, or any other property of the Company, in any manner not specifically directed by the Company or in any way which is detrimental to the Company, as determined by a majority of the Board of Directors of the Company in its sole discretion. 7.2 For the purposes hereof, the term "confidential material" shall mean all information in any way concerning the activities, business or affairs of the Company or the Company's customers and clients, including, without limitation, information concerning trade secrets and the preparation of raw material for, manufacture of, and/or finishing processes utilized in the production of, the products or projects of the Company and/or any improvements therein, together with all sales and financial information concerning the Company and any and all information concerning projects in research and development or marketing plans for any such products or projects, and all information concerning the practices, customers and clients of the Company, and all information in any way concerning the activities, business or affairs of any of such customers or clients, as such, which is furnished to the Employee by the Company or any of its agents, customers or clients, as such, otherwise acquired by the Employee in the course of the Employees employment with the Company; provided, however, that the term "confidential material" shall not include information which (i) becomes generally available to the public other than as a result of a disclosure by the Employee, (ii) was available to the Employee on a non-confidential basis prior to her employment with the Company or (iii) becomes available to the Employee on a non-confidential basis from a source other than the Company or any of its agents, customers or clients, as such, provided that such source is not bound by a confidentiality agreement with the Company or any of such agents, customers or clients. 7.3 Promptly upon the request of the Company, the Employee shall deliver to the Company all confidential material in the possession of the Employee without retaining a copy thereof, unless, in the opinion of counsel for the Company, either returning such confidential material or failing to retain a copy thereof would violate any applicable Federal, state, local or foreign law, in which event such confidential material shall be returned without retaining any copies thereof as soon as practicable after such counsel advises that the same may be lawfully done. 7.4 In the event that the Employee is required, by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process, to disclose any confidential material, the Employee shall provide the Company with prompt notice thereof so that the Company may seek an appropriate protective order and/or waive compliance by the Employee with the provisions hereof; provided, however, that if in the absence of a protective order or the receipt of such a waiver, the Employee is, in the opinion of counsel for the Company, compelled to disclose confidential material not otherwise disclosable hereunder to any legislative, judicial or regulatory body, agency or authority, or else be exposed to liability for contempt, fine or penalty or to other censure, such confidential material may be so disclosed. 8. Intellectual Property. Any and all inventions made, developed or created by the Employee (whether at the request or suggestion of the Company or otherwise, whether alone or in conjunction with others, and whether during regular hours of work or otherwise) (a) during the period of this Agreement, or (b) within a period of one (1) year after the date of termination of employment hereunder, which may be directly or indirectly useful in, or relate to, the business of or tests being carried out by the Company, shall be promptly and fully disclosed by the Employee to the Board of Directors of the Company and shall be the Company's exclusive property as against the Employee, and the Employee shall promptly deliver to an appropriate representative of the Company as designated by the Board of Directors all papers, drawings, models, data and other material relating to any invention made, developed or created by her as aforesaid. The Employee shall, at the request of the Company and without any payment therefor, execute any documents necessary or advisable in the opinion of the Company's counsel to direct issuance of patents or copyrights to the Company with respect to such inventions as are to be the Company's exclusive property as against the Employee or to vest in the Company title to such inventions as against the Employee. The expense of securing any such patent or copyright shall be borne by the Company. 9. Non-Competition. The Employee acknowledges that the services to be rendered by her to the Company are of a special and unique character. The Employee agrees that, in consideration of her employment hereunder, the Employee will not (a) during the term of this Agreement and thereafter for a period of one (1) year commencing on the date of termination of her employment with the Company (i) engage, directly or indirectly, whether as principal, agent, distributor, representative, consultant, stockholder (other than an investment of not more than 5% of the stock of equity of any corporation the capital stock of which is publicly traded), employee or otherwise, in any activity or business venture which is competitive with the business conducted or proposed to be conducted by the Company as of the date of termination of her employment with the Company or (ii) solicit or entice or endeavor to solicit or entice away from the Company any person who was an officer, employee or consultant of the Company, either on her own account or for any person, firm, corporation or other organization, whether or not such person would commit any breach of her contract of employment by reason of leaving the service of the Company, and the Employee agrees not to employ, directly or indirectly, any person who was an officer or employee of the Company or who by reason of such position at any time is or may be likely to be in possession of any confidential information or trade secrets relating to the businesses or products of the Company, or (b) at any time, take any action or make any statement the effect of which would be, directly or indirectly, to impair the good will of the Company or the business reputation or good name of the Company, or be otherwise detrimental to the interests of the Company, including any action or statement intended, directly or indirectly, to benefit a competitor of the Company. 10. Equitable Relief. In the event of a breach or threatened breach by the Employee of any of the provisions of Sections 7, 8 or 9 of this Agreement, the Employee hereby consents and agrees that the Company shall be entitled to an injunction or similar equitable relief from any court of competent jurisdiction restraining the Employee from committing or continuing any such breach or threatened breach or granting specific performance of any act required to be performed by the Employee under any of such provisions, without the necessity of showing any actual damage or that money damages would not afford an adequate remedy and without the necessity of posting any bond or other security. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity which it may have. 11. Successors and Assigns. 11.1 Assignment by the Company. The Company shall require any successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Section, the "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law and this Agreement shall be binding upon, and inure to the benefit of, the Company, as so defined. 11.2 Assignment by the Employee. The Employee may not assign this Agreement or any part thereof without the prior written consent of a majority of the Board of Directors of the Company; provided, however, that nothing herein shall preclude one or more beneficiaries of the Employee from receiving any amount that may be payable following the occurrence of her legal incompetency or her death and shall not preclude the legal representative of her estate from receiving such amount or from assigning any right hereunder to the person or persons entitled thereto under her will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to her estate. The term "beneficiaries", as used in this Agreement, shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of the Employee (in the event of her incompetency) or the Employee's estate. 12. Governing Law. This Agreement shall be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of New Jersey applicable to contracts to be performed entirely within such State. 13. Entire Agreement. This Agreement contains all the understandings and representations between the parties hereto pertaining to the subject matter hereof and supersedes all undertakings and agreements, whether oral or in writing, if any there be, previously entered into by them with respect thereto. 14. Amendment, Modification, Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Employee and by a duly authorized representative of the Company other than the Employee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either party hereto in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege. 15. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall, except as provided in Section 10, be settled by binding arbitration in accordance with the rules of the American Arbitration Association then in effect and judgment upon such award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitration shall be held in the area where the Company then has its principal place of business. 16. Attorneys' Fees and Costs. All attorneys' fees, costs and expenses incurred by the prevailing party in connection with any litigation pursuant to Section 10 or any arbitration pursuant to Section 15 shall be borne by the non-prevailing party. 17. Notices. Any notice to be given hereunder shall be in writing and delivered personally or sent by certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or at such other address as such party may subsequently designate by like notice: If to the Company: Guest Supply, Inc. 4301 U.S. Highway One South Post Office Box 902 Monmouth Junction, New Jersey 08852-0902 If to the Employee: Teri E. Unsworth 1960 Deermont Road Glendale, California 91207 18. Severability. Should any provision of this Agreement be held by a court or arbitration panel of competent jurisdiction to be enforceable only if modified, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification to become a part hereof and treated as though originally set forth in this Agreement. The parties further agree that any such court or arbitration panel is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The parties expressly agree that this Agreement as so modified by the court or arbitration panel shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been set forth herein. 19. Withholding. Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Employee or her beneficiaries, including her estate, shall be subject to withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company, may, in its sole discretion, accept other provision for payment of taxes as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 20. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 21. Titles. Titles of the sections of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GUEST SUPPLY, INC. By /s/ Clifford W. Stanley Name: Clifford W. Stanley Title: President /s/ Teri E. Unsworth Teri E. Unsworth EX-10.(K) 5 EXHIBIT 10(k) EMPLOYMENT AGREEMENT AMENDED AND RESTATED AGREEMENT dated the 6th day of August, 1997, by and between GUEST SUPPLY, INC., a New Jersey corporation (the "Company"), and PAUL T. XENIS (the "Employee"). W I T N E S S E T H: WHEREAS, the parties desire to amend and restate in its entirety the Employment Agreement dated July 29, 1988, as amended on May 18, 1994, between the Company and the Employee; WHEREAS, the Company wishes to retain the services of the Employee, and the Employee wishes to serve in the employ of the Company, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereto hereby agree as follows: 1. Employment. 1.1 The Company agrees to employ the Employee, and the Employee agrees to serve in the employ of the Company, for the term set forth in Section 1.2, in the position and with the responsibilities, duties and authority set forth in Section 2 and on the other terms and conditions set forth in this Agreement. 1.2 The term of the Employee's employment under this Agreement shall commence as of August 1, 1997 and shall terminate on July 31, 2000, unless extended or sooner terminated in accordance with this Agreement. 1.3 As of July 31, 1998 and each subsequent July 31 during the term of this Agreement (each, an "Automatic Renewal Date"), unless either party shall have given a notice of non-extension not less than two (2) months prior to such Automatic Renewal Date, the term of this Agreement shall be extended automatically for a period of one (1) year to the first anniversary of the expiration date of the then-current term of this Agreement. Once a notice of non-extension shall have been given by either party, there shall be no further automatic extension of this Agreement. 2. Position, Duties. The Employee shall serve in the position of Vice President - Finance of the Company. The Employee shall perform, faithfully and diligently, such duties, and shall have such responsibilities, appropriate to said positions, as shall be assigned to him from time to time by the President of the Company. The Employee shall report directly to the President of the Company. The Employee shall devote his complete and undivided attention to the performance of his duties and responsibilities hereunder during the normal working hours of executive employees of the Company. 3. Salary. During the term of this Agreement, in consideration of the performance by the Employee of the services set forth in Section 2 and his observance of the other covenants set forth herein, the Company shall pay the Employee, and the Employee shall accept, a base salary at the rate of $137,903 per annum, payable in accordance with the standard payroll practices of the Company. The Employee shall be entitled to such increases in base salary during the term hereof as shall be determined by the Board of Directors of the Company in its sole discretion based on the performance of the Company, the performance of the Employee and increases in the cost of living. 4. Expense Reimbursement and Perquisites. During the term of this Agreement, (a) the Company shall reimburse the Employee for all reasonable and necessary out-of-pocket expenses incurred by him in connection with the performance of his duties hereunder, upon the presentation of proper accounts therefor in accordance with the Company's policies and (b) the Employee shall be entitled to such perquisites as may be made available from time to time to senior executive employees of the Company. 5. Benefits. During the term of this Agreement, the Employee will be eligible to participate in all employee benefit plans and programs offered by the Company from time to time to its employees of comparable seniority, including but not limited to group hospitalization, surgical and major medical insurance plans, subject to the provisions of such plans and programs as in effect from time to time. 6. Termination of Employment. 6.1 Death. In the event of the death of the Employee during the term of this Agreement, the Company shall continue to pay to the estate or other legal representative of the Employee the base salary provided for in Section 3 (at the annual rate then in effect) until the expiration of a period of three (3) months from the date of the Employee's death. Rights and benefits of the estate or other legal representative of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the estate or other legal representative of the Employee nor the Company shall have any further rights or obligations under this Agreement. 6.2 Disability. If the Employee shall become incapacitated by reason of sickness, accident or other physical or mental disability and shall be unable to perform his normal duties hereunder for a cumulative period of two (2) months in any period of four (4) consecutive months, the employment of the Employee hereunder may be terminated by the Company or the Employee. In the event of such termination, the Company shall continue to pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) until the first to occur of (i) the expiration of a period of six (6) months from the date of such termination, (ii) the commencement of payment of benefits to the Employee under any disability plan or policy maintained by the Company or (iii) the expiration of a period of three (3) months from the date of death of the Employee. The Company shall continue to carry the group life, hospitalization, surgical and major medical insurance coverage for the Employee for a one (1) year period following termination of employment. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.3 Due Cause. The employment of the Employee hereunder may be terminated by the Company at any time for Due Cause (as hereinafter defined). In the event of such termination, the Company shall pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) accrued to the date of such termination and not theretofore paid to the Employee. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. For purposes hereof, "Due Cause" shall mean (i) willful, gross neglect or willful, gross misconduct in the Employee's discharge of his duties and responsibilities under this Agreement, or (ii) the Employee's commission of (x) a felony or (y) any crime or offense involving moral turpitude; provided, however, the Employee shall be given written notice by a majority of the Board of Directors of the Company that it intends to terminate the Employee's employment for Due Cause, which written notice shall specify the act or acts upon the basis of which the majority of the Board of Directors of the Company intends so to terminate the Employee's employment, and the Employee shall then be given the opportunity, within fifteen (15) days of his receipt of such notice, to have a meeting with the Board of Directors of the Company to discuss such act or acts. If the basis of such written notice is other than an act described in clause (ii), the Employee shall be given seven (7) days after such meeting within which to cease or correct the performance (or nonperformance) giving rise to such written notice and, upon failure of the Employee within such seven (7) days to cease or correct such performance (or nonperformance), the Employee's employment by the Company shall automatically be terminated hereunder for Due Cause. After the satisfaction of any claim of the Company against the Employee incidental to such Due Cause, neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.4 Other Termination by the Company. The Company may terminate the Employee's employment at any time for whatever reason it deems appropriate; provided, however, that in the event that such termination is not pursuant to Sections 6.1, 6.2 or 6.3: (A) The Company shall pay to the Employee, within thirty (30) days of the date of such termination, a lump sum amount in cash equal to (a) if such termination shall take place prior to a Change in Control (as hereinafter defined), the lesser of (i) the product of one (1) month's base salary (at the highest monthly rate in effect during the six (6) month period immediately preceding such termination) multiplied by a fraction, the numerator of which shall be the Employee's annual base salary at a rate equal to the highest annual rate in effect, pursuant to Section 3, during the six (6) month period immediately preceding such termination, and the denominator of which shall be 10,000, or (ii) three (3) times the Employee's average annualized cash compensation (base salary and bonus) during the most recent five (5) taxable years of the Company ending before the date of such termination (or during such portion of such period as the Employee was employed by, or rendered services for, the Company), less $1,000, or (b) if such termination shall take place subsequent to a Change in Control, the lesser of (i) the product of two (2) months' base salary (at the highest monthly rate in effect during the six (6) month period immediately preceding such termination) multiplied by a fraction, the numerator of which shall be the Employee's annual base salary at a rate equal to the highest annual rate in effect, pursuant to Section 3, during the six (6) month period immediately preceding such termination, and the denominator of which shall be 10,000, or (ii) three (3) times the Employee's average annualized cash compensation (base salary and bonus) during the most recent five (5) taxable years of the Company ending before the date of such termination (or during such portion of such period as the Employee was employed by, or rendered services for, the Company), less $1,000. The Employee shall be under no obligation to seek subsequent employment and upon obtaining subsequent employment shall be under no obligation to offset any amounts earned from such subsequent employment (whether as an employee, a consultant or otherwise) against such lump sum payment. (B) The Company shall continue to carry the group life, hospitalization, surgical and major medical insurance coverage for the Employee for a two (2) year period following termination of employment. (C) Other rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. (D) For a period of five years following termination of the employment of the Employee under Section 6.4 (the "Consulting Period"), the Company shall retain the Employee to provide such consulting services, on such projects, at such compensation and at such times as are mutually agreed to from time to time by the Employee and the Company. During the Consulting Period, the Employee shall be deemed an employee of the Company for purposes of the stock option plans and incentive plans of the Company (the "Plans"). Any options to purchase common stock, no par value (the "Common Stock"), of the Company (the "Options") heretofore or hereafter granted to the Employee pursuant to the Plans shall become fully exercisable and shall remain exercisable upon the termination of employment of the Employee until the first to occur of (a) the expiration of the term of such Options or (b) the expiration of the Consulting Period. In the event the Company terminates the Employee's services as a consultant hereunder prior to the expiration of the Consulting Period, the Employee shall be entitled to receive payment from the Company of liquidated damages in an amount equal to the aggregate Adjusted Option Spread (as hereinafter defined), it being agreed that the Employee's damages might be impossible to ascertain and that such amount constitutes a fair and reasonable amount of damages under the circumstances and is not a penalty. Any damages payable to the Employee hereunder shall be paid by the Company to the Employee within fifteen (15) days following the original expiration date of the Consulting Period. For purposes hereof, the Adjusted Option Spread with respect to each Option held by the Employee on the date of termination of the Employee's services as a consultant hereunder shall be equal to the product of (a) the number of shares of Common Stock which are subject to such Option multiplied by (b) the excess of (i) the highest Market Price (as hereinafter defined) of the Common Stock during the period commencing on the date on which such Option ceases to be exercisable as a result of the termination of the Employee's services as a consultant hereunder and terminating on the original expiration date of the Consulting Period over (ii) the greater of (x) the option exercise price per share of Common Stock under such Option or (y) the highest Market Price of the Common Stock during the period commencing on the date of termination of the Employee's services as a consultant hereunder and terminating on the date on which such Option ceases to be exercisable as a result of such termination. For purposes hereof, Market Price on any date shall mean the closing price per share of Common Stock on the New York Stock Exchange (or such other national securities exchange on which the Common Stock may be listed, if not listed on the New York Stock Exchange, or in the over-the-counter market, if not listed on a national securities exchange). Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.5 Voluntary Termination. The Employee may terminate his employment with the Company at any time upon 30 days' prior written notice to the Company. In the event of such termination, the Company shall pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) accrued to the date of such termination and not theretofore paid to the Employee. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.6 Constructive Termination Subsequent to a Change in Control. Anything herein to the contrary notwithstanding, if, subsequent to a Change in Control, the Company: (A) demotes the Employee to a lesser position than provided in Section 2; (B) causes a material change in the nature or scope of the authorities, powers, functions, duties, or responsibilities attached to the Employee's position as described in Section 2; (C) decreases the Employee's salary below the level provided for in Section 3 (taking into account increases made from time to time in accordance with Section 3); (D) fails to agree in writing (within ten (10) days of such Change in Control) to employ the Employee for a period of not less than one year commencing with such Change in Control on the terms and conditions set forth in this Agreement; or (E) fails to obtain the agreement of a successor company to assume the obligation of the Company under this Agreement as required by Section 11.1; then such action (or inaction) by the Company, unless consented to in writing by the Employee, shall constitute a termination of the Employee's employment by the Company pursuant to Section 6.4 (subsequent to a change in control for purposes of Section 6.4(A)). Notwithstanding the preceding sentence, within thirty (30) days after learning of the action (or inaction) constituting the basis for a Constructive Termination of Employment, the Employee shall (unless he gives written consent thereto) advise the Company in writing, that the action (or inaction) constitutes a termination of his employment pursuant to Section 6.4. In such event the Company shall have thirty (30) days in which to correct such action (or inaction) and if the Company does so correct such action (or inaction) the Employee shall not be entitled to terminate his employment under this Section as a result of such action (or inaction) (the notice provided by the Employee to the Company of the action or inaction and the Company's correction of the action or inaction, being hereinafter referred to as the "Correction Process"); provided, however, that if the Employee and the Company engage in the Correction Process three (3) times subsequent to a Change in Control, the Employee shall not thereafter be required to engage in the Correction Process and shall be entitled to treat any such subsequent action or inaction by the Company as a termination of the Employee's employment pursuant to Section 6.4 (subsequent to a change in control for purposes of Section 6.4(A)). 6.7 Termination of Employment Following a Change in Control. The Employee may terminate his employment with the Company during the one (1) year period following a Change in Control, and such termination of employment shall be deemed to constitute a termination of the Employee's employment by the Company pursuant to Section 6.4 (subsequent to a change in control for purposes of Section 6.4(A)). For purposes of this Agreement, a Change in Control shall be deemed to have occurred if: (A) a "person" (meaning an individual, a partnership, or other group or association as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, other than the Employee or a group including the Employee) acquires twenty percent (20%) or more of the combined voting power of the outstanding securities of the Company having a right to vote in elections of directors and such acquisition shall not have been approved by a majority of the Continuing Directors (as hereinafter defined) then in office not later than sixty (60) days after completion of such acquisition; or (B) Continuing Directors shall for any reason cease to constitute a majority of the Board of Directors of the Company; or (C) the business of the Company is disposed of by the Company to a party or parties other than a subsidiary or other affiliate of the Company, in which the Company owns less than a majority of the equity, pursuant to a partial or complete liquidation of the Company, sale of assets (including stock of a subsidiary of the Company) or otherwise, and such disposition shall not have been approved in advance by a majority of the Continuing Directors then in office. For purposes of this Agreement, the term "Continuing Director" shall mean a member of the Board of Directors of the Company who either was a member of the Board of Directors on the date hereof or who subsequently became a Director and whose election, or nomination for election, was approved by a vote of at least two-thirds of the Continuing Directors then in office. 7. Confidential Information. 7.1 The Employee shall, during the Employee's employment with the Company and thereafter, treat all confidential material confidentially and, except in accordance with the terms of this Agreement, shall not, without the prior written consent of a majority of the Board of Directors of the Company, disclose such material, directly or indirectly, to any party not at the time of such disclosure an employee or agent of the Company, or remove from the Company's premises any notes or records relating thereto, copies or facsimiles thereof (whether made by electronic, electrical, magnetic, optical, laser, acoustic or other means), or any other property of the Company. The Employee agrees that all confidential material, together with all notes and records of the Employee relating thereto, and all copies or facsimiles thereof in the possession of the Employee (whether made by the foregoing or other means) are the exclusive property of the Company. The Employee shall not in any manner use any confidential material, or any other property of the Company, in any manner not specifically directed by the Company or in any way which is detrimental to the Company, as determined by a majority of the Board of Directors of the Company in its sole discretion. 7.2 For the purposes hereof, the term "confidential material" shall mean all information in any way concerning the activities, business or affairs of the Company or the Company's customers and clients, including, without limitation, information concerning trade secrets and the preparation of raw material for, manufacture of, and/or finishing processes utilized in the production of, the products or projects of the Company and/or any improvements therein, together with all sales and financial information concerning the Company and any and all information concerning projects in research and development or marketing plans for any such products or projects, and all information concerning the practices, customers and clients of the Company, and all information in any way concerning the activities, business or affairs of any of such customers or clients, as such, which is furnished to the Employee by the Company or any of its agents, customers or clients, as such, or otherwise acquired by the Employee in the course of the Employee's employment with the Company; provided, however, that the term "confidential material" shall not include information which (i) becomes generally available to the public other than as a result of a disclosure by the Employee, (ii) was available to the Employee on a non-confidential basis prior to his employment with the Company or (iii) becomes available to the Employee on a non-confidential basis from a source other than the Company or any of its agents, customers or clients, as such, provided that such source is not bound by a confidentiality agreement with the Company or any of such agents, customers or clients. 7.3 Promptly upon the request of the Company, the Employee shall deliver to the Company all confidential material in the possession of the Employee without retaining a copy thereof, unless, in the opinion of counsel for the Company, either returning such confidential material or failing to retain a copy thereof would violate any applicable Federal, state, local or foreign law, in which event such confidential material shall be returned without retaining any copies thereof as soon as practicable after such counsel advises that the same may be lawfully done. 7.4 In the event that the Employee is required, by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process, to disclose any confidential material, the Employee shall provide the Company with prompt notice thereof so that the Company may seek an appropriate protective order and/or waive compliance by the Employee with the provisions hereof; provided, however, that if in the absence of a protective order or the receipt of such a waiver, the Employee is, in the opinion of counsel for the Company, compelled to disclose confidential material not otherwise disclosable hereunder to any legislative, judicial or regulatory body, agency or authority, or else be exposed to liability for contempt, fine or penalty or to other censure, such confidential material may be so disclosed. 8. Intellectual Property. Any and all inventions made, developed or created by the Employee (whether at the request or suggestion of the Company or otherwise, whether alone or in conjunction with others, and whether during regular hours of work or otherwise) (a) during the period of this Agreement, or (b) within a period of one (1) year after the date of termination of employment hereunder, which may be directly or indirectly useful in, or relate to, the business of or tests being carried out by the Company, shall be promptly and fully disclosed by the Employee to the Board of Directors of the Company and shall be the Company's exclusive property as against the Employee, and the Employee shall promptly deliver to an appropriate representative of the Company as designated by the Board of Directors all papers, drawings, models, data and other material relating to any invention made, developed or created by him as aforesaid. The Employee shall, at the request of the Company and without any payment therefor, execute any documents necessary or advisable in the opinion of the Company's counsel to direct issuance of patents or copyrights to the Company with respect to such inventions as are to be the Company's exclusive property as against the Employee or to vest in the Company title to such inventions as against the Employee. The expense of securing any such patent or copyright shall be borne by the Company. 9. Non-Competition. The Employee acknowledges that the services to be rendered by him to the Company are of a special and unique character. The Employee agrees that, in consideration of his employment hereunder, the Employee will not (a) during the term of this Agreement and thereafter for a period of one (1) year commencing on the date of termination of his employment with the Company (i) engage, directly or indirectly, whether as principal, agent, distributor, representative, consultant, stockholder (other than an investment of not more than 5% of the stock of equity of any corporation the capital stock of which is publicly traded), employee or otherwise, in any activity or business venture which is competitive with the business conducted or proposed to be conducted by the Company as of the date of termination of his employment with the Company or (ii) solicit or entice or endeavor to solicit or entice away from the Company any person who was an officer, employee or consultant of the Company, either on his own account or for any person, firm, corporation or other organization, whether or not such person would commit any breach of his contract of employment by reason of leaving the service of the Company, and the Employee agrees not to employ, directly or indirectly, any person who was an officer or employee of the Company or who by reason of such position at any time is or may be likely to be in possession of any confidential information or trade secrets relating to the businesses or products of the Company, or (b) at any time, take any action or make any statement the effect of which would be, directly or indirectly, to impair the good will of the Company or the business reputation or good name of the Company, or be otherwise detrimental to the interests of the Company, including any action or statement intended, directly or indirectly, to benefit a competitor of the Company. 10. Equitable Relief. In the event of a breach or threatened breach by the Employee of any of the provisions of Sections 7, 8 or 9 of this Agreement, the Employee hereby consents and agrees that the Company shall be entitled to an injunction or similar equitable relief from any court of competent jurisdiction restraining the Employee from committing or continuing any such breach or threatened breach or granting specific performance of any act required to be performed by the Employee under any of such provisions, without the necessity of showing any actual damage or that money damages would not afford an adequate remedy and without the necessity of posting any bond or other security. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity which it may have. 11. Successors and Assigns. 11.1 Assignment by the Company. The Company shall require any successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Section, the "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law and this Agreement shall be binding upon, and inure to the benefit of, the Company, as so defined. 11.2 Assignment by the Employee. The Employee may not assign this Agreement or any part thereof without the prior written consent of a majority of the Board of Directors of the Company; provided, however, that nothing herein shall preclude one or more beneficiaries of the Employee from receiving any amount that may be payable following the occurrence of his legal incompetency or his death and shall not preclude the legal representative of his estate from receiving such amount or from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiaries", as used in this Agreement, shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of the Employee (in the event of his incompetency) or the Employee's estate. 12. Governing Law. This Agreement shall be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of New Jersey applicable to contracts to be performed entirely within such State. 13. Entire Agreement. This Agreement contains all the understandings and representations between the parties hereto pertaining to the subject matter hereof and supersedes all undertakings and agreements, whether oral or in writing, if any there be, previously entered into by them with respect thereto. 14. Amendment, Modification, Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Employee and by a duly authorized representative of the Company other than the Employee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either party hereto in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege. 15. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall, except as provided in Section 10, be settled by binding arbitration in accordance with the rules of the American Arbitration Association then in effect and judgment upon such award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitration shall be held in the area where the Company then has its principal place of business. 16. Attorneys' Fees and Costs. All attorneys' fees, costs and expenses incurred by the prevailing party in connection with any litigation pursuant to Section 10 or any arbitration pursuant to Section 15 shall be borne by the non-prevailing party. 17. Notices. Any notice to be given hereunder shall be in writing and delivered personally or sent by certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or at such other address as such party may subsequently designate by like notice: If to the Company: Guest Supply, Inc. 4301 U.S. Highway One South Post Office Box 902 Monmouth Junction, New Jersey 08852-0902 If to the Employee: Mr. Paul T. Xenis 27 Marc Drive Dayton, New Jersey 08810 18. Severability. Should any provision of this Agreement be held by a court or arbitration panel of competent jurisdiction to be enforceable only if modified, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification to become a part hereof and treated as though originally set forth in this Agreement. The parties further agree that any such court or arbitration panel is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The parties expressly agree that this Agreement as so modified by the court or arbitration panel shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been set forth herein. 19. Withholding. Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Employee or his beneficiaries, including his estate, shall be subject to withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company, may, in its sole discretion, accept other provision for payment of taxes as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 20. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 21. Titles. Titles of the sections of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GUEST SUPPLY, INC. By /s/ Clifford W. Stanley Name: Clifford W. Stanley Title: President /s/ Paul T. Xenis Paul T. Xenis EX-10.(L) 6 EXHIBIT 10(l) EMPLOYMENT AGREEMENT AGREEMENT dated the 6th day of August, 1997, by and between GUEST SUPPLY, INC., a New Jersey corporation (the "Company"), and R. EUGENE BIBER (the "Employee"). W I T N E S S E T H : WHEREAS, the Company wishes to retain the services of the Employee, and the Employee wishes to serve in the employ of the Company, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereto hereby agree as follows: 1. Employment. 1.1 The Company agrees to employ the Employee, and the Employee agrees to serve in the employ of the Company, for the term set forth in Section 1.2, in the position and with the responsibilities, duties and authority set forth in Section 2 and on the other terms and conditions set forth in this Agreement. 1.2 The term of the Employee's employment under this Agreement shall commence as of August 1, 1997 and shall terminate on July 31, 2000, unless extended or sooner terminated in accordance with this Agreement. 1.3 As of July 31, 1998 and each subsequent July 31 during the term of this Agreement (each, an "Automatic Renewal Date"), unless either party shall have given a notice of non-extension not less than two (2) months prior to such Automatic Renewal Date, the term of this Agreement shall be extended automatically for a period of one (1) year to the first anniversary of the expiration date of the then-current term of this Agreement. Once a notice of non-extension shall have been given by either party, there shall be no further automatic extension of this Agreement. 2. Position, Duties. The Employee shall serve in the position of Vice President - Operations of the Company. The Employee shall perform, faithfully and diligently, such duties, and shall have such responsibilities, appropriate to said position, as shall be assigned to him from time to time by the President of the Company. The Employee shall report directly to the President of the Company. The Employee shall devote his complete and undivided attention to the performance of his duties and responsibilities hereunder during the normal working hours of executive employees of the Company. 3. Salary. During the term of this Agreement, in consideration of the performance by the Employee of the services set forth in Section 2 and his observance of the other covenants set forth herein, the Company shall pay the Employee, and the Employee shall accept, a base salary at the rate of $173,056 per annum, payable in accordance with the standard payroll practices of the Company. The Employee shall be entitled to such increases in base salary during the term hereof as shall be determined by the Board of Directors of the Company in its sole discretion based on the performance of the Company, the performance of the Employee and increases in the cost of living. 4. Expense Reimbursement and Perquisites. During the term of this Agreement, (a) the Company shall reimburse the Employee for all reasonable and necessary out-of-pocket expenses incurred by his in connection with the performance of his duties hereunder, upon the presentation of proper accounts therefor in accordance with the Company's policies and (b) the Employee shall be entitled to such perquisites as may be made available from time to time to senior executive employees of the Company. 5. Benefits. During the term of this Agreement, the Employee will be eligible to participate in all employee benefit plans and programs offered by the Company from time to time to its employees of comparable seniority, including but not limited to group hospitalization, surgical and major medical insurance plans, subject to the provisions of such plans and programs as in effect from time to time. 6. Termination of Employment. 6.1 Death. In the event of the death of the Employee during the term of this Agreement, the Company shall continue to pay to the estate or other legal representative of the Employee the base salary provided for in Section 3 (at the annual rate then in effect) until the expiration of a period of three (3) months from the date of the Employee's death. Rights and benefits of the estate or other legal representative of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the estate or other legal representative of the Employee nor the Company shall have any further rights or obligations under this Agreement. 6.2 Disability. If the Employee shall become incapacitated by reason of sickness, accident or other physical or mental disability and shall be unable to perform his normal duties hereunder for a cumulative period of two (2) months in any period of four (4) consecutive months, the employment of the Employee hereunder may be terminated by the Company or the Employee. In the event of such termination, the Company shall continue to pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) until the first to occur of (i) the expiration of a period of six (6) months from the date of such termination, (ii) the commencement of payment of benefits to the Employee under any disability plan or policy maintained by the Company or (iii) the expiration of a period of three (3) months from the date of death of the Employee. The Company shall continue to carry the group life, hospitalization, surgical and major medical insurance coverage for the Employee for a one (1) year period following termination of employment. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.3 Due Cause. The employment of the Employee hereunder may be terminated by the Company at any time for Due Cause (as hereinafter defined). In the event of such termination, the Company shall pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) accrued to the date of such termination and not theretofore paid to the Employee. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. For purposes hereof, "Due Cause" shall mean (i) willful, gross neglect or willful, gross misconduct in the Employee's discharge of his duties and responsibilities under this Agreement, or (ii) the Employee's commission of (x) a felony or (y) any crime or offense involving moral turpitude; provided, however, the Employee shall be given written notice by a majority of the Board of Directors of the Company that it intends to terminate the Employee's employment for Due Cause, which written notice shall specify the act or acts upon the basis of which the majority of the Board of Directors of the Company intends so to terminate the Employee's employment, and the Employee shall then be given the opportunity, within fifteen (15) days of his receipt of such notice, to have a meeting with the Board of Directors of the Company to discuss such act or acts. If the basis of such written notice is other than an act described in clause (ii), the Employee shall be given seven (7) days after such meeting within which to cease or correct the performance (or nonperformance) giving rise to such written notice and, upon failure of the Employee within such seven (7) days to cease or correct such performance (or nonperformance), the Employee's employment by the Company shall automatically be terminated hereunder for Due Cause. After the satisfaction of any claim of the Company against the Employee incidental to such Due Cause, neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.4 Other Termination by the Company. The Company may terminate the Employee's employment at any time for whatever reason it deems appropriate; provided, however, that in the event that such termination is not pursuant to Sections 6.1, 6.2 or 6.3: (A) The Company shall pay to the Employee, within thirty (30) days of the date of such termination, a lump sum amount in cash equal to (a) if such termination shall take place prior to a Change in Control (as hereinafter defined), the lesser of (i) the product of one (1) month's base salary (at the highest monthly rate in effect during the six (6) month period immediately preceding such termination) multiplied by a fraction, the numerator of which shall be the Employee's annual base salary at a rate equal to the highest annual rate in effect, pursuant to Section 3, during the six (6) month period immediately preceding such termination, and the denominator of which shall be 10,000, or (ii) three (3) times the Employee's average annualized cash compensation (base salary and bonus) during the most recent five (5) taxable years of the Company ending before the date of such termination (or during such portion of such period as the Employee was employed by, or rendered services for, the Company), less $1,000, or (b) if such termination shall take place subsequent to a Change in Control, the lesser of (i) the product of two (2) months' base salary (at the highest monthly rate in effect during the six (6) month period immediately preceding such termination) multiplied by a fraction, the numerator of which shall be the Employee's annual base salary at a rate equal to the highest annual rate in effect, pursuant to Section 3, during the six (6) month period immediately preceding such termination, and the denominator of which shall be 10,000, or (ii) three (3) times the Employee's average annualized cash compensation (base salary and bonus) during the most recent five (5) taxable years of the Company ending before the date of such termination (or during such portion of such period as the Employee was employed by, or rendered services for, the Company), less $1,000. The Employee shall be under no obligation to seek subsequent employment and upon obtaining subsequent employment shall be under no obligation to offset any amounts earned from such subsequent employment (whether as an employee, a consultant or otherwise) against such lump sum payment. (B) The Company shall continue to carry the group life, hospitalization, surgical and major medical insurance coverage for the Employee for a two (2) year period following termination of employment. (C) Other rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. (D) For a period of five years following termination of the employment of the Employee under Section 6.4 (the "Consulting Period"), the Company shall retain the Employee to provide such consulting services, on such projects, at such compensation and at such times as are mutually agreed to from time to time by the Employee and the Company. During the Consulting Period, the Employee shall be deemed an employee of the Company for purposes of the stock option plans and incentive plans of the Company (the "Plans"). Any options to purchase common stock, no par value (the "Common Stock"), of the Company (the "Options") heretofore or hereafter granted to the Employee pursuant to the Plans shall become fully exercisable and shall remain exercisable upon the termination of employment of the Employee until the first to occur of (a) the expiration of the term of such Options or (b) the expiration of the Consulting Period. In the event the Company terminates the Employee's services as a consultant hereunder prior to the expiration of the Consulting Period, the Employee shall be entitled to receive payment from the Company of liquidated damages in an amount equal to the aggregate Adjusted Option Spread (as hereinafter defined), it being agreed that the Employee's damages might be impossible to ascertain and that such amount constitutes a fair and reasonable amount of damages under the circumstances and is not a penalty. Any damages payable to the Employee hereunder shall be paid by the Company to the Employee within fifteen (15) days following the original expiration date of the Consulting Period. For purposes hereof, the Adjusted Option Spread with respect to each Option held by the Employee on the date of termination of the Employee's services as a consultant hereunder shall be equal to the product of (a) the number of shares of Common Stock which are subject to such Option multiplied by (b) the excess of (i) the highest Market Price (as hereinafter defined) of the Common Stock during the period commencing on the date on which such Option ceases to be exercisable as a result of the termination of the Employee's services as a consultant hereunder and terminating on the original expiration date of the Consulting Period over (ii) the greater of (x) the option exercise price per share of Common Stock under such Option or (y) the highest Market Price of the Common Stock during the period commencing on the date of termination of the Employee's services as a consultant hereunder and terminating on the date on which such Option ceases to be exercisable as a result of such termination. For purposes hereof, Market Price on any date shall mean the closing price per share of Common Stock on the New York Stock Exchange (or such other national securities exchange on which the Common Stock may be listed, if not listed on the New York Stock Exchange, or in the over-the-counter market, if not listed on a national securities exchange). Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.5 Voluntary Termination. The Employee may terminate his employment with the Company at any time upon 30 days' prior written notice to the Company. In the event of such termination, the Company shall pay to the Employee the base salary provided for in Section 3 (at the annual rate then in effect) accrued to the date of such termination and not theretofore paid to the Employee. Rights and benefits of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs. Neither the Employee nor the Company shall have any further rights or obligations under this Agreement, except as provided in Sections 7, 8, 9 and 10. 6.6 Constructive Termination Subsequent to a Change in Control. Anything herein to the contrary notwithstanding, if, subsequent to a Change in Control, the Company: (A) demotes the Employee to a lesser position than provided in Section 2; (B) causes a material change in the nature or scope of the authorities, powers, functions, duties, or responsibilities attached to the Employee's position as described in Section 2; (C) decreases the Employee's salary below the level provided for in Section 3 (taking into account increases made from time to time in accordance with Section 3); (D) fails to agree in writing (within ten (10) days of such Change in Control) to employ the Employee for a period of not less than one year commencing with such Change in Control on the terms and conditions set forth in this Agreement; or (E) fails to obtain the agreement of a successor company to assume the obligation of the Company under this Agreement as required by Section 11.1; then such action (or inaction) by the Company, unless consented to in writing by the Employee, shall constitute a termination of the Employee's employment by the Company pursuant to clause of Section 6.4 (subsequent to a change in control for purposes of Section 6.4(A)). Notwithstanding the preceding sentence, within thirty (30) days after learning of the action (or inaction) constituting the basis for a Constructive Termination of Employment, the Employee shall (unless he gives written consent thereto) advise the Company in writing, that the action (or inaction) constitutes a termination of his employment pursuant to Section 6.4. In such event, the Company shall have thirty (30) days in which to correct such action (or inaction) and if the Company does so correct such action (or inaction) the Employee shall not be entitled to terminate his employment under this Section as a result of such action (or inaction) (the notice provided by the Employee to the Company of the action or inaction and the Company's correction of the action or inaction, being hereinafter referred to as the "Correction Process"); provided, however, that if the Employee and the Company engage in the Correction Process three (3) times subsequent to a Change in Control, the Employee shall not thereafter be required to engage in the Correction Process and shall be entitled to treat any such subsequent action or inaction by the Company as a termination of the Employee's employment pursuant to Section 6.4 (subsequent to a change in control for purposes of Section 6.4(A)). 6.7 Termination of Employment Following a Change in Control. The Employee may terminate his employment with the Company during the one (1) year period following a Change in Control, and such termination of employment shall be deemed to constitute a termination of the Employee's employment by the Company pursuant to Section 6.4 (subsequent to a change in control for purposes for Section 6.4(A)). For purposes of this Agreement, a Change in Control shall be deemed to have occurred if: (A) a "person" (meaning an individual, a partnership, or other group or association as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, other than the Employee or a group including the Employee) acquires twenty percent (20%) or more of the combined voting power of the outstanding securities of the Company having a right to vote in elections of directors and such acquisition shall not have been approved by a majority of the Continuing Directors (as hereinafter defined) then in office not later than sixty (60) days after completion of such acquisition; or (B) Continuing Directors shall for any reason cease to constitute a majority of the Board of Directors of the Company; or (C) the business of the Company is disposed of by the Company to a party or parties other than a subsidiary or other affiliate of the Company, in which the Company owns less than a majority of the equity, pursuant to a partial or complete liquidation of the Company, sale of assets (including stock of a subsidiary of the Company) or otherwise, and such disposition shall not have been approved in advance by a majority of the Continuing Directors then in office. For purposes of this Agreement, the term "Continuing Director" shall mean a member of the Board of Directors of the Company who either was a member of the Board of Directors on the date hereof or who subsequently became a Director and whose election, or nomination for election, was approved by a vote of at least two-thirds of the Continuing Directors then in office. 7. Confidential Information. 7.1 The Employee shall, during the Employee's employment with the Company and thereafter, treat all confidential material confidentially and, except in accordance with the terms of this Agreement, shall not, without the prior written consent of a majority of the Board of Directors of the Company, disclose such material, directly or indirectly, to any party not at the time of such disclosure an employee or agent of the Company, or remove from the Company's premises any notes or records relating thereto, copies or facsimiles thereof (whether made by electronic, electrical, magnetic, optical, laser, acoustic or other means), or any other property of the Company. The Employee agrees that all confidential material, together with all notes and records of the Employee relating thereto, and all copies or facsimiles thereof in the possession of the Employee (whether made by the foregoing or other means) are the exclusive property of the Company. The Employee shall not in any manner use any confidential material, or any other property of the Company, in any manner not specifically directed by the Company or in any way which is detrimental to the Company, as determined by a majority of the Board of Directors of the Company in its sole discretion. 7.2 For the purposes hereof, the term "confidential material" shall mean all information in any way concerning the activities, business or affairs of the Company or the Company's customers and clients, including, without limitation, information concerning trade secrets and the preparation of raw material for, manufacture of, and/or finishing processes utilized in the production of, the products or projects of the Company and/or any improvements therein, together with all sales and financial information concerning the Company and any and all information concerning projects in research and development or marketing plans for any such products or projects, and all information concerning the practices, customers and clients of the Company, and all information in any way concerning the activities, business or affairs of any of such customers or clients, as such, which is furnished to the Employee by the Company or any of its agents, customers or clients, as such, otherwise acquired by the Employee in the course of the Employees employment with the Company; provided, however, that the term "confidential material" shall not include information which (i) becomes generally available to the public other than as a result of a disclosure by the Employee, (ii) was available to the Employee on a non-confidential basis prior to his employment with the Company or (iii) becomes available to the Employee on a non-confidential basis from a source other than the Company or any of its agents, customers or clients, as such, provided that such source is not bound by a confidentiality agreement with the Company or any of such agents, customers or clients. 7.3 Promptly upon the request of the Company, the Employee shall deliver to the Company all confidential material in the possession of the Employee without retaining a copy thereof, unless, in the opinion of counsel for the Company, either returning such confidential material or failing to retain a copy thereof would violate any applicable Federal, state, local or foreign law, in which event such confidential material shall be returned without retaining any copies thereof as soon as practicable after such counsel advises that the same may be lawfully done. 7.4 In the event that the Employee is required, by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process, to disclose any confidential material, the Employee shall provide the Company with prompt notice thereof so that the Company may seek an appropriate protective order and/or waive compliance by the Employee with the provisions hereof; provided, however, that if in the absence of a protective order or the receipt of such a waiver, the Employee is, in the opinion of counsel for the Company, compelled to disclose confidential material not otherwise disclosable hereunder to any legislative, judicial or regulatory body, agency or authority, or else be exposed to liability for contempt, fine or penalty or to other censure, such confidential material may be so disclosed. 8. Intellectual Property. Any and all inventions made, developed or created by the Employee (whether at the request or suggestion of the Company or otherwise, whether alone or in conjunction with others, and whether during regular hours of work or otherwise) (a) during the period of this Agreement, or (b) within a period of one (1) year after the date of termination of employment hereunder, which may be directly or indirectly useful in, or relate to, the business of or tests being carried out by the Company, shall be promptly and fully disclosed by the Employee to the Board of Directors of the Company and shall be the Company's exclusive property as against the Employee, and the Employee shall promptly deliver to an appropriate representative of the Company as designated by the Board of Directors all papers, drawings, models, data and other material relating to any invention made, developed or created by him as aforesaid. The Employee shall, at the request of the Company and without any payment therefor, execute any documents necessary or advisable in the opinion of the Company's counsel to direct issuance of patents or copyrights to the Company with respect to such inventions as are to be the Company's exclusive property as against the Employee or to vest in the Company title to such inventions as against the Employee. The expense of securing any such patent or copyright shall be borne by the Company. 9. Non-Competition. The Employee acknowledges that the services to be rendered by him to the Company are of a special and unique character. The Employee agrees that, in consideration of his employment hereunder, the Employee will not (a) during the term of this Agreement and thereafter for a period of one (1) year commencing on the date of termination of his employment with the Company (i) engage, directly or indirectly, whether as principal, agent, distributor, representative, consultant, stockholder (other than an investment of not more than 5% of the stock of equity of any corporation the capital stock of which is publicly traded), employee or otherwise, in any activity or business venture which is competitive with the business conducted or proposed to be conducted by the Company as of the date of termination of his employment with the Company or (ii) solicit or entice or endeavor to solicit or entice away from the Company any person who was an officer, employee or consultant of the Company, either on his own account or for any person, firm, corporation or other organization, whether or not such person would commit any breach of his contract of employment by reason of leaving the service of the Company, and the Employee agrees not to employ, directly or indirectly, any person who was an officer or employee of the Company or who by reason of such position at any time is or may be likely to be in possession of any confidential information or trade secrets relating to the businesses or products of the Company, or (b) at any time, take any action or make any statement the effect of which would be, directly or indirectly, to impair the good will of the Company or the business reputation or good name of the Company, or be otherwise detrimental to the interests of the Company, including any action or statement intended, directly or indirectly, to benefit a competitor of the Company. 10. Equitable Relief. In the event of a breach or threatened breach by the Employee of any of the provisions of Sections 7, 8 or 9 of this Agreement, the Employee hereby consents and agrees that the Company shall be entitled to an injunction or similar equitable relief from any court of competent jurisdiction restraining the Employee from committing or continuing any such breach or threatened breach or granting specific performance of any act required to be performed by the Employee under any of such provisions, without the necessity of showing any actual damage or that money damages would not afford an adequate remedy and without the necessity of posting any bond or other security. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity which it may have. 11. Successors and Assigns. 11.1 Assignment by the Company. The Company shall require any successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Section, the "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law and this Agreement shall be binding upon, and inure to the benefit of, the Company, as so defined. 11.2 Assignment by the Employee. The Employee may not assign this Agreement or any part thereof without the prior written consent of a majority of the Board of Directors of the Company; provided, however, that nothing herein shall preclude one or more beneficiaries of the Employee from receiving any amount that may be payable following the occurrence of his legal incompetency or his death and shall not preclude the legal representative of his estate from receiving such amount or from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiaries", as used in this Agreement, shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of the Employee (in the event of his incompetency) or the Employee's estate. 12. Governing Law. This Agreement shall be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of New Jersey applicable to contracts to be performed entirely within such State. 13. Entire Agreement. This Agreement contains all the understandings and representations between the parties hereto pertaining to the subject matter hereof and supersedes all undertakings and agreements, whether oral or in writing, if any there be, previously entered into by them with respect thereto. 14. Amendment, Modification, Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Employee and by a duly authorized representative of the Company other than the Employee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either party hereto in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege. 15. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall, except as provided in Section 10, be settled by binding arbitration in accordance with the rules of the American Arbitration Association then in effect and judgment upon such award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitration shall be held in the area where the Company then has its principal place of business. 16. Attorneys' Fees and Costs. All attorneys' fees, costs and expenses incurred by the prevailing party in connection with any litigation pursuant to Section 10 or any arbitration pursuant to Section 15 shall be borne by the non-prevailing party. 17. Notices. Any notice to be given hereunder shall be in writing and delivered personally or sent by certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or at such other address as such party may subsequently designate by like notice: If to the Company: Guest Supply, Inc. 4301 U.S. Highway One South Post Office Box 902 Monmouth Junction, New Jersey 08852-0902 If to the Employee: R. Eugene Biber 11 Briar Hill Court Bellemead, New Jersey 08502 18. Severability. Should any provision of this Agreement be held by a court or arbitration panel of competent jurisdiction to be enforceable only if modified, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification to become a part hereof and treated as though originally set forth in this Agreement. The parties further agree that any such court or arbitration panel is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The parties expressly agree that this Agreement as so modified by the court or arbitration panel shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been set forth herein. 19. Withholding. Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Employee or his beneficiaries, including his estate, shall be subject to withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company, may, in its sole discretion, accept other provision for payment of taxes as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 20. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 21. Titles. Titles of the sections of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GUEST SUPPLY, INC. By /s/ Clifford W. Stanley Name: Clifford W. Stanley Title: President /s/ R. Eugene Biber ------------------- R. Eugene Biber EX-10.(M) 7 EXHIBIT 10(m) GENERAL COUNSEL AGREEMENT AGREEMENT dated the 6th day of August, 1997 by and between THOMAS M. HAYTHE ("TMH") and GUEST SUPPLY, INC., a New Jersey corporation (the "Company"). W I T N E S S E T H : WHEREAS, TMH is engaged in the practice of law and has served as counsel to the Company since 1982; WHEREAS, TMH's knowledge and experience in the business and legal affairs of the Company as well as his expertise and judgment are a valuable asset to the Company; and WHEREAS, the Company desires to retain TMH as General Counsel to the Company, and TMH desires to serve as General Counsel to the Company, on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereto hereby agree as follows: 1. Services; Term. 1.1 The Company agrees to retain TMH, and TMH agrees to serve as General Counsel to the Company, for the term set forth in Section 1.2, in the position and with the responsibilities, duties and authority set forth in Section 2 and on the other terms and conditions set forth in this Agreement. 1.2 The term of this Agreement shall commence as of August 1, 1997 and shall terminate on July 31, 2000, unless sooner terminated in accordance with this Agreement. 1.3 As of July 31, 1998 and each subsequent July 31 during the term of this Agreement (each, an "Automatic Renewal date"), unless either party shall have given a notice of non-extension not less than two (2) months prior to such Automatic Renewal Date, the term of this Agreement shall be extended automatically for a period of one (1) year to the first anniversary of the expiration date of the then- current term of this Agreement. Once a notice of non- extension shall have been given by either party, there shall be no further automatic extension of this Agreement. 2. Duties; Independent Contractor. 2.1 During the Term, TMH shall serve in the position of General Counsel of the Company. TMH shall perform such legal services as shall be required by the Company. TMH shall provide such services through the law firm of Haythe & Curley. TMH shall also retain such other special or local counsel as shall be necessary or appropriate from time to time. TMH shall report directly to the Chief Executive Officer of the Company and to the Board of Directors of the Company. 2.2 In performing services under this Agreement, TMH shall be acting at all times as an independent contractor and not as an employee of the Company. Under no circumstances shall TMH be considered an employee of the Company, nor is this Agreement intended to, and shall not, create any type of joint venture or partnership between TMH and the Company. TMH shall not be entitled to any of the benefits, including, but not limited to, fringe benefits and workers' compensation benefits, afforded by the Company to its employees. The Company shall not exercise any control or direction over the exercise of professional judgement used by TMH in providing services under this Agreement. TMH shall be exclusively responsible for the payment of all taxes, withholding payments, penalties, fees, fringe benefits, professional liability insurance premiums, contributions to insurance and pension or other deferred compensation plans, including, but not limited to, workers' compensation and Social Security obligations, licensing fees, and the like, and the filing of all necessary documents, forms, and returns pertinent to the services performed and fees earned pursuant to this Agreement. 3. Compensation. In consideration of the services to be performed by TMH hereunder, the Company shall pay to TMH a General Counsel fee of $7,500.00 per month, payable on or about the 15th day of each month during the Term. The General Counsel fee shall be credited on a current basis against the fees of Haythe & Curley for services rendered to the Company and, to the extent that the General Counsel fee exceeds the fees of Haythe & Curley on a current basis, it shall be credited against future fees of Haythe & Curley for services rendered to the Company. 4. Termination. 4.1 In the event of termination of TMH's services as General Counsel under this Agreement by the Company at any time during the term of this Agreement prior to a Change in Control (as defined in Section 4.3 of this Agreement), the Company shall pay to TMH the monthly General Counsel fee set forth in Section 3 of this Agreement payable for the month in which such termination occurs and not theretofore paid. Neither TMH nor the Company shall have any further rights or obligations under this Agreement, except as set forth in Sections 5, 6 and 13 of this Agreement. 4.2 In the event of termination of TMH's services as General Counsel under this Agreement by the Company upon or subsequent to a Change in Control, other than by reason of (i) the death or permanent disability of TMH or (ii) Due Cause (as hereinafter defined), the Company shall pay to TMH, on the date of such termination, a lump sum amount in cash equal to $270,000. The parties agree that the amount set forth in the preceding sentence shall constitute liquidated damages, it being agreed that TMH's damages in the event of termination of his services as General Counsel under this Agreement might be impossible to ascertain and that the amount set forth in the preceding sentence constitutes a fair and reasonable amount of damages under the circumstances and is not a penalty. Neither TMH nor the Company shall have any further rights or obligations under this Agreement, except as set forth in Sections 5, 6 and 13 of this Agreement. For purposes hereof, "Due Cause" shall mean (i) gross neglect or gross misconduct in TMH's discharge of his duties and responsibilities under this Agreement, or (ii) TMH's commission of (x) a felony or (y) any crime or offense involving moral turpitude. 4.3 For purposes of this Agreement, a Change in Control of the Company shall be deemed to have occurred if: (A) a "person" (meaning an individual, a partnership, or other group or association as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, other than TMH or a group including TMH), acquires twenty percent (20%) or more of the combined voting power of the outstanding securities of the Company having a right to vote in elections of directors; or (B) Continuing Directors shall for any reason cease to constitute two-thirds of the Board of Directors of the Company; or (C) the business of the Company is disposed of by the Company to a party or parties other than a subsidiary or other affiliate of the Company, in which the Company owns less than a majority of the equity, pursuant to a partial or complete liquidation of the Company, sale of assets (including stock of a subsidiary of the Company) or otherwise. For purposes of this Agreement, the term "Continuing Director" shall mean a member of the Board of Directors of the Company who either was a member of the Board of Directors on the date hereof or who subsequently became a Director and whose election, or nomination for election, was approved by a vote of at least two-thirds of the Continuing Directors then in office, other than in connection with an event specified in clauses (A) or (C) above. 4.4 For a period of five years following termination of the services of TMH as General Counsel under this Agreement pursuant to Section 4.1 or 4.2 (the "Consulting Period"), the Company shall retain TMH to provide such consulting services, on such projects, at such compensation and at such times as are mutually agreed to from time to time by TMH and the Company. During the Consulting Period, TMH shall be deemed an employee of the Company for purposes of the stock option plans and incentive plans of the Company (the "Plans"). Any options to purchase common stock, no par value (the "Common Stock"), of the Company (the "Options") heretofore or hereafter granted to TMH pursuant to the Plans shall become fully exercisable and shall remain exercisable upon the termination of TMH's services as General Counsel under this Agreement until the first to occur of (a) the expiration of the term of such Options or (b) the expiration of the Consulting Period. In the event the Company terminates TMH's services as a consultant hereunder prior to the expiration of the Consulting Period, TMH shall be entitled to receive payment from the Company of liquidated damages in an amount equal to the aggregate Adjusted Option Spread (as hereinafter defined), it being agreed that TMH's damages might be impossible to ascertain and that such amount constitutes a fair and reasonable amount of damages under the circumstances and is not a penalty. Any damages payable to TMH hereunder shall be paid by the Company to TMH within fifteen (15) days following the original expiration date of the Consulting Period. For purposes hereof, the Adjusted Option Spread with respect to each Option held by TMH on the date of termination of TMH's services as a consultant hereunder shall be equal to the product of (a) the number of shares of Common Stock which are subject to such Option multiplied by (b) the excess of (i) the highest Market Price (as hereinafter defined) of the Common Stock during the period commencing on the date on which such Option ceases to be exercisable as a result of the termination of TMH's services as a consultant hereunder and terminating on the original expiration date of the Consulting Period over (ii) the greater of (x) the option exercise price per share of Common Stock under such Option or (y) the highest Market Price of the Common Stock during the period commencing on the date of termination of TMH's services as a consultant hereunder and terminating on the date on which such Option ceases to be exercisable as a result of such termination. For purposes hereof, Market Price on any date shall mean the closing price per share of Common Stock on the New York Stock Exchange (or such other national securities exchange on which the Common Stock may be listed, if not listed on the New York Stock Exchange, or in the over-the-counter market, if not listed on a national securities exchange). 5. Confidential Information. 5.1 TMH shall, during the term of this Agreement and thereafter, treat all confidential material confidentially and, except in accordance with the terms of this Agreement and as required in the performance of his duties hereunder, shall not, without the prior written consent of a majority of the Board of Directors of the Company, disclose such material, directly or indirectly, to any party not at the time of such disclosure either an employee or agent of the Company or a partner or employee of Haythe & Curley. TMH agrees that all confidential material, together with all notes and records of TMH relating thereto, and all copies or facsimiles thereof in the possession of TMH (whether made by the foregoing or other means) are the exclusive property of the Company. TMH shall not in any manner use any confidential material, or any other property of the Company, in any manner not specifically directed by the Company. 5.2 For the purposes hereof, the term "confidential material" shall mean all information in any way concerning the activities, business or affairs of the Company or the Company's customers and clients, including, without limitation, information concerning trade secrets and the preparation of raw material for, manufacture of, and/or finishing processes utilized in the production of, the products or projects of the Company and/or any improvements therein, together with all sales and financial information concerning the Company and any and all information concerning projects in research and development or marketing plans for any such products or projects, and all information concerning the practices, customers and clients of the Company, and all information in any way concerning the activities, business or affairs of any of such customers or clients, as such, which is furnished to TMH by the Company or any of its agents, customers or clients, as such, or otherwise acquired by TMH in the course of his service as General Counsel to the Company; provided, however, that the term "confidential material" shall not include information which (i) becomes generally available to the public other than as a result of a disclosure by TMH, (ii) was available to TMH on a non-confidential basis prior to his service as General Counsel to the Company or (iii) becomes available to TMH on a non-confidential basis from a source other than the Company or any of its agents, customers or clients, as such, provided that such source is not bound by a confidentiality agreement with the Company or any of such agents, customers or clients. 5.3 The obligations of TMH under this Section 5 are in addition to and not in any way in limitation of the professional obligations of TMH relating to the confidentiality of attorney-client communications. 6. Equitable Relief. In the event of a breach or threatened breach by TMH of any of the provisions of Section 5 of this Agreement, TMH hereby consents and agrees that the Company shall be entitled to an injunction or similar equitable relief from any court of competent jurisdiction restraining TMH from committing or continuing any such breach or threatened breach or granting specific performance of any act required to be performed by TMH under any of such provisions, without the necessity of showing any actual damage or that money damages would not afford an adequate remedy and without the necessity of posting any bond or other security. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity which it may have. 7. Failure to Make Payments. If the Company shall fail to pay to TMH the General Counsel fee under Section 3 of this Agreement or the termination payment under Section 4 of this Agreement for a period of thirty (30) days after the same shall become due and payable, such amount shall bear interest at the rate of eighteen percent (18%) per annum or, if less, the highest legal rate per annum permitted under the laws of the State of New Jersey, from and after the date that such amount shall have become due and payable to and including the date that such amount shall have been paid in full. 8. Successors and Assigns. 8.1 This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. 8.2 The Company shall require any successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Section, the "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law and this Agreement shall be binding upon, and inure to the benefit of, the Company, as so defined. 9. Governing Law. This Agreement shall be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of New Jersey applicable to contracts to be performed entirely within such State. In the event that a court of any jurisdiction shall hold any of the provisions of this Agreement to be wholly or partially unenforceable for any reason, such determination shall not bar or in any way affect each party's right to relief as provided for herein in the courts of any other jurisdiction. Such provisions, as they relate to each jurisdiction, are, for this purpose, severable into diverse and independent covenants. Service of process on the parties hereto at the addresses set forth herein shall be deemed adequate service of such process. 10. Entire Agreement. This Agreement contains all the understandings and representations between the parties hereto pertaining to the subject matter hereof and supersedes all undertakings and agreements, whether oral or in writing, if any there be, previously entered into by them with respect thereto. 11. Amendment, Modification, Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by TMH and by a duly authorized representative of the Company. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either party hereto in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege. 12. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall be settled by binding arbitration in accordance with the rules of the American Arbitration Association then in effect and judgment upon such award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitration shall be held in New York, New York. 13. Attorneys' Fees and Costs. All attorneys' fees, costs and expenses incurred by the prevailing party in connection with any litigation pursuant to Section 6 or any arbitration pursuant to Section 12 shall be borne by the non-prevailing party. 14. Notices. Any notice to be given hereunder shall be in writing and delivered personally or sent by certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or at such other address as such party may subsequently designate by like notice: If to the Company: Guest Supply, Inc. 4301 U.S. Highway One P.O. Box 902 Monmouth Junction, New Jersey 08852-0902 Attention: Mr. Clifford W. Stanley Chairman and Chief Executive Officer If to TMH: Thomas M. Haythe, Esq. 21 Mayfair Lane Greenwich, Connecticut 06831 15. Severability. Should any provision of this Agreement be held by a court or arbitration panel of competent jurisdiction to be enforceable only if modified, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification to become a part hereof and treated as though originally set forth in this Agreement. The parties further agree that any such court or arbitration panel is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The parties expressly agree that this Agreement as so modified by the court or arbitration panel shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been set forth herein. 16. Authority. The Company represents and warrants to TMH that the execution and delivery of this Agreement by the Company and the performance by the Company of its covenants and agreements hereunder have been duly authorized by all necessary corporate action and that this Agreement has been duly executed and delivered on behalf of the Company. 17. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 18. Titles. Titles of the sections of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GUEST SUPPLY, INC. By /s/ Clifford W. Stanley ----------------------- Name: Clifford W. Stanley Title: President /s/ Thomas M. Haythe -------------------- Thomas M. Haythe EX-10.(N) 8 REVOLVING CREDIT AGREEMENT dated December 3, 1997 among GUEST SUPPLY, INC., GUEST PACKAGING, INC., BRECKENRIDGE-REMY CO., and GUEST DISTRIBUTION SERVICES, INC., as the Borrower PNC BANK, NATIONAL ASSOCIATION FIRST UNION NATIONAL BANK, as Lenders and PNC BANK, NATIONAL ASSOCIATION, as Agent TABLE OF CONTENTS Page ---- ARTICLE 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .1 Section 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . .1 Section 1.2 Other Definitional Provisions.. . . . . . . . . . . . . 19 ARTICLE 2. AMOUNT AND TERMS OF COMMITMENTS. . . . . . . . . . . . . . . 19 Section 2.1 Revolving Credit Commitments. . . . . . . . . . . . . . 19 Section 2.2 Revolving Credit Note . . . . . . . . . . . . . . . . . 20 Section 2.3 Procedure for Revolving Credit Borrowings . . . . . . . 20 Section 2.4 Commitment Fees . . . . . . . . . . . . . . . . . . . . 21 Section 2.5 Termination or Reduction of Commitments . . . . . . . . 22 Section 2.6 Prepayments . . . . . . . . . . . . . . . . . . . . . . 22 Section 2.7 Conversion and Continuation Options . . . . . . . . . . 23 Section 2.8 Minimum Amounts of Tranches . . . . . . . . . . . . . . 24 Section 2.9 Interest Rates and Payment Dates. . . . . . . . . . . . 24 Section 2.10 Inability to Determine Interest Rate . . . . . . . . . 26 Section 2.11 Payments/Funding . . . . . . . . . . . . . . . . . . . 26 Section 2.12 Change in Legality . . . . . . . . . . . . . . . . . . 28 Section 2.13 Increased Costs. . . . . . . . . . . . . . . . . . . . 29 Section 2.14 Indemnity. . . . . . . . . . . . . . . . . . . . . . . 32 Section 2.15 Letters of Credit. . . . . . . . . . . . . . . . . . . 33 Section 2.16 Purpose of Loans . . . . . . . . . . . . . . . . . . . 37 ARTICLE 3 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . 38 Section 3.1 Financial Condition . . . . . . . . . . . . . . . . . . 38 Section 3.2 No Material Adverse Change. . . . . . . . . . . . . . . 39 Section 3.3 Corporate Existence; Compliance with Law. . . . . . . . 39 Section 3.4 Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 3.5 No Legal Bar. . . . . . . . . . . . . . . . . . . . . . 40 Section 3.6 No Material Litigation. . . . . . . . . . . . . . . . . 40 Section 3.7 No Default. . . . . . . . . . . . . . . . . . . . . . . 40 Section 3.8 Ownership of Property; Liens. . . . . . . . . . . . . . 41 Section 3.9 Intellectual Property . . . . . . . . . . . . . . . . . 41 Section 3.10 No Burdensome Restrictions . . . . . . . . . . . . . . 41 Section 3.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 3.12 Federal Regulations. . . . . . . . . . . . . . . . . . 42 Section 3.13 Investment Company Act; Public Utility Holding Company Act; Other Regulations. . . . . . . . . . . . . . . . . 42 Section 3.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . 42 Section 3.15 Employee Grievances. . . . . . . . . . . . . . . . . . 42 Section 3.16 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 43 ARTICLE 4 CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . 44 Section 4.1 Conditions to Effective Date. . . . . . . . . . . . . . 44 Section 4.2 Conditions to Each Loan . . . . . . . . . . . . . . . . 45 ARTICLE 5 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 46 Section 5.1 Financial Statements. . . . . . . . . . . . . . . . . . 47 Section 5.2 Certificates; Other Information . . . . . . . . . . . . 48 Section 5.3 Payment of Obligations. . . . . . . . . . . . . . . . . 49 Section 5.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 5.5 Maintenance of Property; Insurance. . . . . . . . . . . 49 Section 5.6 Inspection of Property; Books and Records; Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 5.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 5.8 ERISA Compliance. . . . . . . . . . . . . . . . . . . . 50 ARTICLE 6 NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . 51 Section 6.1 Limitation on Indebtedness. . . . . . . . . . . . . . . 51 Section 6.2 Limitation on Liens . . . . . . . . . . . . . . . . . . 52 Section 6.3 Limitation on Contingent Obligations. . . . . . . . . . 54 Section 6.4 Limitations on Fundamental Changes. . . . . . . . . . . 54 Section 6.5 Limitation on Sale of Assets. . . . . . . . . . . . . . 54 Section 6.6 Limitation on Investments, Loans and Advances . . . . . 55 Section 6.7 Limitation on Optional Payments and Modifications of Debt Instruments . . . . . . . . . . . 56 Section 6.8 Transactions with Affiliates. . . . . . . . . . . . . . 56 Section 6.9 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 56 Section 6.10 Limitation on Conduct of Business. . . . . . . . . . . 56 Section 6.11 Tangible Net Worth . . . . . . . . . . . . . . . . . . 57 Section 6.12 Fixed Charge Coverage Ratio. . . . . . . . . . . . . . 57 Section 6.13 Funded Debt to EBITDA. . . . . . . . . . . . . . . . . 57 Section 6.14 Capital Expenditures.. . . . . . . . . . . . . . . . . 57 Section 6.15 Obligor Tangible Assets. . . . . . . . . . . . . . . . 57 Section 6.16 ERISA Obligations. . . . . . . . . . . . . . . . . . . 57 ARTICLE 7 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 57 Section 7.1 Events of Default . . . . . . . . . . . . . . . . . . . 57 ARTICLE 8 THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Section 8.1 Actions . . . . . . . . . . . . . . . . . . . . . . . . 61 Section 8.2 Exculpation . . . . . . . . . . . . . . . . . . . . . . 62 Section 8.3 Successor . . . . . . . . . . . . . . . . . . . . . . . 63 Section 8.4 Credit Decisions. . . . . . . . . . . . . . . . . . . . 63 Section 8.5 Notices, etc. from Agent. . . . . . . . . . . . . . . . 64 Section 8.6 Security Documents. . . . . . . . . . . . . . . . . . . 64 ARTICLE 9 PURCHASING LENDER . . . . . . . . . . . . . . . . . . . . . . 64 Section 9.1 Purchasing Lender . . . . . . . . . . . . . . . . . . . 64 Section 9.2 Disclosure of Information . . . . . . . . . . . . . . . 66 Section 9.3 Pledges to Federal Reserve Bank . . . . . . . . . . . . 66 ARTICLE 10 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 66 Section 10.1 Amendments and Waivers . . . . . . . . . . . . . . . . 66 Section 10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . 69 Section 10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . 71 Section 10.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 10.5 Payment of Expenses and Taxes. . . . . . . . . . . . . 71 Section 10.6 Successors and Assigns . . . . . . . . . . . . . . . . 73 Section 10.7 Set-off/Sharing. . . . . . . . . . . . . . . . . . . . 73 Section 10.8 Original Agreement . . . . . . . . . . . . . . . . . . 74 Section 10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . 74 Section 10.10 Severability. . . . . . . . . . . . . . . . . . . . . 74 Section 10.11 Integration . . . . . . . . . . . . . . . . . . . . . 75 Section 10.12 Governing Law . . . . . . . . . . . . . . . . . . . . 75 Section 10.13 Submission To Jurisdiction; Waivers . . . . . . . . . 75 Section 10.14 Acknowledgments . . . . . . . . . . . . . . . . . . . 76 Section 10.15 Waivers of Jury Trial . . . . . . . . . . . . . . . . 76 Exhibits Exhibit A Revolving Credit Note Exhibit B Borrowing Base Certificate Exhibit C Issuance Request Exhibit D Form of Letter of Credit Exhibit E Form of Letter of Credit Exhibit F Opinion of Counsel Schedules Schedule I Commitments Schedule II Consents ( 3.4(b)) Schedule III Litigation ( 3.6) Schedule IV Intellectual Property Schedule V Subsidiaries ( 3.14) Schedule VI Employee Grievances ( 3.15) Schedule VII ERISA Plans ( 3.16) Schedule VIII Liens ( 6.2(g)) REVOLVING CREDIT AGREEMENT REVOLVING CREDIT AGREEMENT, dated December 3, 1997 among GUEST SUPPLY, INC. ("GSI"), a New Jersey corporation, Guest Packaging, Inc., a New Jersey corporation, BRECKENRIDGE-REMY CO., a Delaware corporation, and GUEST DISTRIBUTION SERVICES, INC., a Delaware corporation, jointly and severally as co-obligors (collectively, the "Borrower"), PNC BANK, NATIONAL ASSOCIATION and FIRST UNION NATIONAL BANK (each a "Lender" and, collectively, the "Lenders") and PNC BANK, NATIONAL ASSOCIATION as agent for the Lenders (in such capacity, the "Agent"). W I T N E S S E T H: WHEREAS, GSI, Guest Packaging, Inc. and Breckenridge- Remy Co., Lenders and Agent entered into a Revolving Credit and Term Loan (the "Original Agreement") dated October 31, 1995; and WHEREAS, the Borrower has requested the Lenders to extend a new credit facility to Borrower; and WHEREAS, the Lenders have agreed, upon the terms and conditions set forth herein, to extend such credit facility to the Borrower; and WHEREAS, the Borrower and Lenders have agreed that the Original Agreement will be terminated and amounts outstanding thereunder will be repaid simultaneously with the making of the initial loan hereunder. NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Lenders, the Agent and the Borrower hereby agree as follows: ARTICLE 1. DEFINITIONS Section 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Affiliate" as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agent" (a) PNC Bank, National Association; or (b) such other bank or financial institution as shall have been subsequently appointed as successor Agent pursuant to Section 8.3 of this Agreement. "Agreement" this Revolving Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Applicable Margin" means a rate per annum determined in accordance with the Pricing Schedule. "Assignment and Acceptance" as defined in Section 9.1. "Available Commitment" at any time with respect to Revolving Credit Loans for each Lender, an amount equal to (i) the amount of such Lender's Commitment at such time to make Revolving Credit Loans minus (ii) the sum of (a) the aggregate principal amount of all then outstanding Revolving Credit Loans made by such Lender and (b) the amount of such Lender's Percentage of the Letter of Credit Outstandings at such time. "Board" the Board of Governors of the Federal Reserve System of the United States. "Borrowing Base" an amount equal to the sum of (x) 80% of the value of Eligible Receivables for the most recent Calculation Period plus (y) 20% of the aggregate amount of Letter of Credit Outstandings (less the then aggregate amount of all unpaid and outstanding Reimbursement Obligations) during such Calculation Period, provided, however, that if the value of "x" is less than "y," then the Borrowing Base shall be equal to "x" only. "Borrowing Base Certificate" a certificate in the form of Exhibit B hereto to be delivered by the Borrower for each Calculation Period. "Borrowing Date" any Business Day specified in a notice pursuant to Section 2.3 as a date on which a Borrower requests the Lenders to make Loans. "Business Day" a day other than Saturday, Sunday or other day on which commercial banks in New Jersey are authorized or required by law to be closed and, in the case of Eurodollar Loans, a day which is also a Working Day. "CAPEX" for any period, the cost attributed in accordance with GAAP consistent with those applied in preparation of the financial statements referred to in Section 5.1 hereof to acquisitions during such period by GSI and/or its consolidated Subsidiaries of any asset, tangible or intangible, or replacements or substitutes therefor or additions thereto which are treated as a non current asset on such financial statements, including, without limitation, the acquisition or construction of assets having a useful life of more than one year. "Calculation Period" each successive calendar month, beginning November 1, 1997. "Capital Lease Obligations" of any Person for any period, the obligations of such Person to pay rent and other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, for such period, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP. "Capital Stock" any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Change in Control" means the acquisition by any Person, or two or more Persons acting in concert (other than any individuals who are members of GSI's senior management on the Effective Date or any entity, if and so long as, the majority of equity and voting interests in which is owned by one or more of such individuals), of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of greater than 50% of the outstanding shares of voting stock of GSI. "Closing Date" the date on which the Lenders make the initial Loan. "Code" the Internal Revenue Code of 1986, as amended from time to time. "Commitment" for each Lender at any time from and including the Effective Date to but excluding the Maturity Date the lesser of (i) the amount set forth opposite such Lender's name in Schedule I under the heading "Commitment" as such amount may be adjusted pursuant to Sections 2.5 or 9.1 and (ii) the product of such Lender's Percentage and the Borrowing Base for the then immediately preceding Calculation Period; (subject to an aggregate sublimit for all Lenders of $1,000,000 for Letters of Credit). "Consolidated Current Liabilities" at a particular date, the sum of all amounts which would, in conformity with GAAP, be included under current liabilities on a consolidated balance sheet of GSI as at such date. "Consolidated EBITDA" means, for any fiscal period, the sum of (i) Consolidated Net Income (Loss) for such period plus, (ii) Consolidated Interest Expense, plus (iii) depreciation, plus (iv) amortization of intangible assets and plus (v) federal, state and local income taxes; all computed and calculated in accordance with GAAP. "Consolidated Intangibles" at a particular date, all assets of GSI, determined on a consolidated basis at such date, that would be classified as intangible assets in accordance with GAAP, but in any event including, without limitation, unamortized organization and reorganization expense, patents, trade or service marks, franchises, trade names and goodwill. "Consolidated Interest Expense" for any period, the total interest expense for such period (including, without limitation, that attributable to Capital Lease Obligations in accordance with GAAP) of GSI and its consolidated Subsidiaries with respect to all outstanding Indebtedness of GSI and its consolidated Subsidiaries. "Consolidated Net Income" for any period, the consolidated net income (or net loss) of GSI and its consolidated Subsidiaries for such period, determined in accordance with GAAP. "Consolidated Obligor Tangible Assets" means, at any time, Consolidated Tangible Assets at such time, excluding, however, in the determination thereof any assets for any Subsidiary of GSI unless such Subsidiary is one of the Persons constituting the Borrower at such time or has guaranteed payment of the Obligations pursuant to Section 6.6(f). "Consolidated Tangible Assets" means, at any time, (a) the total assets of GSI and its consolidated Subsidiaries as would be shown on a consolidated balance sheet of GSI and its Consolidated Subsidiaries as of such time prepared in accordance with GAAP, minus (b) to the extent included in clause (a), the net book value of all Consolidated Intangibles deducting any reserves applicable thereto). "Consolidated Tangible Net Worth" at a particular date, (a) the sum of all amounts which would be included under shareholders' equity on a consolidated balance sheet of GSI and its consolidated Subsidiaries determined in accordance with GAAP as at such date minus (b) Consolidated Intangibles as at such date. "Contingent Obligation" as to any Person any guarantee of payment, collection or performance by such Person of any Indebtedness or other obligation of any other Person, or any agreement to provide financial assurance with respect to the financial condition, or the payment of the obligations of, such other Person (including, without limitation, purchase or repurchase agreements, reimbursement agreements with respect to letters of credit or acceptances, indemnity arrangements, grants of security interests to support the obligations of another Person, keepwell agreements and take-or-pay or through-put arrangements) which has the effect of assuring or holding harmless any third Person against loss with respect to one or more obligations of such other Person; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business or indemnities entered into in the ordinary course of business in connection with the sale of inventory or licensing of intellectual property or other proprietary information. The amount of any Contingent Obligation of any Person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made and (b) the maximum amount for which such contingently liable Person may be liable pursuant to the terms of the instrument embodying such Contingent Obligation, unless such primary obligation and the maximum amount for which such contingently liable Person may be liable are not stated or determinable, in which case the amount of such Contingent Obligation shall be such contingently liable Person's maximum reasonably anticipated liability in respect thereof as determined by the contingently liable Person in good faith. "Contractual Obligation" as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Controlled Group" as set forth in Section 1563(a) of the Code. "CPLTD" for any period, the sum of (i) the current portion of Capital Lease Obligations of GSI and its consolidated Subsidiaries and any permitted prepayments of Subordinated Debt of GSI and its consolidated Subsidiaries, and (ii) all other amounts which were, or would be, in conformity with GAAP included under current portion of long term debt on the consolidated balance sheet of GSI for the relevant period then ended; provided that the calculation of CPLTD shall not include the current portion of any Loans. "Default" any of the events specified in Section 7.1, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Dollar" and "$" lawful currency of the United States of America. "Effective Date" as set forth in Section 4.1. "Eligible Receivables" all accounts receivable of each of the Persons constituting the Borrower other than accounts receivable (i) which have remained unpaid for more than 90 days after the date of their creation; (ii) which are owed by any Person where 50% or more of the receivables owed by such Person would be excluded by reason of clause (i) of this definition (the "50% Rule"); (iii) which are owed by any Affiliate of any Person constituting the Borrower to any Person constituting the Borrower or another Affiliate; (iv) which are payable by any Person not incorporated in a jurisdiction which is part of the United States of America or any state thereof; (v) as to which the goods which gave rise to the receivable have been or are being returned or as to which a credit has been claimed; (vi) as to which (collectively, "Contras") the account party is or may set off against or net out amounts due such account party by any Person constituting the Borrower; (vii) as to which there are accrued and unpaid late charges, to the extent of such late charges (provided, that this clause (vii) shall not derogate from the provisions of clause (i) above); (viii) which are payable by any Person which is the subject of any voluntary or involuntary bankruptcy or insolvency proceeding (state or federal), which has made a general assignment for the benefit of creditors or had a receiver, trustee or other similar official appointed with respect to all or a substantial portion of its properties or which has ceased doing business; or (ix) which Lender deems to be otherwise unacceptable in its reasonable judgement. "ERISA" means the Employee Retirement Income Security Act of 1974 (and any sections of the Code amended by it), as the same from time to time may be amended, supplemented or modified, and all regulations promulgated thereunder. "ERISA Affiliate" means each trade or business (whether or not incorporated) which together with any Person constituting the Borrower would be deemed to be a single employer under Section 414 of the Code. "Eurocurrency Reserve Requirements" for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exceptions or offsets which may be available from time to time to Lender under Regulation D. "Eurodollar Base Rate" with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at which PNC or its Affiliate is offering Eurodollar deposit-based loans to prime banks at or about 10:00 a.m., New Jersey time, two Business Days prior to the beginning of such Interest Period, (a) in the interbank eurodollar market where the eurodollar and foreign currency exchange operations in respect of its Eurodollar Loans then are being conducted, (b) for delivery on the first day of such Interest Period, (c) for the number of days contained therein and (d) in an amount comparable to PNC's Percentage of the Eurodollar Loan to be outstanding during such Interest Period. "Eurodollar Loans" Loans whose rate of interest is based upon the Eurodollar Rate. "Eurodollar Rate" with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum for such day (rounded upward to the nearest 1/100 of 1%) obtained by dividing (x) the Eurodollar Base Rate by (y) 1.00 minus the then current Eurocurrency Reserve Requirement. "Event of Default" as defined in Section 7.1. "Federal Funds Rate" for any period, a fluctuating interest rate per annum (based on a 360 day year) equal for each day during such period to the average of the rates of interest charged on overnight federal funds transactions, with member banks of the Federal Reserve System only, as published for any day which is a Business Day by the Federal Reserve Bank of New York (or, in the absence of such publication, as reasonably determined by the Agent). "Fixed Charge Coverage Ratio" means, as of the last day of any fiscal quarter of GSI, the ratio of (i) the sum of (x) earnings before tax of GSI and its consolidated Subsidiaries, (y) Consolidated Interest Expense, plus (z) rent expense under operating leases of GSI and its consolidated Subsidiaries for the four consecutive fiscal quarters of GSI and its consolidated Subsidiaries ending on such date to (ii) the sum of (x) Consolidated Interest Expense, (y) rent expense under operating leases of GSI and its consolidated Subsidiaries plus (z) CPLTD for such period. "Funded Debt" for any Person, at any date of determination, for GSI and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP); obligations created, issued or incurred for borrowed money (whether by loan or the issuance and sale of debt securities or otherwise). "GAAP" generally accepted accounting principles in the United States of America consistent with those utilized in preparing the audited financial statements referred to in Section 5.1(a). "Governmental Authority" 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. "Indebtedness" of any Person at any date (without duplication): (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all Capital Lease Obligations of such Person, (d) all reimbursement and other obligations of such Person in respect of letters of credit, acceptances and similar obligations issued or created for the account of such Person, (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, (f) net liabilities of such Person under interest rate cap agreements, interest rate swap agreements, foreign currency exchange agreements and other hedging agreements or arrangements, (g) all Contingent Obligations of such Person, and (h) withdrawal liabilities of such Person or any Commonly Controlled Entity under a Plan. The Indebtedness of any Person shall include any Indebtedness of any partnership in which such Person is a general partner. "indemnified liabilities" as defined in Section 10.5. "Intellectual Property" has the meaning ascribed thereto in Section 3.9. "Interest Payment Date" (a) as to any Loan, the first day of each calendar month to occur while such Loan is outstanding, beginning on the first day of the first full calendar month occurring after the date of such Loan, and (b) in addition, as to any Eurodollar Loan the last day of each Interest Period with respect thereto. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "Interest Period" with respect to any Eurodollar Loan: (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three, six or twelve months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, given with respect thereto, subject to availability; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three, six or twelve months thereafter, as selected by the Borrower by irrevocable notice to the Agent given not less than three Business Days prior to the last day of the then current Interest Period with respect thereto, subject to availability; provided that, the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period would end on a day other than a Business Day such Interest Period shall be extended to the next Business Day unless, in the case of a Eurodollar Loan, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day; (2) in the case of a Eurodollar Loan, if an Interest Period commences on the last day in a calendar month that is a Business Day, such Interest Period shall end on the last day that is a Business Day in the month that is the specified number of months after the month in which such Interest Period commenced; and (3) an Interest Period that otherwise would extend beyond the Maturity Date shall end on the Maturity Date. "Issuance Request" a certificate duly executed by a Responsible Officer of any Person constituting the Borrower in substantially the form of Exhibit C hereto, and delivered to the Issuer (with a copy to the Agent) requesting the issuance of a Letter of Credit described therein. "Issuer" PNC. "Letter of Credit" has the meaning set forth in Section 2.15(a) hereof. "Letter of Credit Availability" at any time, the lesser of (a) $1,000,000 minus any Letter of Credit Outstanding(s) and (b) the then Available Commitment for Revolving Credit Loans and Letters of Credit. "Letter of Credit Outstandings" at any time, an amount equal to the sum of (a) the aggregate undrawn, available amount at such time of all Letters of Credit then outstanding plus (b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations. "Lien" any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), other charge or security interest; or any preference, priority or other agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any Capital Lease Obligations having substantially the same economic effect as any of the foregoing). A precautionary filing of a financing statement by a lessor of property (other than with respect to a Capital Lease Obligation) covering only such property shall not constitute a Lien. "Loan" any loan made by the Lenders pursuant to this Agreement (whether denominated as a Prime Rate Loan, Eurodollar Loan or otherwise). "Loan Documents" this Agreement, the Notes and the Security Documents. "Material Adverse Effect" a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of GSI and the Subsidiary Borrowers, taken as a whole, or (b) the validity or enforceability of (i) this Agreement, any of the Notes or the other Loan Documents or (ii) the rights or remedies of the Lender hereunder or thereunder. "Maturity Date" December 3, 2002. "Multiemployer Plan" a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Notes" the collective reference to the Revolving Credit Notes. "Note Purchase Agreements" the collective reference to the Note Purchase Agreement dated as of December 3, 1997 among Borrower and the Mutual Life Insurance Company of New York, the Note Purchase Agreement dated as of December 3, 1997 among Borrower and Great West Life & Annuity Insurance Company, the Note Purchase Agreement dated as of December 3, 1997 among Borrower and AUSA Life Insurance Company, Inc. and the Note Purchase Agreement dated as of December 3, 1997 among Borrower and Nationwide Life and Annuity Insurance Company; pursuant to which the Borrower is issuing the Senior Notes in the Private Placement, as the same may be amended, modified or supplemented, from time to time. "Obligations" all obligations (monetary or otherwise) of the Borrower to the Lenders and/or the Agent arising under or in connection with this Agreement (including, without limitation, the Reimbursement Obligations and the Letters of Credit), the Notes and the other Loan Documents. "Obligor Fixed Charge Coverage Ratio" means, as of the last day of any fiscal quarter of GSI, the ratio of (i) the sum of (x) earnings before tax of the Borrower and each Subsidiary which has guaranteed the Obligations pursuant to Section 6.6, (y) Consolidated Interest Expense of the Borrower and each Subsidiary which has guaranteed the Obligations pursuant to Section 6.6, plus (z) rent expense under operating leases of the Borrower and each Subsidiary which has guaranteed the Obligations pursuant to Section 6.6 for the four consecutive fiscal quarters of GSI ending on such date to (ii) the sum of (x) Consolidated Interest Expense (but excluding Consolidated Interest Expense of any Subsidiary of GSI which is not a Person constituting the Borrower or which has not guaranteed the Obligations pursuant to Section 6.6), (y) rent expense under operating leases of the Borrower and each Subsidiary which has guaranteed the Obligations pursuant to Section 6.6 plus (z) CPLTD for such period (but excluding Consolidated Interest Expense of any Subsidiary of GSI which is not a Person constituting the Borrower or which has not guaranteed the Obligations pursuant to Section 6.6). "Payment Office" as specified in Section 2.14. "PBGC" the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, and any entity succeeding to any or all of its functions under ERISA. "Percentage" of any Lender means, at any time, with respect to Revolving Credit Loans, the percentage set forth opposite such Lender's name on Schedule I hereto under the heading "Revolving Credit Loans." "Permitted Investments" (a) marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within six months from the date of acquisition thereof; (b) marketable general obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within six months from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings generally obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc.; (c) without limiting the provisions of subsection (d) of this definition, commercial paper maturing no more than six months from the date of acquisition thereof and, at the time of acquisition, having a rating of A-1 (or the equivalent) or higher from Standard & Poor's Corporation and P-1 (or the equivalent) or higher from Moody's Investors Service, Inc.; (d) commercial paper maturing no more than six months from the date of acquisition thereof and issued by (i) the holding company of any Lender or (ii) the holding company of any other bank that has (A) combined capital, surplus and undivided profits (less any undivided losses) of not less than $250 million, (B) a Keefe Bank Watch Rating of C or better and (C) commercial paper having a rating of A-2 (or the equivalent) from Standard & Poor's Corporation or P-2 (or the equivalent) or higher from Moody's Investors Service, Inc.; (e) domestic and Eurodollar certificates of deposit, time or demand deposits or bankers' acceptances maturing within six months from the date of acquisition issued or guaranteed by or placed with, and money market deposit accounts issued or offered by: (i) any Lender, (ii) any other commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia having combined capital, surplus and undivided profits (less any undivided losses) of not less than $500 million, (iii) any branch located in the United States of America of a commercial bank organized under the laws of the United Kingdom or Canada having combined capital, surplus and undivided profits (less any undivided losses) of not less than $500 million or (iv) any domestic commercial bank the deposits of which are guaranteed by the Federal Deposit Insurance Corporation, provided that (A) the full amount of the deposits of the Person making such Permitted Investment are so guaranteed and (B) the aggregate amount of all Permitted Investments under this clause (iv) does not exceed $500,000; and (f) fully collateralized repurchase agreements with a term of not more than 30 days for underlying securities of the type described in subsections (a) and (b) of this definition, entered into with any institution meeting the qualifications specified in clause (d) or subclauses (i) through (iii) of clause (e) of this definition; provided, in each case, that such obligations are payable in Dollars. "Person" an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan" any employee benefit plan which is subject to ERISA and which covers the employees or former employees of any Person constituting the Borrower or an ERISA Affiliate, under which any Person constituting the Borrower or an ERISA Affiliate has any obligation or liability or under which such Person or an ERISA Affiliate has made contributions within the preceding five years. References herein to a Plan shall include any Multiemployer Plan. "PNC" PNC Bank, National Association. "Pricing Schedule" means the Schedule identified as such, attached hereto and made a part hereof. "Prime Rate" means the rate of interest per annum publicly announced from time to time by PNC as its prime rate in effect at its principal office in Moorestown, New Jersey. The Prime Rate is not intended to be the lowest rate of interest charged by PNC in connection with extensions of credit to debtors. "Prime Rate Loans" Loans whose interest rate is based on the Prime Rate. "Private Placement" means the issuance of an aggregate of $25,000,000 in original face amount of Series A Senior Notes due November 15, 2009, Series B Senior Notes due November 15, 2007 and Series C Senior Notes due November 15, 2003 pursuant to the Note Purchase Agreements. "Purchasing Lender" as defined in Section 9.1. "Regulation U" Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Reimbursement Obligation" as defined in Section 2.15(h) hereof. "Reportable Event" any event set forth in Section 4043(b) of ERISA or the regulations thereunder. "Required Lenders" each of PNC and First Union National Bank, so long as they are the only Lenders, and at any time when such institutions are not the sole Lenders, the Lenders holding 66 2/3% of the aggregate Commitments, if no Loans are outstanding, and, otherwise, Lenders holding 66 2/3% of outstanding Loans and Letter of Credit Outstandings. "Requirement of Law" as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" in such Person's capacity as such, the chief executive officer of any Person constituting the Borrower and the president of such Person (if not the chief executive officer) and, with respect to financial matters, the chief financial officer or corporate controller of such Person. "Revolving Credit Loans" as defined in Section 2.1(a). "Revolving Credit Note" as defined in Section 2.2. "Revolving Loan Commitment" as to any Lender, the obligation of such Lender to make Revolving Credit Loans to the Borrower hereunder. "Security Documents" the collective reference to any guarantee(s) delivered pursuant to Section 6.6(f). "Senior Notes" the collective reference to the $15,000,000 7.06% Series A Senior Notes due November 15, 2009, the $5,000,000 6.95% Series B Senior Notes due November 15, 2007 and $5,000,000 6.70% Series C Senior Notes due November 15, 2003 as the same may be amended, modified or supplemented from time to time. "Subordinated Debt" any unsecured Indebtedness of any Person constituting the Borrower (a) no part of the principal of which is stated to be payable or is required to be paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to October 31, 2002, and the payment of the principal of and interest on which and other obligations of the Borrower in respect thereof are subordinated to the prior payment in full of the principal of and interest (including post-petition interest) on the Notes and all other Obligations hereunder on terms and conditions approved in writing by the Required Lenders and (b) otherwise containing terms, covenants and conditions satisfactory in form and substance to the Required Lenders, as evidenced by their prior written approval thereof. "Subsidiary" as to any Person (a "Parent") (a) any other Person in which the Parent owns or controls, directly or indirectly, more than 50% of the Capital Stock of such Person, (b) any other Person of which such percentage of Capital Stock shall at the time be owned or controlled by the Parent or one or more of its Subsidiaries as defined in clause (a) or by one or more such Subsidiaries, or (c) any other Person of which Capital Stock having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such Person are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Parent. "Subsidiary Borrower" Guest Packaging, Inc., Breckenridge-Remy Co. or Guest Distribution Services, Inc., as the case may be, and, collectively, the "Subsidiary Borrowers." "Taxes" for any period, the amount of taxes on income which would, in conformity with GAAP, be set forth on the income statements of GSI and its consolidated Subsidiaries net of the amount of any net operating losses used in determining the amount of such Taxes. "Tranche" the collective reference to Eurodollar Loans whose Interest Periods begin on the same date and end on the same later date (whether or not such Loans originally were made on the same day). "Type" as to any Loan, its nature as a Prime Rate Loan or a Eurodollar Loan. "Working Day" any Business Day on which dealings in foreign currencies and exchange between banks may be carried on in London, England. Section 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in the Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to GSI and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. ARTICLE 2. AMOUNT AND TERMS OF COMMITMENTS Section 2.1 Revolving Credit Commitments. (a) Subject to the terms and conditions of this Agreement, each Lender severally agrees to make revolving credit loans ("Revolving Credit Loans") to the Borrower from time to time from the date hereof to but excluding the Maturity Date in an aggregate principal amount at any one time outstanding for the Borrower not to exceed the then Available Commitment of such Lender. The Borrower may borrow and prepay the Revolving Credit Loans in whole or in part, and reborrow Revolving Credit Loans, all in accordance with the terms and conditions hereof. All Revolving Credit Loans shall be paid in full on the Maturity Date. (b) The Revolving Credit Loans may from time to time be Eurodollar Loans, Prime Rate Loans or a combination thereof, as determined by the Borrower and notified to the Agent in accordance with Section 2.3 and Section 2.10, provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Maturity Date. Section 2.2 Revolving Credit Note. The Revolving Credit Loans made by each Lender shall be evidenced by a promissory note of the Borrower, substantially in the form of Exhibit A, with appropriate insertions as to date and principal amount (each a "Revolving Credit Note"), payable to the order of such Lender and in a principal amount equal to such Lender's Revolving Loan Commitment. Each Lender is hereby authorized to record the date, Type and amount of each Revolving Credit Loan, each continuation thereof, each conversion of all or a portion thereof to another Type, the date and amount of each payment or prepayment of principal thereof and, in the case of Eurodollar Loans, the length of each Interest Period with respect thereto, on the schedule annexed to and constituting a part of each Revolving Credit Note, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded. Each Revolving Credit Note shall (x) be dated the Closing Date, (y) be stated to mature on the Maturity Date and (z) provide for the payment of interest in accordance with Section 2.12. Section 2.3 Procedure for Revolving Credit Borrowings. (a) The Borrower may borrow under the Commitment for Revolving Credit Loans prior to the Maturity Date on any Business Day. The Borrower shall give the Agent irrevocable notice (which notice must be received by the Agent prior to 10:00 a.m., New Jersey time, three Business Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Credit Loans are to be initially Eurodollar Loans and one Business Day prior to the requested Borrowing Date in the case of the initial Prime Rate Loan and otherwise by 12:00 noon on the date of the requested Prime Rate Loan), specifying (1) the amount to be borrowed, (2) the requested Borrowing Date, (3) whether the borrowing is to be of Eurodollar Loans or Prime Rate Loans or a combination thereof and (4) if the borrowing is to be entirely or partly of Eurodollar Loans, the amount of such Loans and the length of the initial Interest Period therefor. Each Revolving Credit Loan shall be in an amount equal to (x) in the case of Prime Rate Loans, $50,000 or a whole multiple thereof (or, if less, the then Available Commitment) and (y) in the case of Eurodollar Loans $500,000 or a whole multiple of $10,000 in excess thereof. The Agent shall promptly notify the Lenders of its receipt of any such irrevocable notice of borrowing from the Borrower. (b) On or before 12:00 noon New Jersey time on the Business Day specified in the Borrower's notice of borrowing, each Lender shall provide the Agent with funds at the Payment Office in an amount equal to such Lender's Percentage of the requested borrowing. The proceeds of each borrowing shall be made available by the Agent to the Borrower pursuant to Section 2.14(c). No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. Neither the Agent nor any Lender shall have any liability for the failure of any Lender (other than itself) to fund a Loan. (c) With respect to any Loan, unless the Agent shall have been notified in writing by any Lender prior to the date of making such Loan that such Lender does not intend to make available to the Agent such Lender's portion of the Loan to be made on such date, the Agent may (but shall not be obligated to) assume that such Lender has made such amount available to the Agent on that date and, in reliance on such assumption, the Agent may make available to the Borrower a corresponding amount. If such amount is not made available by such Lender to the Agent on the date of making such Loan, such Lender shall be obligated to pay such amount to the Agent and shall pay to the Agent on demand interest on such amount at the Federal Funds Rate for the number of days from and including the date of making such Loan to the date on which such Lender's portion of the Loan becomes immediately available to the Agent. The Agent shall also be entitled to recover such amount, with interest thereon at the rate per annum then applicable to the Loans comprising such borrowing, upon demand, from the Borrower. A statement of the Agent submitted to any Lender with respect to any amounts owing under this Section 2.3(c) shall be conclusive and binding in the absence of demonstrable error. Nothing in this Section 2.3(c) shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder. Section 2.4 Commitment Fees. The Borrower agrees to pay to the Agent for the benefit of and disbursement to the Lenders a commitment fee in respect of the Commitments to make Revolving Credit Loans, for the period from and including the date hereof to the Maturity Date, computed at the rate of .125% per annum, calculated on the basis of a 360-day year for the actual days elapsed, on the average daily amount of the aggregate Available Commitments during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Maturity Date or such earlier date as the Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof. Section 2.5 Termination or Reduction of Commitments. (a) GSI shall have the right, upon not less than five Business Days' written notice to the Agent, to terminate the Revolving Loan Commitments or, from time to time, to reduce the amount of such Commitments, provided that at no time may the Revolving Loan Commitments be reduced by the Borrower to an amount less than the sum of the outstanding principal amount of Revolving Credit Loans and Letter of Credit Outstandings. Any such reduction shall be in an amount equal to $500,000 or a whole multiple thereof and shall reduce permanently the Revolving Loan Commitments then in effect. Any such reduction in the Revolving Loan Commitment shall be binding on the Subsidiary Borrowers whether or not they have notice thereof. (b) Each reduction in the Revolving Loan Commitments, whether voluntary or automatic, shall be permanent and irrevocable. All reductions in the Revolving Loan Commitments shall be made pro rata to the Revolving Loan Commitments of the Lenders. The Agent shall promptly notify each Lender of the amount of any reduction of its Revolving Loan Commitment. Section 2.6 Prepayments. (a) From time to time the Borrower may prepay the Loans, in whole or in part, subject to the provisions of Section 2.14 but otherwise without premium or penalty, upon at least two Business Days' irrevocable notice to the Agent (except in the case of prepayments required pursuant to Section 2.6(c) for which no notice is required), specifying the date and amount of prepayment. Prepayments of Eurodollar Loans shall be subject to the provisions of Section 2.14. Partial prepayments shall be in an aggregate principal amount of $100,000 or a whole multiple of $10,000 in excess thereof in the case of Prime Rate Loans and $500,000 or a whole multiple thereof in the case of Eurodollar Loans or if such prepayment would reduce the principal amount of such Eurodollar Tranche below $500,000, in an aggregate principal amount equal to the outstanding principal amount of such Tranche. All prepayments shall be allocated to the Lenders based on their respective Percentages. (b) If any notice of prepayment is given, the amount specified in such notice shall be due and payable on the date specified therein. Prepayments of the Loans shall be accompanied by payment of accrued interest to the payment date on the principal amount prepaid. (c) In the event (i) the aggregate outstanding principal amount of the Revolving Credit Loans and Reimbursement Obligations and (ii) Letter of Credit Outstandings (excluding Reimbursement Obligations) exceeds the Revolving Loan Commitments at the end of any Calculation Period, the Borrower shall, on or before 3:00 p.m. on the first Business Day after such excess is established by the Agent in writing, prepay the Revolving Credit Loans and Reimbursement Obligations in an amount equal to such excess (together with interest on the amount prepaid to the date of prepayment). If such excess is greater than the outstanding principal amount of Revolving Credit Loans and Reimbursement Obligations, the Borrower shall, in addition, post cash collateral with the Agent to secure repayment of the Letter of Credit Outstandings in an amount equal to the balance of such excess. Any such prepayments shall be made on or before 3:00 p.m. on the first Business Day after any excess is established pursuant to this Section 2.6(c) and shall be subject to the provisions of Section 2.14. (d) The Agent shall disburse all prepayments of the Loans to the Lenders on a pro rata basis. Section 2.7 Conversion and Continuation Options. The Borrower shall have the right at any time upon prior irrevocable notice to the Agent (i) not later than 12:00 noon, New Jersey time, on any Business Day, to convert any Eurodollar Loan to a Prime Rate Loan, (ii) not later than 10:00 a.m., New Jersey time, three Business Days prior to conversion or continuation, to convert any Prime Rate Loan into a Eurodollar Loan or to continue any Eurodollar Loan as a Eurodollar Loan for any additional Interest Period, and (iii) not later than 10:00 a.m., New Jersey time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Loan to another permissible Interest Period, subject in each case to the following: (a) a Eurodollar Loan may not be converted at a time other than the last day of the Interest Period applicable thereto; (b) any portion of a Loan maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Loan; (c) No Eurodollar Loan may be continued as such and no Prime Rate Loan may be converted to a Eurodollar Loan when any Event of Default has occurred and is continuing; (d) any portion of a Eurodollar Loan that cannot be converted into or continued as a Eurodollar Loan by reason of Section 2.7(b) or 2.7(c) or otherwise automatically shall be converted at the end of the Interest Period in effect for such Loan to a Prime Rate Loan; (e) on the last day of any Interest Period for Eurodollar Loans, if the Borrower has failed to give notice of conversion or continuation as described in this subsection or if such conversion or continuation is not permitted pursuant to Section 2.7(d) or otherwise, such Loans shall be converted to Prime Rate Loans on the last day of such then expiring Interest Period; (f) accrued interest on a Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion. Section 2.8 Minimum Amounts of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to $500,000 or a whole multiple of $10,000 in excess thereof. Section 2.9 Interest Rates and Payment Dates. (a) Subject to the provisions of Section 2.9(c), each Prime Rate Loan shall bear interest at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days and twelve 30-day months) equal to the Prime Rate less the Applicable Margin. (b) Subject to the provisions of Section 2.9(c), each Eurodollar Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Eurodollar Rate for the Interest Period in effect for such Eurodollar Loan plus the Applicable Margin in effect for such Interest Period. (c) If all or a portion of (A) the principal amount of any Loan, (B) any interest payable thereon or (C) any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, upon notice to the Borrower from the Agent, bear interest at a rate per annum which is (1) in the case of overdue principal, the rate that otherwise would be applicable thereto pursuant to the foregoing provisions of this subsection plus 3% per annum, or (2) in the case of overdue interest or fees or other amounts, the Prime Rate plus 3%, in each case from the date of such nonpayment until such amount is paid in full (as well as after, to the extent permitted by law, as before judgment). In no event shall any interest to be paid pursuant to this Agreement exceed the maximum rate permitted by law. (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing on overdue amounts pursuant to Section 2.9(c) shall be payable on demand. (e) As soon as practicable the Agent shall notify the Borrower and the Lenders of (A) each determination of a Eurodollar Rate and Applicable Margin and (B) the effective date and the amount of each change in the interest rate on a Loan. Each determination of an interest rate by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of clearly demonstrable error. At the request of the Borrower, the Agent shall deliver to the Borrower a statement showing the quotations used by the Agent in determining any interest rate pursuant to Sections 2.9(a), (b) or (c). Section 2.10 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) a Lender notifies the Agent and Borrower that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lender of making or maintaining the Eurodollar Loans during such Interest Period, or (c) The Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that Dollar deposits in the principal amounts of the Eurodollars Loans to which such Interest Period is to be applicable are not generally available in the London Interbank Market, the Agent shall give notice thereof to the Borrower by fax or telephone as soon as practicable thereafter. If such notice is given (A) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans, and (B) any Loans that were to have been converted to or continued as Eurodollar Loans on the first day of such Interest Period shall be converted to or continued as Prime Rate Loans. Until such notice has been withdrawn by the Agent, no Loans shall be made as or converted to or continued as Eurodollar Loans. Section 2.11 Payments/Funding. (a) All payments (including prepayments) made by the Borrower hereunder and under the Notes, whether on account of principal, interest, fees, Reimbursement Obligations or otherwise, shall be made without set off or counterclaim and shall be made prior to 12:00 noon, New Jersey time, on the due date thereof to the Agent, for the account of the Lenders in Dollars and in immediately available funds to the Agent's account at such address as the Agent shall give notice to the Borrower and the Lenders (the "Payment Office"). Except for payments received by the Agent for the account of the Agent in its capacity as such, or for the account of a specific Lender in accordance with the provisions of this Agreement, the Agent shall, within one Business Day of funds collection, distribute like funds relating to the payment of principal, interest or fees pro rata to the Lenders (based on their Percentages) to which such payment is due and payable for their accounts and at the addresses as each such Lender shall specify in its notice to the Agent made in accordance with Section 10.2 of this Agreement. If the Agent fails to so distribute funds within the time set forth in the preceding sentence, the Agent shall pay interest on the amount to be distributed at a rate equal to the Federal Funds Rate from the date such funds were to be distributed to the date of distribution. Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Agent may (but shall not be obligated to) assume that the Borrower has made such payment in full to the Agent on such date, and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand the amount distributed to such Lender together with interest thereon, at the rate equal to the Federal Funds Rate, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent. (b) If any principal payment hereunder (other than payments on Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment date shall be extended to the next succeeding Business Day, and interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day (and interest shall accrue during such extension of time) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. (c) If on any date a payment is due hereunder, the Borrower shall pay less than the amount stated to be due or on any date the Agent shall receive any payment under any Security Document or pursuant to any proceeding to enforce the Obligations of any Person constituting the Borrower, such proceeds shall be distributed to the Lenders pro rata based on their respective Percentages and shall be applied first to costs of collection incurred by each Lender, second to accrued and unpaid interest, third to principal and then to the payment of any other amounts due hereunder or the other Loan Documents. (d) The Agent shall fund each Loan by depositing the amount thereof in the joint account (the "Account") of GSI and the Subsidiary Borrowers (account no. 8002751648) at the Agent's office at Two Tower Center Boulevard, East Brunswick, New Jersey 08817; provided that the proceeds of each Loan shall first be applied to principal prepayments or payments due on the date of such Loan (without derogating from the Borrower's obligation to repay) and proceeds of any conversion or continuation of a Loan to or as a particular Type shall be applied by the Agent solely to effect such conversion or continuation. Each Lender is hereby authorized to debit the accounts of each Person constituting the Borrower for all payments due hereunder; provided the foregoing shall not derogate from the Borrower's obligation to pay or restrict any Lender's recourse to any particular fund or source of monies; and provided further, each Lender agrees not to debit such accounts for amounts payable pursuant to Sections 2.13, 2.14 or 10.5 unless an Event of Default has occurred and is continuing. The Borrower agrees to maintain its primary depository accounts with PNC's office at Two Tower Center Boulevard, East Brunswick, New Jersey 08817. Section 2.12 Change in Legality. Notwithstanding any other provision herein, if any change in any Requirement of Law or in the interpretation or application thereof by a Governmental Authority shall make it unlawful for a Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the Commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Loans to Eurodollar Loans forthwith shall be canceled and (b) such Loans then outstanding as Eurodollar Loans, if any, automatically shall be converted to Prime Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.14. Section 2.13 Increased Costs. (a) If the adoption of, or any change in, any Requirement of Law or in the interpretation or application thereof by a Governmental Authority or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (1) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for the imposition of and changes in the rate of tax on the overall net income of the Lender); (2) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of a Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder, including, without limitation, the imposition of any reserves with respect to Eurocurrency Liabilities under Regulation D of the Board; or (3) shall impose on a Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans hereunder or to reduce any amount receivable hereunder in respect thereof then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If a Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Agent and the Borrower of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection submitted by a Lender to the Borrower and Agent shall be conclusive in the absence of clearly demonstrable error. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. (b) In the event that a Lender shall have determined that any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such change or compliance (taking into consideration Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Agent) of a written request therefore, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) In the event that by reason of any change in any Requirement of Law (including, without limitation, the lapse or termination of any treaty) or in the interpretation thereof, or the adoption of any new law, regulation or requirement by any Governmental Authority, or the imposition of any requirement of any central bank whether or not having the force of law, (i) the Agent or any Lender shall, with respect to this Agreement, the Loans, the Letters of Credit (or risk participations therein), the Reimbursement Obligations (or risk participations therein), the Notes or its obligation to make Loans or issue and/or own risk participations in Letters of Credit under this Agreement, be subjected to any withholding or other tax, levy, impost, charge, fee, duty or deduction of any kind whatsoever (other than franchise taxes imposed by the jurisdiction in which the Agent or such Lender is domiciled and other than any tax generally imposed or based upon the net income or branch profits of the Agent or such Lender) (collectively, "Taxes") or (ii) any change shall occur in the taxation of the Agent or such Lender with respect to any Loan, any Reimbursement Obligation (or any risk participation therein), the interest payable thereon or any fees payable hereunder or referred to herein (other than franchise taxes imposed by the jurisdiction in which the Agent or such Lender is domiciled and other than any change which affects, and to the extent that it affects, the taxation of the net income or branch profits of the Agent or such Lender), and if any such measures or any other similar measure shall result in an increase in the cost to the Agent or such Lender of making or maintaining any Loan or any Letter of Credit or a reduction in the amount of principal, interest or fees receivable by the Agent or such Lender in respect thereof, the Agent or such Lender promptly after learning of the imposition of such cost or reduction in any amount shall notify the Borrower and the Agent (if applicable) stating the reasons therefor. The Borrower shall thereafter pay to the Agent or such Lender, upon demand from time to time, as additional consideration hereunder, such additional amounts as will fully compensate the Agent or such Lender for such increased costs or reduced amounts and shall promptly provide the Agent or such Lender, as the case may be, with official tax receipts or other evidence of the payment of any taxes paid by the Borrower. A certificate as to the increased costs or reduced amounts setting forth the calculations therefor, shall be submitted promptly by the Agent or such Lender to the Borrower and the Agent (if applicable) and, in the absence of demonstrable error, shall be conclusive and binding as to the amount thereof. If the Agent or Lender receives any additional amounts from the Borrower pursuant to this subsection (c) if requested by Borrower, the Agent or such Lender shall (at the Borrower's expense) use its best efforts to obtain a refund, reduction, deduction or credit for any Taxes with respect to the additional amounts paid under this subsection (c). If the Agent or such Lender actually receives or enjoys the benefit of any such refund, reduction, deduction or credit for any such Taxes, the Agent or such Lender shall reimburse the Borrower if and to the extent, but only the extent, that the Agent or such Lender determines that it has actually received (i) a refund of taxes or other amounts (together with any interest actually received thereon from the respective Governmental Authority) which refund is attributable to the Taxes with respect to which such additional amounts were paid; or (ii) an effective net reduction (through a reduction, deduction, credit or otherwise) in any taxes or other amounts otherwise payable by the Agent or such Lender (including any taxes imposed on or measured by the net income of the Agent or such Lender), which reduction is attributable to the Taxes with respect to such additional amounts were paid. If, at any time after the Agent or such Lender makes a payment to the Borrower pursuant to the preceding sentence, the Agent or such Lender determines that it was not entitled to the full amount of any refund (together with the interest thereon) reimbursed to the Borrower as aforesaid or that its taxes are not reduced by a credit or deduction for the full amount of Taxes reimbursed to the Borrower as aforesaid, the Borrower upon the demand of the Agent or such Lender will promptly pay to the Agent or such Lender the amounts so refunded to which the Agent or such Lender was not so entitled, or the amount by which the taxes of the Agent or such Lender were not so reduced, as the case may be. Section 2.14 Indemnity. (a) The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (1) default by the Borrower in payment when due of any portion of the principal amount of or interest on any Eurodollar Loan, (2) default by Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (3) default by Borrower in making any prepayment after Borrower has given a notice thereof in accordance with the provisions of this Agreement, or (4) the making of a payment (other than scheduled repayments) or a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto, including, without limitation, in each case, any such loss or expense arising from the reemployment of funds obtained by such Lender or from fees payable to terminate the deposits from which such funds were obtained. If the Borrower prepays all or any part of any advance which is accruing interest at a fixed rate on other than the last day of the applicable interest period, the Borrower shall also pay to the Lender, on demand therefor, the Cost of Prepayment. "Cost of Prepayment" means an amount equal to the present value, if positive, of the product of (a) the difference between (i) the yield, on the beginning date of the applicable interest period minus (ii) the yield, on the prepayment date, of a U.S. Treasury obligation with a maturity similar to the remaining maturity of the applicable interest period, and (b) the principal amount to be prepaid, and (c) the number of years, including fractional years from the prepayment date to the end of the applicable interest period. The yield on any U.S. Treasury obligation shall be determined by reference to Federal Reserve Statistical Release H.15(519) "Selected Interest Rates." For purposes of making present value calculations, the yield to maturity of a similar maturity U.S. Treasury obligation on the prepayment date shall be deemed the discount rate. The Cost of Prepayment shall also apply to any payments made after acceleration of the maturity of any Note. (b) For the purpose of calculation of all amounts payable to a Lender under this subsection such Lender shall be deemed to have actually funded its relevant Eurodollar Loan through the purchase of a deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of that Eurodollar Loan and having a maturity comparable to the relevant Interest Period; provided, however, that each Lender may fund each of its Eurodollar Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. Section 2.15 Letters of Credit. (a) By delivering to the Agent an Issuance Request on a Business Day, prior to the Maturity Date and not less than three Business Days prior to the requested date of issuance, Borrower may request that the Issuer issue an irrevocable letter of credit or a documentary letter of credit each in substantially the form of Exhibits D and E, respectively, attached hereto, with such insertions with respect to required presentation of documentation or certifications upon a draw as may be requested by the Borrower and approved by the Issuer, or in such other form as may be requested by the Borrower and approved by the Issuer and the Required Lenders (each a "Letter of Credit"), in support of financial obligations of the Borrower incurred in the ordinary course of business and which are described in such Issuance Request. Upon receipt of each Issuance Request, the Agent shall promptly notify the Lenders thereof. The stated amount of any Letter of Credit requested to be issued pursuant to an Issuance Request shall be denominated in Dollars. (b) Each Letter of Credit shall by its terms: (i) be issued in a stated amount which (A) is at least $10,000, and (B) when added to the Letter of Credit Outstandings does not exceed (or would not exceed) the then Letter of Credit Availability and (C) when added to all Revolving Credit Loans and Letter of Credit Outstandings does not exceed the amount of the then Revolving Loan Commitment; (ii) be stated to expire on a date (its "Stated Expiry Date") no later than the earlier of 12 months from its date of issuance or the then Maturity Date, whichever occurs first; and (iii) on or prior to its Stated Expiry Date (A) terminate immediately upon notice to the Issuer from the beneficiary thereunder that all obligations covered thereby have been terminated, paid, or otherwise satisfied in full, or (B) reduce in part immediately and to the extent the beneficiary thereunder has notified the Issuer that the obligations covered thereby have been paid or otherwise satisfied in part. (c) Subject to the terms and conditions of this Agreement, the Issuer shall issue Letters of Credit in accordance with the Issuance Requests made therefor. The Issuer will make available the original of each Letter of Credit which it issues in accordance with the Issuance Request therefor to the beneficiary thereof. (d) The Borrower agrees to pay to the Agent for the account of the Issuer, with respect to each Letter of Credit, the following fees: (i) an issuance fee of $75 for manual Letters of Credit and $45 for automated Letters of Credit; (ii) $45 for each amendment to a Letter of Credit; (iii) an amount equal to 1/4 of 1% ($50 minimum) of the amount of each draw under a Letter of Credit; (iv) a processing fee of $30 and (v) $75 in the case of each draw which the Borrower authorizes the Issuer to honor notwithstanding the failure of the beneficiary of a Letter of Credit to present any or all documents required by such Letter of Credit (it being agreed that the Borrower shall be required to reimburse the Issuer for any draws so authorized). It is understood that the foregoing charges are currently the Issuer's standard charges relating to Letters of Credit of the type contemplated hereby and that such charges may be changed by the Issuer from time to time. Any changes in such fees and charges shall be binding on the Borrower on the date each change therein is established by the Issuer. (e) To the extent of its Percentage, each Lender agrees to and shall be deemed to have irrevocably purchased a participation in each Letter of Credit on the date of issuance thereof. Each Lender shall make available to the Issuer, regardless of whether any Default or Event of Default shall have occurred and is continuing, an amount equal to its respective Percentage of each drawing on each Letter of Credit in same day or immediately available funds not later than 4:00 p.m. New Jersey time on each Disbursement Date (as hereinafter defined) for each such drawing provided such Lender has received notice pursuant to Section 2.15(g) by 11:00 a.m. New Jersey time; and by 10:00 a.m. on the next Business Day if such notice is not received by 11:00 a.m. In the event that any Lender fails to make available to the Issuer the amount of such Lender's Percentage of any drawing on a Letter of Credit as provided herein, the Issuer shall be entitled to recover such amount on demand from such Lender together with interest at the daily average Federal Funds Rate for the first three Business Days after the Disbursement Date (together with such other compensatory amounts as may be required to be paid by such Lender to the Issuer pursuant to the Rules for Interbank Compensation of the Council on International Lending or of the New York Clearing House Compensation Committee, as the case may be, as in effect from time to time) and thereafter at the Prime Rate. (f) The Agent shall distribute to each Lender that has paid all amounts payable by it under this Section 2.15 with respect to any Letter of Credit issued by Issuer such Lender's Percentage of all payments received by the Agent from the Borrower in reimbursement of drawings honored by Issuer under such Letter of Credit promptly after such payments are received. (g) The Issuer will notify the Borrower and the Agent promptly of the presentment for payment of any Letter of Credit (on the date of presentment, if possible, and otherwise on the next Business Day, it being agreed that such notice may be made by phone), together with notice of the date (the "Disbursement Date") such payment shall be made and the Agent will promptly notify the Lenders of such matters. Subject to the terms and provisions of such Letter of Credit, the Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 3:00 p.m. New Jersey time on the Disbursement Date, the Borrower shall (by payment to the Payment Office for distribution by the Agent) reimburse the Issuer for all amounts which have been disbursed under such Letter of Credit. To the extent the Issuer and the Lenders are not reimbursed in full in accordance with this Section 2.18(g), the Reimbursement Obligation shall accrue interest at a rate per annum equal to the Prime Rate, payable on demand. (h) The Borrower's obligation (a "Reimbursement Obligation") under Section 2.15(g) to reimburse the Lenders with respect to each drawing under each Letter of Credit (including interest thereon), and each Lender's obligation to fund each drawing, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which any Person constituting the Borrower or any Lender may have or have had against any Lender or any beneficiary of a Letter of Credit, including, without limitation, any defense based upon the occurrence of any Default or Event of Default, any draft, demand or certificate or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient, or any failure to apply or misapplication by the beneficiary of the proceeds of any disbursement, or the legality, validity, form, regularity, or enforceability of such Letter of Credit. (i) The Borrower assumes all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. Except to the extent of its own gross negligence or willful misconduct, the Issuer shall not be responsible for: (1) the form, validity, sufficiency, accuracy, genuineness, or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (2) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part; (3) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit; (4) errors, omissions, interruptions or delays in transmission or delivery of any information or messages, by mail, cable, telegraph, telex or otherwise; (5) any loss or delay in the transmission or otherwise of any document or draft required in order to make a disbursement under a Letter of Credit or of the proceeds thereof; (6) errors in interpretation of technical terms; (7) any misapplication by a beneficiary of the proceeds of any disbursement under any Letter of Credit; and (8) any consequences arising from causes beyond the control of the Issuer including, without limitation, acts of any Governmental Authority. None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to the Issuer hereunder. (j) In addition to amounts payable as elsewhere provided in this Section 2.15, the Borrower hereby agrees to protect, indemnify, pay and save the Issuer harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) which the Issuer may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of the Letters of Credit, other than as a result of the gross negligence or wilful misconduct of the Issuer as determined by a court of proper jurisdiction, or (ii) the failure of the Issuer to honor a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority. Section 2.16 Purpose of Loans. The proceeds of the Revolving Credit Loans shall be used first to repay all amounts outstanding under the Original Agreement. After repayment of all such amounts, proceeds of Revolving Credit Loans may be used to finance working capital needs of the Borrower (including, without limitation, payment of Reimbursement Obligations) and for general corporate purposes. ARTICLE 3 REPRESENTATIONS AND WARRANTIES To induce the Agent and the Lenders to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Agent and the Lenders that as of the Effective Date: Section 3.1 Financial Condition. (a) The consolidated balance sheets of GSI and its consolidated Subsidiaries as at June 30, 1997 and the related consolidated statements of income and of cash flows for the fiscal period ended on each such date, copies of which have heretofore been furnished to Lender, and present fairly in all material respects the consolidated financial condition of GSI and its consolidated Subsidiaries as at such dates, and the consolidated results of their operations and their consolidated cash flows for the fiscal years then ended. (b) All such financial statements, including the related schedules, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants and as disclosed therein). (c) Neither GSI nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet delivered to the Agent pursuant to Section 5.1 hereof, any material Contingent Obligation, material contingent liability or material liability for taxes, or any material long-term lease or material unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other financial derivative, except as reflected in the foregoing statements or in the notes thereto or would not reasonably be expected to have a Material Adverse Effect. (d) During the period from June 30, 1997, to and including the Effective Date hereof there has been no sale, transfer or other disposition by GSI or any of its consolidated Subsidiaries of any material part of its business or property (other than in the ordinary course of business) and no purchase or other acquisition of any business or property (including any Capital Stock of any other Person, in any case, other than in the ordinary course of business) material in relation to the consolidated financial condition of the Borrower and its consolidated Subsidiaries at June 30, 1997. Section 3.2 No Material Adverse Change. Since June 30, 1997, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. Section 3.3 Corporate Existence; Compliance with Law. Each of GSI and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except where the failure to so qualify or be in good standing therewith would not have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except where the failure to comply therewith would not, in the aggregate, have a Material Adverse Effect. Section 3.4 Corporate Power; Authorization; Enforceable Obligations. (a) Each Person constituting the Borrower has the corporate power and authority, and the legal right, to make, deliver and perform this Agreement, the Notes and each other Loan Document to which it is a party and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement, the Notes and each other Loan Document to which it is a party and to authorize the execution, delivery and performance of this Agreement, the Notes and each other Loan Document to which it is a party. (b) Except for consents, authorizations, approvals, notices and filings described on Schedule II, all of which have been obtained, made or waived, no consent or authorization of, approval by, notice to, filing with or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or the Notes or any other Loan Document. (c) This Agreement has been, and each Note and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of each Person constituting the Borrower. (d) This Agreement constitutes, and each Note and each other Loan Document when executed and delivered will constitute, a legal, valid and binding obligation of each Person constituting the Borrower enforceable against each such Person in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). Section 3.5 No Legal Bar. The execution, delivery and performance of this Agreement and the Notes, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of any Person constituting the Borrower or of any of their respective Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. Section 3.6 No Material Litigation. Except as set forth on Schedule III, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the any Person constituting the Borrower, threatened by or against any Person constituting the Borrower or any of their respective Subsidiaries or against any of its or their respective properties or revenues (a) with respect to this Agreement or the Notes or any of the transactions contemplated hereby, or (b) which if adversely determined would have a Material Adverse Effect. Section 3.7 No Default. No Person constituting the Borrower nor any of their respective Subsidiaries is in default under or with respect to any of their respective Contractual Obligations in any respect which would reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. Section 3.8 Ownership of Property; Liens. Each Person constituting the Borrower and their respective Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 6.2. Section 3.9 Intellectual Property. Each Person constituting the Borrower and each of their respective Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents, technology, know-how and processes necessary for the conduct of its business as currently conducted (collectively, the "Intellectual Property") except where the failure to own or license any such Intellectual Property would not have a Material Adverse Effect. Except as set forth on Schedule IV, no claim has been asserted in writing and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property which would have a Material Adverse Effect, nor does any Person constituting the Borrower know of any valid basis for any such claim which, if asserted, would have a Material Adverse Effect. To the best of the knowledge of the Borrower, the use of such Intellectual Property by each Person constituting the Borrower and their respective Subsidiaries does not infringe the rights of any Person. Section 3.10 No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of any Person constituting the Borrower or any of their respective Subsidiaries has a Material Adverse Effect. Section 3.11 Taxes. Each Person constituting the Borrower and their respective Subsidiaries has filed or caused to be filed all tax returns which, to the knowledge of such Person, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of such Person constituting the Borrower or its respective Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of such Person, no claim is being asserted, with respect to any such tax, fee or other charge in any case which would have a Material Adverse Effect. Section 3.12 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board as now and from time to time hereafter in effect or for any purpose which violates the provisions of any Regulations of the Board. If requested by any Lender at any time, each Person constituting the Borrower will furnish to such Lender a statement in conformity with the requirements of FR Form U-1 referred to in Regulation U. Section 3.13 Investment Company Act; Public Utility Holding Company Act; Other Regulations. No Person constituting the Borrower is (a) an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or (b) a "holding company" as defined in, or otherwise subject to regulation under, the Public Utility Holding Company Act of 1935. No Person constituting the Borrower is subject to regulation under any federal or state statute or regulation which limits its ability to incur Indebtedness. Section 3.14 Subsidiaries. All the Subsidiaries of GSI as of the Effective Date are listed on Schedule V to this Agreement. None of the Capital Stock of any such Subsidiary is subject to a Lien in favor of any Person (except Liens permitted by Section 6.2(b) and (i)). Section 3.15 Employee Grievances. Except as set forth on Schedule VI hereof, as of the Effective Date no Person constituting the Borrower nor any of their Subsidiaries is a party to any collective bargaining agreement or, to the best knowledge of such Person, subject to any current effort to organize, and there are no actions or proceedings pending or, to the best of the knowledge of such Person, threatened against it or its Subsidiaries, by or on behalf of, or with, its employees, other than employee grievances arising in the ordinary course of business which are not, in the aggregate, material. Section 3.16 ERISA. (a) Except as set forth in Schedule VII hereof, as of the Effective Date no Person constituting the Borrower nor any of their Subsidiaries have any Plan (including without limitation any Multiemployer Plan) or have made or make any payments to any Plan. (b) Each Person constituting the Borrower and each Subsidiary of such Person is and has at all times been in substantial compliance with all applicable provisions of ERISA, except where a failure to be in such compliance would not have a Material Adverse Effect. (c) No Person constituting the Borrower has engaged in a transaction in connection with which such Person or any ERISA Affiliate could be subject to a material liability for either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code. (d) There has been no termination of a Plan or trust created under any Plan that would give rise to a material liability to the PBGC on the part of any Person constituting the Borrower or any ERISA Affiliate. No material liability to the PBGC has been or is expected to be incurred with respect to any Plan by any Person constituting the Borrower or any ERISA Affiliate. The PBGC has not instituted proceedings to terminate any Plan. There exists no condition or set of circumstances which presents a material risk of termination or partial termination of any Plan by the PBGC. Each Person constituting the Borrower and each ERISA Affiliate have paid all premiums to the PBGC when due. (e) Full payment has been made of all amounts which are required under the terms of each Plan to have been paid as contributions to such Plan as of the last day of the most recent fiscal year of such Plan ended on or before the date of this Agreement, and no accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists with respect to any Plan. No Person constituting the Borrower nor any ERISA Affiliate has failed to make a required installment under Section 412(m) of the Code or any other payment required under Section 412 of the Code on or before the due date. (f) The value of the benefit liabilities (as defined in Section 4001(a)(16) of ERISA) of each Plan (based on the actuarial assumptions contained in Title IV of ERISA) does not exceed the fair market value of the assets of such Plan. No Person constituting the Borrower nor any ERISA Affiliate is required to provide security to a Plan under Section 401(a)(29) of the Code. (g) No Person constituting the Borrower nor any ERISA Affiliate has made a complete or partial withdrawal from a Multiemployer Plan. To the best knowledge of each Person constituting the Borrower the liability to which such Person or any ERISA Affiliate would become subject under ERISA if such Person and all ERISA Affiliates were to withdraw completely from all Multiemployer Plans as of the most recent valuation date, together with any secondary liability for withdrawal liability such Person and any ERISA Affiliate may have as of the date hereof, would not have a Material Adverse Effect. To the best knowledge of each Person constituting the Borrower no such Multiemployer Plan is in reorganization (as such term is defined in Section 4241 of ERISA) or is insolvent (as such term is defined in Section 4245 of ERISA). ARTICLE 4 CONDITIONS PRECEDENT Section 4.1 Conditions to Effective Date. This Agreement shall become effective on the date (the "Effective Date") on which each condition listed in Section 4.2 is satisfied and each of the following shall have occurred: (a) The Agent shall have received counterparts of this Agreement, executed and delivered by a duly authorized officer of each Person constituting the Borrower and each Lender. Each Lender shall have received a Revolving Credit Note conforming to the requirements hereof and executed by a duly authorized officer of each Person constituting the Borrower. (b) The Agent shall have received a certificate of the Secretary or an Assistant Secretary of each Person constituting the Borrower dated as of the Effective Date and certifying (1) that attached thereto is a true, complete and correct copy of resolutions duly adopted by the Board of Directors of such Person authorizing (x) the execution, delivery and performance of this Agreement and the Notes and the other Loan Documents and (y) the borrowings contemplated hereunder and that such resolutions have not been amended, modified, revoked or rescinded and (2) as to the incumbency and specimen signature of each officer executing any Loan Documents on behalf of such Person constituting the Borrower; and such certificate and the resolutions attached thereto shall be in form and substance satisfactory to the Agent. (c) The Agent shall have received the executed legal opinion of Haythe & Curley and Jameson Moore Peskin & Spicer, counsel to the Persons constituting the Borrower, substantially in the form of Exhibit F. Such legal opinion shall cover such matters incident to the transactions contemplated by this Agreement as the Agent and the Lenders reasonably may require. (d) The Borrower shall have paid to the Agent, for distribution to the Lenders, a non-refundable facility fee of $37,500. Such fee shall be distributed as follows: $14,062.50 to First Union National Bank and $23,437.50 to PNC Bank, National Association. (e) The Borrower shall have paid to the Agent, for its account, the annual fee payable to the Agent pursuant to the letter agreement between the Agent and the Borrower dated December 3, 1997. (f) The Borrower shall have paid all fees of counsel to the Agent submitted on the date hereof. This condition precedent does not derogate from the Borrower's continuing obligations under Section 10.5. (g) All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to the Lenders, and the Agent and the Lenders shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as they may reasonably request. Section 4.2 Conditions to Each Loan. The obligation of the Lenders to make any Loan requested to be made on any date (including, without limitation, the initial Loan) or to issue any Letter of Credit (including, without limitation, the initial Letter of Credit) is subject to the satisfaction of the following conditions precedent: (a) Each of the representations and warranties made by each Person constituting the Borrower in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date except for representations and warranties which speak as of another date, in which case such representations and warranties shall have been true in all material respects as of such date. (b) No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans or Letters of Credit requested to be made or issued on such date. (c) The Agent shall have received a Borrowing Base Certificate for the then most recently ended Calculation Period. (d) The Agent and the Lenders shall have received all fees due and owing pursuant to Sections 2.4. (e) No notice of, or any other document or instrument creating, any federal tax Lien or Lien under Section 412 of the Code or Section 4068 of ERISA shall have been issued, recorded or filed with respect to the assets of the Borrower or any of its Subsidiaries and no Lender shall have informed the Agent or the Borrower that such Lender has processed any such Lien or has notice thereof. Each borrowing hereunder shall constitute a representation and warranty by the Borrower as of the date of such Loan that the conditions contained in subsections (a) through (e) of this Section 4.2 have been satisfied. ARTICLE 5 AFFIRMATIVE COVENANTS Each Person constituting the Borrower hereby agrees that, so long as the Commitments remain in effect, any Note remains outstanding and unpaid or any other amount is owing to the Agent or any Lender hereunder, each Person constituting the Borrower shall (except the Subsidiary Borrowers in the case of delivery of financial information, reports and notices, other than Borrowing Base Certificates): Section 5.1 Financial Statements. Furnish to the Agent (with sufficient copies for each Lender): (a) as soon as available, but in any event within 105 days after the end of each fiscal year of GSI, a copy of the consolidated balance sheet of GSI and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, certified by and reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by KPMG Peat Marwick & Co. or other independent certified public accountants of nationally recognized standing reasonably acceptable to the Required Lenders together with the consolidating balance sheet of GSI and its consolidated Subsidiaries as at the end of such year, setting forth in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects when considered in relation to the consolidated financial statements of GSI and its consolidated Subsidiaries; and (b) as soon as available, but in any event not later than 50 days after the end of each of the first three quarterly periods of each fiscal year of GSI, the unaudited consolidated and consolidating balance sheet of GSI and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of GSI and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects when considered in relation to the consolidated financial statements of GSI and its consolidated Subsidiaries (subject to normal year-end audit adjustments); all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). Section 5.2 Certificates; Other Information. Furnish to the Agent (with sufficient copies for each Lender): (a) concurrently with the delivery of the financial statements referred to in Sections 5.1(a) and 5.1(c), the following: a certificate of a Responsible Officer of GSI stating that, to the best of such Officer's knowledge, each Person constituting the Borrower during such period have observed or performed all of their respective covenants and other agreements, and satisfied every condition, contained in this Agreement and in the Notes and the other Loan Documents to which they are a party to be observed, performed or satisfied by them, and that such Officer has obtained no knowledge of any Default or Event of Default, except as specified in such certificate. (b) not later than 30 days prior the beginning of each fiscal year of GSI, a copy of the quarter to quarter projections by GSI of the operating budget and cash flow budget of GSI and its Subsidiaries for such fiscal year, such projections to be accompanied by a certificate of a Responsible Officer of GSI to the effect that such projections have been prepared on the basis of assumptions deemed reasonable at the time of preparation and that such Officer has no reason to believe they are incorrect or misleading in any material respect; (c) within five days after the same are sent, copies of all financial statements and reports which GSI sends to its stockholders generally, and within five days after the same are filed, copies of all financial statements and reports which GSI may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; (d) within seven days after the end of each Calculation Period, a Borrowing Base Certificate for such Calculation Period which certificate shall include, inter alia, an accounts receivable aging report for each Person constituting the Borrower as of the end of the Calculation Period covered by such certificate; and (e) promptly, such additional financial and other information as the Agent from time to time reasonably may request. Section 5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Person constituting the Borrower or its Subsidiaries, as the case may be or except for immaterial amounts incurred in the ordinary course of business. Section 5.4 Conduct of Business and Maintenance of Existence. Continue to engage in businesses related to the businesses now conducted by it and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to Section 6.4; comply with all Contractual Obligations and Requirements of Law (excluding, for purposes of this subsection, Requirements of Law specifically addressed in other subsections of this Article 5) except to the extent that failure to comply therewith would not, in the aggregate, have a Material Adverse Effect. Section 5.5 Maintenance of Property; Insurance. Keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted; maintain with financially sound and reputable insurance companies (rated A or better by A.M. Best & Co.) insurance on all its property in at least such amounts and against at least such risks (but including in any event general liability, product liability and business interruption) as is maintained by the Borrower on the date hereof; and furnish to the Agent proof reasonably satisfactory to the Agent of the annual renewal thereof (within 30 days of such renewal) and, upon written request, such other information as to the insurance carried as Agent may reasonably request. Section 5.6 Inspection of Property; Books and Records; Discussions. Keep proper books of record and account in which full, true and correct entries in conformity with prudent business practices and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of the Agent and each Lender during normal business hours and upon reasonable notice (unless an Event of Default has occurred and is continuing, in which case no such notice from the Agent or any Lender shall be required) to visit and inspect any of its properties, examine and make abstracts from any of its books and records and conduct asset/system reviews and/or appraisals (such asset/system reviews and appraisals to be at the Lenders' expense if no Default or Event of Default exists and otherwise at the Borrower's sole cost and expense; provided that the Borrower shall not be required to pay for more than two appraisals during the term hereof) at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of any Person constituting the Borrower and its Subsidiaries with officers and employees of such Person and its Subsidiaries and with its independent certified public accountants. Section 5.7 Notices. Promptly give notice to the Agent of: (a) the occurrence of any Default or Event of Default of which the Borrower has knowledge; (b) any (i) default or event of default under any Contractual Obligation of any Person constituting the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between any Person constituting the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, would have a Material Adverse Effect; (c) any litigation or proceeding affecting any Person constituting the Borrower or any of its Subsidiaries in which the amount involved is $500,000 or more and not covered by insurance or in which injunctive or similar relief is sought; and (d) the occurrence of any event having a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer of the relevant Person constituting the Borrower setting forth details of the occurrence referred to therein and stating what action such Person proposes to take with respect thereto. Section 5.8 ERISA Compliance. Comply with all the applicable provisions of ERISA now or hereafter in effect with respect to each of its Plans except where the failure to comply would not have a Material Adverse Effect. Notify the Lender of the following events, as soon as possible and in any event within thirty days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan; (ii) the occurrence of a prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan, (iii) the institution of proceedings or the taking or expected taking of any other action by the PBGC or any Person constituting the Borrower or any ERISA Affiliate to terminate or withdraw or partially withdraw from any Plan and, with respect to a Multiemployer Plan, the Reorganization or Insolvency of such Plan (as such terms are defined in ERISA), (iv) the failure of any Person constituting the Borrower or any ERISA Affiliate to make a required installment under Section 412 (m) of the Code or any other payment required under Section 412 of the Code on or before the due date or (v) the adoption of an amendment with respect to a Plan so that any Person constituting the Borrower or any ERISA Affiliate is required to provide security to the Plan under Section 401(a)(29) of the Code, and in addition to such notice, deliver to the Lender a certificate signed by a Responsible Officer setting forth the details relating thereto, and the action that such Person and the ERISA Affiliate propose to take with respect thereto and when known, any action taken or threatened by the Internal Revenue Service or the PBGC, together wit a copy of any notice to the PBGC or the Internal Revenue Service or any notice delivered by the PBGC or the Internal Revenue Service. ARTICLE 6 NEGATIVE COVENANTS Each Person constituting the Borrower hereby agrees that, so long as the Commitments remain in effect, any Note remains outstanding and unpaid or any other amount is owing to the Agent or any Lender hereunder, it shall not, and shall not permit any of its Subsidiaries to, directly or indirectly (except as to the Subsidiary Borrowers, the covenants set forth in Sections 6.11, 6.12, 6.13 and 6.14): Section 6.1 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness in respect of the Loans, the Notes and other obligations of such Person constituting the Borrower under this Agreement; (b) Indebtedness arising pursuant to the Private Placement; (c) Indebtedness of any Person constituting the Borrower owing to another Person constituting the Borrower or any Subsidiary of the Borrower and of any Subsidiary of GSI to any Person constituting the Borrower; (d) Subordinated Debt; (e) Indebtedness of a Person which becomes a Subsidiary after the date hereof, provided that such Indebtedness existed at the time such Person became a Subsidiary and was not created in anticipation thereof; (f) Capital Lease Obligations plus purchase money indebtedness existing on the Effective Date plus additional Capital Lease Obligations and purchase money indebtedness provided the aggregate amount of such additional Capital Lease Obligations and purchase money indebtedness does not increase in any fiscal year during the term of this Agreement by more than $1,000,000 over the amount thereof in the prior fiscal year; and (g) Contingent Obligations in accordance with Section 6.3 of this Agreement. Section 6.2 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens securing Indebtedness permitted by Section 6.1(a), (e) and (f); provided, that, in the case of Liens securing Indebtedness permitted by Section 6.1(f) such Liens shall not encumber any property not financed by such Indebtedness, and in the case of any Liens permitted by Section 6.1(e), such Liens shall not encumber any property not encumbered by such Lien at the time it was created, such Liens existed at the time such Person became a Subsidiary and were not created in anticipation of the acquisition, and any such Lien does not by its terms secure any Indebtedness other than Indebtedness existing immediately prior to the time such Person becomes a Subsidiary; (b) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the relevant Person constituting the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (c) carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlords' or other like Liens arising in the ordinary course of business which secure amounts not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (d) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (e) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the relevant Person constituting the Borrower or such Subsidiary; (g) Liens listed on Schedule VIII, provided that no such Lien is amended after the date of this Agreement to cover any additional property or to secure additional Indebtedness; and (h) Liens granted to secure Indebtedness evidenced by the Senior Notes, provided payment of the Obligations is equally and ratably secured by such Liens and such Liens (in favor of the holders of the Senior Notes and the Lenders) are effected pursuant to security documentation from Borrower and/or any Subsidiary granting such Lien and the holders of the Senior Notes in form and substance reasonably satisfactory to the Required Lenders. Section 6.3 Limitation on Contingent Obligations. Create, incur, assume or suffer to exist any Contingent Obligation, except guarantees made in the ordinary course of its business by any Borrower of obligations of a Borrower or any of its Subsidiaries and except Letter of Credit Reimbursement Obligations, provided, in any case those obligations are not otherwise prohibited under this Agreement. Section 6.4 Limitations on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except: (a) any Subsidiary of GSI may be merged or consolidated with or into GSI (provided that GSI shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of GSI (provided that the wholly owned Subsidiary or Subsidiaries or the Subsidiary Borrower, if it is a party to such merger or consolidation, shall be the continuing or surviving corporation) and after giving effect to any of such transactions, no Default or Event of Default shall exist; and (b) any wholly owned Subsidiary of GSI may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to GSI or any wholly- owned Subsidiary of GSI and GSI may sell, lease, transfer or otherwise dispose of any or all of its assets to any Person constituting the Borrower; and (c) sales of assets in accordance with Section 6.5 of this Agreement. Section 6.5 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, Capital Stock of any Person constituting the Borrower (other than GSI), receivables and leasehold interests), whether now owned or hereafter acquired, except: (a) obsolete or worn out property disposed of in the ordinary course of business; (b) the sale or other disposition of any property (other than inventory) provided, that, the aggregate book value of all assets so sold or disposed of in any period of twelve consecutive months shall not exceed 2% of Consolidated Tangible Assets of GSI as at the beginning of such twelve-month period; (c) the sale of inventory in the ordinary course of business; (d) the sale or discount without recourse of accounts receivable only in connection with the compromise thereof or the assignment of past-due accounts receivable for collection; and (e) as otherwise contemplated by Section 6.4 of this Agreement. Section 6.6 Limitation on Investments, Loans and Advances. Purchase, hold or acquire beneficially any Capital Stock, other securities or evidences of indebtedness of, make or permit to exist any loans or advances to, or make or permit to exist any investment or acquire any interest whatsoever in, any other Person, except: (a) extensions of trade credit to customers in the ordinary course of business; (b) Permitted Investments; (c) capital contributions, loans and advances by any Person constituting the Borrower or any Subsidiary of the Borrower to any Person constituting the Borrower or a domestic Subsidiary of the Borrower and loans and advances by any foreign Subsidiary of the Borrower to any other foreign Subsidiary of the Borrower; (d) loans and advances in the form of cash by any Person constituting the Borrower to the foreign Subsidiaries of the Borrower in an aggregate amount not to exceed $500,000 in outstanding principal amount at any time; (e) so long as no Default or Event of Default has occurred and is continuing, GSI or any wholly-owned Subsidiary of GSI may purchase Capital Stock of any Person not a Subsidiary for a purchase price not exceeding $4,000,000 in the aggregate for all such purchases; provided GSI has given the Agent 15 days prior written notice of the consummation of the proposed purchase; (f) GSI may create, or (subject to Section 6.6(e)) acquire any Capital Stock of, a Person not a Subsidiary on the date hereof (if, in the case of the acquisition of Capital Stock, such acquisition would constitute such Person a Subsidiary); provided that simultaneously with such creation or acquisition, any Person becoming a domestic Subsidiary guarantees payment of the obligations of the Borrower hereunder pursuant to a written agreement in favor of, and otherwise in form and substance satisfactory to, the Lenders; and (g) loans and advances to employees or directors of any Person constituting the Borrower not to exceed $100,000 in aggregate principal amount outstanding at any time. Section 6.7 Limitation on Optional Payments and Modifications of Debt Instruments. Make any optional payment or prepayment on or redemption, defeasance or purchase of any Subordinated Debt, or amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms relating to the payment or prepayment or principal of or interest on, any such Indebtedness, other than any amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon. Section 6.8 Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) not otherwise prohibited under this Agreement, and (b) upon fair and reasonable terms no less favorable to the relevant Person constituting the Borrower, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. Section 6.9 Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than September 30. Section 6.10 Limitation on Conduct of Business. Enter into any business either directly or through any Subsidiary except for businesses in which GSI and its Subsidiaries are engaged on the date of this Agreement and business related to such existing businesses. Section 6.11 Tangible Net Worth. Permit Consolidated Tangible Net Worth at the end of any fiscal quarter of GSI to be less than the sum of (i) $35,400,000 plus (ii) 50% of the aggregate, cumulative Consolidated Net Income (but excluding net losses for purposes of this calculation), if any, for each fiscal year end occurring after the Closing Date. Section 6.12 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio for the period of four consecutive fiscal quarters preceding any date of determination to be less than 1.35 to 1. Section 6.13 Funded Debt to EBITDA. Permit the ratio of Funded Debt of GSI and its consolidated Subsidiaries to Consolidated EBITDA for the period of four consecutive fiscal quarters preceding any date of determination to be greater than: 3.0 to 1 through September 30, 1999 or 2.50 to 1 thereafter. Section 6.14 Capital Expenditures. Permit expenditures of GSI and its consolidated Subsidiaries for CAPEX in any fiscal year to exceed $7,500,000 for the fiscal year ending September 30, 1998, or $6,500,000 for any fiscal year of GSI ending thereafter. Section 6.15 Obligor Tangible Assets. Permit the ratio of (a) Consolidated Obligor Tangible Assets to (b) Consolidated Tangible Assets to be less than 0.9 to 1.0, unless at such time the Obligor Fixed Charged Coverage Ratio is 1.1 to 1.0 or greater. Section 6.16 ERISA Obligations. Be or become obligated to the PBGC, in any material respect, other than in respect of annual premium payments. ARTICLE 7 EVENTS OF DEFAULT Section 7.1 Events of Default. If any of the following events (each, an "Event of Default") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Note or Reimbursement Obligation when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Note or Reimbursement Obligation, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by any Person constituting the Borrower or any other party to a Loan Document herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) Any Person constituting the Borrower shall default in the observance or performance of any agreement contained in Article 6; or (d) Any Person constituting the Borrower or any other Party to a Loan Document shall default in the observance or performance of any other agreement contained in this Agreement (other than as provided in Sections 7.1(a), (b) or (c)) or any other Loan Document, and such default shall continue unremedied for a period of 30 days; or (e) GSI or any of its Subsidiaries shall: (1) default in any payment of principal of or interest on any Indebtedness (other than the Notes or Reimbursement Obligations) or in the payment of any Contingent Obligation in either case in excess of $500,000, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Contingent Obligation was created; or (2) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Contingent Obligation to become payable; or (f) (1) GSI or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or GSI or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (2) there shall be commenced against GSI or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (1) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (3) there shall be commenced against GSI or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (4) GSI or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (1), (2) or (3) above; or (5) GSI or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) One or more judgments or decrees shall be entered against GSI or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $500,000 or more and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (h) (i) Any Reportable Event, which the Required Lenders determine in good faith (which determination shall be final and conclusive) constitutes grounds for the termination of any Plan or Plans by PBGC or for the appointment by the appropriate United States District Court of a trustee to administer or liquidate any Plan or Plans, shall have occurred and be continuing thirty (30) days after written or telegraphic or telephonic notice to such effect shall have been given to the Borrower by the Lender; or (ii) a decision shall have been made by the Board of Directors (or any committee thereof), any authorized officer or other employee of any Person constituting the Borrower, or any trustee or trustees of any Plan or Plans to terminate any Plan or Plans or to file a termination notice with respect to any Plan or Plans; or (iii) a trustee shall be appointed by the appropriate United States District Court to administer any Plan or Plans, or any Plan or Plans shall be terminated; or (iv) PBGC shall institute proceedings to terminate any Plan or Plans or to appoint a trustee to administer any Plan or Plans; or (v) any Person constituting the Borrower or any ERISA Affiliate shall fail with respect to any Plan or Plans to meet the minimum funding standards established in the Code, or shall obtain a waiver of such minimum funding standards; or (vi) any Person constituting the Borrower or any ERISA Affiliate shall completely or partially withdraw from a Plan; or (vii) any Person constituting the Borrower or any ERISA Affiliate shall make a decision to cease operations at a facility or facilities where such cessation would result in a separation from employment of more than 20% of the total number of employees who are participants under a Plan; where in the case of any one or more of the events described in the preceding clauses (i) through (vii) the aggregate outstanding amount of unfunded vested liabilities under such Plan if a single employer plan (including unfunded vested liabilities which arise or might arise as a result of the termination of or withdrawal from such Plan) or the allocable portion of such outstanding unfunded vested liabilities under a Multiemployer Plan shall exceed (either singly or in the aggregate in the case of any such liability arising out of one or more of the events described in the preceding clauses (i) through (vii) under more than one such Plan) 2% of the Consolidated Tangible Net Worth of GSI and shall in good faith be determined by the Required Lenders (which determination shall be final and conclusive) to have a Material Adverse Effect; or (i) a Change in Control shall occur; then, and in any such event, (A) if such event is an Event of Default specified in clause (1) or (2) of Section 7.1(f) above with respect to any Person constituting the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, any one or more of the following actions may be taken: (i) the Agent may (with the consent of the Required Lenders) and shall (upon the request of the Required Lenders), by written notice to the Borrower, declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; (ii) the Agent may (with the consent of the Required Lenders) and shall (upon the request of the Required Lenders), by written notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable and (iii) the Agent may (with the consent of the Required Lenders) and shall (upon the request of the Required Lenders but subject to the provisions of Article 8), proceed to enforce the rights and remedies of the Secured Party under the Security Documents. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. ARTICLE 8 THE AGENT Section 8.1 Actions. Each Lender authorizes the Agent to act on behalf of such Lender under this Agreement, the other Loan Documents and any other related instruments and, in the absence of other written instructions from the Lenders received from time to time by the Agent (with respect to which the Agent agrees that it will, subject to the last two sentences of this Section 8.1, comply in good faith except as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender agrees (which agreement shall survive any termination of this Agreement) to indemnify the Agent, pro rata according to such Lender's Percentage, from and against any and all liabilities, obligations, damages, penalties, actions, judgements, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement, the Revolving Notes, the Letters of Credit, any of the other Loan Documents and any other related instruments, including, without limitation, the reimbursement of the Agent for all reasonable out-of-pocket expenses (including, without limitation, syndication costs and attorneys' fees) incurred by the Agent hereunder or in connection herewith or in enforcing the obligations of the Borrower or any Lender under this Agreement, under any of the other Loan Documents or any other related instruments, in all cases as to which the Agent is not reimbursed by the Borrower; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, damages, penalties, actions, judgements, suits, costs, expenses or disbursements determined by a court of proper jurisdiction in a final proceeding to have resulted solely from the Agent's gross negligence or willful misconduct. The Agent shall not be required to take any action hereunder or under any other related instruments, or to prosecute or defend any suit in respect of this Agreement or any such instrument, unless indemnified to its satisfaction by the Lenders against costs, liability, and expense. If any indemnity in favor of the Agent shall become impaired, it may call for additional indemnity and cease to do the acts indemnified against until such additional indemnity is given. The Agent may delegate its duties hereunder to affiliates, agents or attorneys-in-fact selected in good faith by the Agent. Each Lender's obligation to indemnify the Agent as set forth above shall be unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which such Lender may have or have had against the Agent, any other Lender, the Borrower, any Subsidiary or any other Person. Section 8.2 Exculpation. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement. Neither the Agent nor any of its directors, officers, employees, or agents (collectively, the "Related Parties") shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement, the other Loan Documents or any other related instrument, or in connection herewith or therewith, except for its own willful misconduct or gross negligence, nor shall the Agent or any Related Parties be responsible for any recitals or representations or warranties herein or therein, or for the effectiveness, enforceability, validity or due execution of this Agreement, the other Loan Documents or any other related instruments, nor shall the Agent or any Related Parties be obligated to make any inquiry respecting the performance by the Borrower of its obligations hereunder or thereunder. The Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which it believes to be genuine and to have been presented by a proper Person. The Agent may at any time request instructions from the Lenders with respect to any actions or approvals which, by the terms of this Agreement, the Agent is permitted or required to take or grant, and the Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from taking any action or withholding any approval under this Agreement or any of the other Loan Documents until it has received instructions from the Required Lenders. No Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder or under any of the other Loan Documents in accordance with instructions from the (i) Required Lenders, or (ii) all of the Lenders to the extent required hereunder. Section 8.3 Successor. The Agent may resign as such at any time upon at least ten days' prior notice to the Borrower and all Lenders, and the Agent may be removed at any time by written notice from the Required Lenders. If the Agent at any time shall resign or be removed, the Required Lenders may appoint another Lender as a successor Agent. If the Required Lenders do not make such appointment within thirty days, the resigning or removed Agent shall appoint a new Agent from among the Lenders or, if no Lender accepts such appointment, from among commercial banking institutions or trust institutions generally; provided such successor agent shall be a domestic commercial bank having a combined capital and surplus in excess of $500,000,000. Upon the acceptance of any appointment as Agent by a successor Agent, such successor Agent shall thereupon become the Agent hereunder and shall be entitled to receive from the prior Agent such documents of transfer and assignment as such successor Agent may reasonably request, and the resigning or removed Agent shall (i) be discharged from its duties and obligations under this Agreement and the other related instruments and (ii) entitled to the continued benefit of this Article 8 with respect to all actions taken by it prior to its removal or resignation. Section 8.4 Credit Decisions. Each Lender represents and acknowledges to the Agent that it has, independently of the Agent and each other Lender, and based on the financial information referred to in this Agreement and the other Loan Documents and such other documents, information and investigations as it has deemed appropriate, made its own credit decision to enter into this Agreement. Each Lender also acknowledges that it will, independently of the Agent and each Lender, and based on such documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement, the Loan Documents or any other related instruments. Section 8.5 Notices, etc. from Agent. The Agent shall give prompt notice to each Lender of each notice or request given to the Agent by the Borrower or by the Agent to the Borrower pursuant to the terms of this Agreement. The Agent will promptly distribute to each Lender each instrument received for its account and copies of all other communications received by the Agent from the Borrower for distribution to the Lenders by the Agent in accordance with the terms of this Agreement. Section 8.6 Security Documents. Each Lender hereby authorizes the Agent to enter into the Security Documents and to take all action contemplated thereby. Each Lender agrees that no Lender shall have any right individually to seek to realize upon the collateral granted for the benefit of the Lenders pursuant to any of the Security Documents, it being understood and agreed that such rights and remedies may be exercised by the Agent for the benefit of the Agent and the Lenders upon the terms of the Security Documents. ARTICLE 9 PURCHASING LENDER Section 9.1 Purchasing Lender. (a) Each Lender, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time may sell, assign and delegate to any Affiliate of such Lender and/or, with the consent of the Agent and the Borrower (which in each case shall not be unreasonably withheld), to one or more additional banks or financial institutions (each, a "Purchasing Lender") all or any part of such Lender's rights and obligations under this Agreement, the Notes and the other Loan Documents (provided, that any such sale, assignment and delegation shall be made with respect to each Loan and Commitment of such Lender hereunder) pursuant to an agreement ("Assignment and Acceptance"), executed by the Purchasing Lender, and such Lender. Such Assignment and Acceptance shall specify an effective date which is not less than five Business Days after the date of execution thereof. Upon such execution, delivery, and acceptance, from and after the effective date determined pursuant to such Assignment and Acceptance, (A) the Purchasing Lender thereunder shall be a party hereto and, to the extent of the Commitments assigned and Loans sold pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (B) the assigning Lender thereunder shall, to the extent of the Commitments assigned pursuant to such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Such Assignment and Acceptance shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender as a Lender and the resulting adjustment of Commitments arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such assigning Lender under this Agreement and the Notes. On or prior to the effective date determined pursuant to such Assignment and Acceptance, the Borrower, at its own expense, shall execute and deliver to the assigning Lender and Purchasing Lender in exchange for the surrendered Revolving Credit Note, a new Revolving Credit Note to the order of such Purchasing Lender in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be dated the Closing Date and otherwise shall be in the form of the Note or Notes replaced thereby. The Note or Notes surrendered by the assigning Lender shall be returned to the Borrower marked "replaced." The assigning Lender shall provide the Agent with a copy of each Assignment and Acceptance. (b) If, pursuant to this Agreement, any interest in this Agreement or any other Loan Documents is assigned to any transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such transferee, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Lender (for the benefit of the transferor Lender, the Agent and the Borrower) that under applicable law and treaties no taxes will be required to be withheld by the Agent, the Borrower or the transferor Lender with respect to any payments to be made to such transferee in respect of the Loans, (ii) to furnish to the transferor Lender, the Agent and the Borrower either Form 4224 or Form 1001 (Ownership Exemption or Reduced Rate Certificate) (wherein such transferee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder) and (iii) to agree (for the benefit of the transferor Lender, the Agent and the Borrower) to provide the transferor Lender, the Agent and the Borrower a new Form 4224 or Form 1001 upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. Section 9.2 Disclosure of Information. Each Person constituting the Borrower authorizes the Lenders to disclose to any Purchasing Lender and any prospective Purchasing Lender any and all information relating to each Person constituting the Borrower and its Affiliates which has been furnished to the Agent and the Lenders by or on behalf of each Person constituting the Borrower; provided that any such Purchasing Lender agrees to keep any information relating to any Person constituting the Borrower received hereunder confidential except as may be required by any Requirement of Law. Section 9.3 Pledges to Federal Reserve Bank. Nothing herein shall prohibit any Lender from pledging or assigning any Note to any Federal Reserve Bank in accordance with applicable law. ARTICLE 10 MISCELLANEOUS Section 10.1 Amendments and Waivers. (a) No amendment or waiver of any provision of this Agreement, or any of the other Loan Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent, unless in writing and signed by all the Lenders, shall do any of the following: (A) waive any of the conditions specified in Section 4.1 (though the Agent alone may defer the fulfillment of such conditions until the date of the applicable borrowing), (B) increase the amount or extend the term of the Commitments of the Lenders or subject the Lenders to any additional obligations, (C) reduce the principal of, or interest on, the Loans, the Reimbursement Obligations or any of the Notes, or reduce any fees payable hereunder, (D) postpone any date fixed for any payment in respect of principal of, or interest on, the Loans, the Reimbursement Obligations or any of the Notes, as the case may be, or fees payable hereunder, (E) change any of the components which shall be required for the Lenders or any Lender to take any action hereunder, (i.e., the Percentage of the Commitments, or the aggregate unpaid principal amount of the Loans, or the number of Lenders), (F) amend or terminate any Security Document, or (G) amend this Section 10.1; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders hereinabove required to take such action, affect the rights or duties of the Agent under this Agreement. Without derogating from the foregoing, no amendment to this Agreement shall be effective unless signed by each Person constituting the Borrower. (b) The liability of each Person constituting the Borrower hereunder shall be absolute and unconditional irrespective of: (1) any change in the time, manner, or place of payment or in any other term of, or any other amendment or waiver of, or any consent to departure from any of the Loan Agreement, any of the Loan Documents or any Obligations; (2) any change in the name, capital stock, Certificate of Incorporation or by-laws, as the case may be, of any Person constituting the Borrower; (3) the insolvency of, or the voluntary or involuntary bankruptcy, assignment for the benefit of creditors, reorganization or other similar proceedings affecting any Person constituting the Borrower or any of their respective assets; or (4) any other circumstance or claim which might otherwise constitute a defense available to, or a discharge of, any Person constituting the Borrower in respect of the Obligations. (c) No payment made by any Person constituting the Borrower, or received or collected by the Agent or any of the Lenders, from any Person constituting the Borrower by virtue of any action or proceeding or set-off or application at any time in reduction of or in payment of the Obligations shall be deemed to modify, release or otherwise affect the liability of any Person constituting the Borrower under the Loan Documents. Notwithstanding any such payments received or collected by the Agent or any of the Lenders in connection with the Obligations, each Person constituting the Borrower shall remain liable for the Obligations until all Obligations are paid in full. The joint and several obligation of each Person constituting the Borrower shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by the Agent or the Lenders upon the insolvency, bankruptcy or reorganization of any Person constituting the Borrower or otherwise, all as though such payment had not been made. (d) The obligations and liabilities of each Person constituting the Borrower hereunder shall not be released, discharged, limited or in any way affected by anything done, suffered or permitted by the Agent or Lenders in connection with any monies or credit advanced by the Agent or Lenders to any Person constituting the Borrower or any security therefor, including, without limitation, any loss of, or in respect of, any security received by the Agent or any of the Lenders from any Person constituting the Borrower. It is agreed that the Lenders and/or the Agent, without releasing, discharging, limiting or otherwise affecting in whole or in part the obligations and liabilities of any Person constituting the Borrower hereunder, may, without limiting the generality of the foregoing: (A) grant time, renewals, extensions, indulgences, releases and discharges to any Person constituting the Borrower; (B) take or abstain from taking security or collateral for the Obligations or from perfecting security or collateral for the Obligations; (C) release, discharge, compromise or otherwise deal with (with or without consideration) any and all collateral, mortgages, indemnities, guaranties or other security given by any Person constituting the Borrower with respect to the Obligations; (D) accept compromises from any Person constituting the Borrower; (E) after an Event of Default, apply all monies at any time received from any Person constituting the Borrower or from any guaranties, indemnities or any collateral upon such part of the Obligations as the Lenders and/or Agent may see fit or change any such application in whole or in part from time to time as the Agent or such Lenders may see fit; or (F) otherwise deal with each Person constituting the Borrower and all other Persons and collateral as the Lenders and/or Agent may see fit; (e) neither the Agent nor any of the Lenders shall be bound or obligated to exhaust recourse against any Person constituting the Borrower or other Persons or any security, guarantee, indemnity, mortgage or collateral it may hold or take any other action before being entitled to payment from each Person constituting the Borrower hereunder and each Person constituting the Borrower hereby waives any requirement that would otherwise compel the Agent or the Lenders to do any of the foregoing. Section 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (or by telex, fax or similar electronic transfer confirmed in writing), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) when delivered by hand or (b) if given by mail, three Business Days after deposited in the mails by certified mail, return receipt requested, postage prepaid, or (c) if by telex, fax or similar electronic transfer, when sent and receipt has been confirmed, addressed as follows. Notwithstanding the foregoing, any notice, demand or request to or upon the Agent pursuant to Section 2.3 or Section 2.7 may be given to the Agent by telephone, provided that the Borrower immediately follows such telephone instructions with a delivery of written notice received by the Agent prior to the extension of Credit requested by one of the methods of delivery otherwise authorized herein. If to the Borrower: Guest Supply, Inc. 4301 U.S. Highway One Box 902 Monmouth Junction, New Jersey 08852-0902 Attention: Paul Xenis Phone: 609-514-7373 Fax: 609-514-7377 with a copy to: Haythe & Curley 237 Park Avenue New York, New York 10017 Attention: Bradley P. Cost, Esq. Phone: 212-880-6000 Fax: 212-682-0200 If to the Agent: PNC Bank, National Association P.O. Box 294 2 Tower Center Boulevard, 16th Floor East Brunswick, New Jersey 08816-1094 Attention: Gary W. Wessels Phone: 732-220-4553 Fax: 732-220-3299 If to the Lenders: PNC Bank, National Association P.O. Box 294 2 Tower Center Boulevard 16th Floor East Brunswick, New Jersey 08816-1094 Attention: Gary W. Wessels Phone: 732-220-4553 Fax: 732-220-3299 and First Union National Bank 550 Broad Street Newark, New Jersey 07102 Attention: Robert Cerny Phone: 973-565-7069 Fax: 973-565-3908 provided that any notice, request or demand to or upon the Agent pursuant to Section 2.3, Section 2.5, Section 2.8, Section 2.9(a), Section 2.10 or Section 2.18(a) shall not be effective until received. Any party may change its address for notices by notice to the other parties hereto in the manner provided in this subsection. Any notice to the Borrower or given by the Borrower shall be binding upon, and deemed received or given by, all Persons constituting the Borrower if given by any Person constituting the Borrower (in the case of notices from the Borrower) or delivered to any Person constituting the Borrower at the address set forth herein (or such other address noticed to the Lender as provided herein) and no separate notice to or by any other Person constituting the Borrower shall be necessary for the binding effect or deemed receipt of a notice to or by the Borrower. Section 10.3 No Waiver; Cumulative Remedies. (a) No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof. (b) No single or partial exercise of any right, remedy, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. (c) The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. Section 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes. Section 10.5 Payment of Expenses and Taxes. The Borrower agrees jointly and severally: (a) to pay or reimburse the Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the negotiation, preparation and execution of, and any proposed or effective amendment, supplement or modification to, this Agreement and the Notes and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agent; (b) to pay or reimburse the Agent and each Lender for all reasonable out-of-pocket costs and expenses incurred by each of them in connection with the enforcement or preservation of any rights under this Agreement, the Notes, the other Loan Documents and any such other documents, including, without limitation, reasonable fees and disbursements of counsel to the Agent and each Lender; (c) to pay, indemnify, and hold the Agent and each Lender harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the Notes, the other Loan Documents and any such other documents; and (d) to pay, indemnify, and hold the Agent and each Lender harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions (whether sounding in contract, in tort or on any other ground), judgments, suits, reasonable out-of-pocket costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of, or in any other way arising out of or relating to, this Agreement, the Notes, the other Loan Documents or any other documents contemplated by or referred to herein or therein or any action taken or omitted to be taken by the Agent or any Lender with respect to any of the foregoing (all the foregoing, collectively, the "indemnified liabilities"), provided, that the Borrower shall have no obligation hereunder to the Agent or any Lender with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Agent or such Lender. The agreements in this subsection shall survive repayment of the Notes and all other amounts payable hereunder. Section 10.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agent, the Lenders, all future holders of the Notes and their respective successors and assigns, except that no Person constituting the Borrower may assign, transfer or delegate any of their rights or obligations under this Agreement without the prior written consent of the Lenders other than pursuant to the operation of law by reason of a transaction permitted by Section 6.4. Section 10.7 Set-off/Sharing. (a) In addition to any rights and remedies of the Agent and Lenders provided by law, each Lender shall have the right, without prior notice to any Person constituting the Borrower, any such notice being expressly waived by each Person constituting the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by any Person constituting the Borrower hereunder or under the Notes or the other Loan Documents (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency of such Lender to or for the credit or the account of any Person constituting the Borrower. Each Lender agrees promptly to notify the Borrower and Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. (b) Each of the Lenders agree among themselves that with respect to all amounts received by them which are applicable to the payment or satisfaction of all or part of the Loans or Reimbursement Obligations, interest thereon, any fees or any other amount payable hereunder or under the other Loan Documents, equitable adjustment will be made so that, in effect, all such amounts will be shared among the Lenders in proportion to their respective Percentages, whether received by voluntary payment, by the exercise of the right of setoff or banker's lien, by counterclaim or by the enforcement of their rights hereunder or under the other Loan Documents. (c) If any Lender shall, through the exercise of any right of counterclaim, setoff, banker's lien or otherwise, receive payment or reduction of a proportion of the aggregate amount of the Loans or interest thereon due to such Lender, or any other amount payable hereunder, as the case may be, which is greater than the proportion received by any other Lender or Lenders in respect to the aggregate amount of any Loan or Reimbursement Obligation and interest thereon due such Lender, or with respect to any other amount payable hereunder, that Lender receiving such proportionately greater payment shall notify the other Lenders and the Agent of such receipt and purchase participations (which it shall be deemed to have done simultaneously upon the receipt of such excess payment) in the Loans and Reimbursement Obligations held by the other Lender or Lenders so that all such recoveries of principal and interest with respect to the Loans shall be proportionate to each Lender's respective Percentage; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to the purchasing Lender to the extent of such recovery, but without interest. (d) The Borrower expressly consents to the arrangement described in this Section 10.7. Section 10.8 Original Agreement. On the Effective Date, the commitment of the Lenders under the Original Agreement to extend credit to the Borrower shall terminate and the Original Agreement and all security and other agreements entered into connection therewith shall terminate. Section 10.9 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Section 10.10 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 10.11 Integration. This Agreement represents the agreement of the Borrower, the Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. Section 10.12 Governing Law. This Agreement and the Notes and the rights and obligations of the parties under this Agreement and the Notes shall be governed by, and construed and interpreted in accordance with, the law of the State of New Jersey. Section 10.13 Submission To Jurisdiction; Waivers. Each Person constituting the Borrower hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to or arising out of this Agreement and the other Loan Documents to which it is a party, or the conduct of any party with respect thereto, or for recognition and enforcement of any judgement in respect thereof, to the nonexclusive general jurisdiction of the Courts of the State of New Jersey, the courts of the United States of America for the District of New Jersey, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives to the fullest extent permitted by law any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at the address set forth in Section 10.1 or at such other address of which the Lender shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent permitted by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. Section 10.14 Acknowledgments. Each Person constituting the Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the Notes and the other Loan Documents; (b) neither the Agent nor any Lender has any fiduciary relationship to any Person constituting the Borrower, and the relationship between the Agent and the Lenders, on one hand, and each Person constituting the Borrower, on the other hand, is solely that of debtor and creditor; and (c) no joint venture exists among any Person constituting the Borrower, the Agent or any Lender. Section 10.15 Waivers of Jury Trial. EACH PERSON CONSTITUTING THE BORROWER, THE AGENT AND EACH LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. Borrowers: GUEST SUPPLY, INC. By:/s/Paul Xenis ---------------- Name: Paul Xenis Title: Secretary and Vice President, Finance GUEST PACKAGING, INC. By:/s/Paul Xenis ---------------- Name: Paul Xenis Title: Secretary and Vice President, Finance BRECKENRIDGE-REMY CO. By:/s/Paul Xenis ---------------- Name: Paul Xenis Title: Secretary and Vice President, Finance GUEST DISTRIBUTION SERVICES, INC. By:/s/Paul Xenis ---------------- Name: Paul Xenis Title: Authorized Signatory Lenders: PNC BANK, NATIONAL ASSOCIATION By:/s/Gary W. Wessels --------------------- Name: Gary W. Wessels Title: Vice President FIRST UNION NATIONAL BANK By:/s/James T. King ------------------- Name: James T. King Title: Vice President Agent: PNC BANK, NATIONAL ASSOCIATION By:/s/Gary W. Wessels --------------------- Name: Gary W. Wessels Title: Vice President PRICING SCHEDULE "Applicable Margin" means for any date, the rates set forth below in the row opposite such term and in the column corresponding to the "Pricing Level" that applies at such date: Level I Level II Level III Level IV Level V Applicable plus .50% plus .60% plus .75% plus .80% plus .85% Eurodollar Margin Applicable minus .75% minus .50% minus .30% minus .20% minus .00% Prime Rate Margin For purposes of this Schedule, the following terms have the following meanings: "Level I Pricing" applies at any date if the ratio of Funded Debt to EBITDA on such date is equal to or less than 1.5:1. "Level II Pricing" applies at any date if (i) the ratio of Funded Debt to EBITDA in effect on such date is equal to or less than 1.75:1 and (ii) Level I Pricing does not apply. "Level III Pricing: applies at any date if (i) the ratio of Funded Debt to EBITDA in effect on such date is equal to or less than 2.00:1 and (ii) neither Level I Pricing nor Level II Pricing applies. "Level IV Pricing" applies at any date if (i) the ratio of Funded Debt to EBITDA in effect on such date is equal to or less than 2.25:1 and (ii) none of Level I Pricing, Level II Pricing and Level III Pricing applies. "Level V Pricing" applies at any date if, on such date, the ratio of Funded Debt to EBITDA is greater than 2.25:1.00. EX-10.(O) 9 REVOLVING CREDIT NOTE $5,625,000 East Brunswick, New Jersey December 3, 1997 FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey corporation, GUEST PACKAGING, INC., a New Jersey corporation, and BRECKENRIDGE-REMY CO., a Delaware corporation, and GUEST DISTRIBUTION SERVICE, INC., a Delaware corporation, collectively, the "Borrower"), hereby jointly and severally, unconditionally promise to pay to the order of First Union National Bank ("FUNB") at the Payment Office, in lawful money of the United States of America and in immediately available funds, the principal amount of FIVE MILLION SIX HUNDRED TWENTY FIVE THOUSAND AND 00/1000 ($5,625,000) DOLLARS, or, if less, the aggregate unpaid principal amount of all revolving credit Loans made by FUNB to the Borrower pursuant to Section 2.1 of the Credit Agreement on the dates and in the amounts specified in the Credit Agreement. The Borrower further agrees to pay interest on the unpaid principal amount outstanding hereunder from time to time from and including the date hereof in like money at such office at the rates and on the dates specified in the Credit Agreement. The holder of this Note is authorized to endorse on the schedule annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof (the "Grid") the date, Type and amount of each Revolving Credit Loan made pursuant to the Credit Agreement, each continuation thereof, each conversion of all or a portion thereof to another Type, the date and amount of each payment or prepayment of principal thereof and, in the case of Eurodollar Loans, the length of each Interest Period with respect thereto, which endorsement shall constitute rebuttable presumptive evidence of the accuracy of the information endorsed; provided, however, that the failure to make any such endorsement shall not affect the obligations of the Borrower in respect of such Revolving Credit Loan. This Note is one of the Revolving Credit Notes referred to in the Revolving Credit Agreement dated the date hereof among the Borrower, PNC Bank, National Association ("PNC"), FUNB, as Lenders, and PNC, as Agent (as the same may hereafter be amended, modified or supplemented from time to time, the "Credit Agreement") is entitled to the benefits thereof, is secured as provided therein and is subject to optional and mandatory prepayment as set forth therein. Upon the occurrence and during the continuance of any one or more the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this note shall become, or may be declared to be, immediately due and payable, all as provided therein. All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Terms defined in the Credit Agreement are used herein with their defined meanings unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New Jersey. GUEST SUPPLY, INC. By: s/ Paul Xenis Name: Paul Xenis Title: Secretary and Vice President-Finance GUEST PACKAGING, INC. By: s/ Paul Xenis Name: Paul Xenis Title: Secretary and Vice President-Finance BRECKENRIDGE-REMY, CO. By: s/ Paul Xenis Name: Paul Xenis Title: Secretary and Vice President-Finance GUEST DISTRIBUTION SERVICES, INC. By: s/ Paul Xenis Name: Paul Xenis Title: Authorized Signatory EX-10.(P) 10 REVOLVING CREDIT NOTE $9,375,000 East Brunswick, New Jersey December 3, 1997 FOR VALUE RECEIVED, the undersigned, GUEST SUPPLY, INC., a New Jersey corporation, GUEST PACKAGING, INC., a New Jersey corporation, and BRECKENRIDGE-REMY CO., a Delaware corporation, and Guest Distribution Service, Inc., a Delaware corporation, collectively, the "Borrower"), hereby jointly and severally, unconditionally promise to pay to the order of PNC Bank, National Association ("PNC") at the Payment Office, in lawful money of the United States of America and in immediately available funds, the principal amount of NINE MILLION THREE HUNDRED SEVENTY FIVE THOUSAND AND 00/1000 ($9,375,000) DOLLARS, or, if less, the aggregate unpaid principal amount of all revolving credit Loans made by PNC to the Borrower pursuant to Section 2.1 of the Credit Agreement on the dates and in the amounts specified in the Credit Agreement. The Borrower further agrees to pay interest on the unpaid principal amount outstanding hereunder from time to time from and including the date hereof in like money at such office at the rates and on the dates specified in the Credit Agreement. The holder of this Note is authorized to endorse on the schedule annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof (the "Grid") the date, Type and amount of each Revolving Credit Loan made pursuant to the Credit Agreement, each continuation thereof, each conversion of all or a portion thereof to another Type, the date and amount of each payment or prepayment of principal thereof and, in the case of Eurodollar Loans, the length of each Interest Period with respect thereto, which endorsement shall constitute rebuttable presumptive evidence of the accuracy of the information endorsed; provided, however, that the failure to make any such endorsement shall not affect the obligations of the Borrower in respect of such Revolving Credit Loan. This Note is one of the Revolving Credit Notes referred to in the Revolving Credit Agreement dated the date hereof among the Borrower, PNC, First Union National Bank, as Lenders, and PNC, as Agent (as the same may hereafter be amended, modified or supplemented from time to time, the "Credit Agreement") is entitled to the benefits thereof, is secured as provided therein and is subject to optional and mandatory prepayment as set forth therein. Upon the occurrence and during the continuance of any one or more the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this note shall become, or may be declared to be, immediately due and payable, all as provided therein. All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Terms defined in the Credit Agreement are used herein with their defined meanings unless otherwise defined herein. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New Jersey. GUEST SUPPLY, INC. By: s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance GUEST PACKAGING, INC. By: s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance BRECKENRIDGE-REMY, CO. By: s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance GUEST DISTRIBUTION SERVICES, INC. By: s/ Paul Xenis ------------- Name: Paul Xenis Title: Authorized Signatory EX-10.(Q) 11 EXHIBIT 10(q) Guest Supply, Inc. and certain other Obligors ----------------------- NOTE PURCHASE AGREEMENT ----------------------- Dated as of December 3, 1997 $15,000,000 7.06% Series A Senior Notes due November 15, 2009 $5,000,000 6.95% Series B Senior Notes due November 15, 2007 $5,000,000 6.70% Series C Senior Notes due November 15, 2003 TABLE OF CONTENTS PAGE ---- 1. AUTHORIZATION OF NOTES. . . . . . . . . . . . . . . . . . . . . . . 1 2. SALE AND PURCHASE OF NOTES. . . . . . . . . . . . . . . . . . . . . 2 3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . 2 4.1 Representations and Warranties . . . . . . . . . . . . . . . . 3 4.2 Performance; No Default. . . . . . . . . . . . . . . . . . . . 3 4.3 Compliance Certificates. . . . . . . . . . . . . . . . . . . . 3 4.4 Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . . 3 4.5 Purchase Permitted By Applicable Law, etc. . . . . . . . . . . 4 4.6 Sale of Other Notes. . . . . . . . . . . . . . . . . . . . . . 4 4.7 Payment of Special Counsel Fees. . . . . . . . . . . . . . . . 4 4.8 Private Placement Number . . . . . . . . . . . . . . . . . . . 4 4.9 Changes in Corporate Structure . . . . . . . . . . . . . . . . 4 4.10 New Credit Agreement; Lien Release . . . . . . . . . . . . . . 4 4.11 Proceedings and Documents. . . . . . . . . . . . . . . . . . . 5 5. REPRESENTATIONS AND WARRANTIES OF OBLIGORS. . . . . . . . . . . . . 5 5.1 Organization; Power and Authority. . . . . . . . . . . . . . . 5 5.2 Authorization, etc.. . . . . . . . . . . . . . . . . . . . . . 5 5.3 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5.4 Organization and Ownership of Shares of Subsidiaries . . . . . 6 5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . 7 5.6 Compliance with Laws, Other Instruments, etc.. . . . . . . . . 7 5.7 Governmental Authorizations, etc.. . . . . . . . . . . . . . . 7 5.8 Litigation; Observance of Agreements, Statutes and Orders. . . 7 5.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.10 Title to Property; Leases. . . . . . . . . . . . . . . . . . . 8 5.11 Licenses, Permits, etc . . . . . . . . . . . . . . . . . . . . 8 5.12 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . 9 5.13 Private Offering by the Obligors . . . . . . . . . . . . . . . 10 5.14 Use of Proceeds; Margin Regulations. . . . . . . . . . . . . . 10 5.15 Existing Debt; Future Liens. . . . . . . . . . . . . . . . . . 10 5.16 Foreign Assets Control Regulations, etc. . . . . . . . . . . . 11 5.17 Status under Certain Statutes. . . . . . . . . . . . . . . . . 11 5.18 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 11 5.19 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6. REPRESENTATIONS OF THE PURCHASERS . . . . . . . . . . . . . . . . . 12 6.1 Purchase for Investment. . . . . . . . . . . . . . . . . . . . 12 6.2 Source of Funds. . . . . . . . . . . . . . . . . . . . . . . . 12 7. INFORMATION AS TO OBLIGORS, ETC . . . . . . . . . . . . . . . . . . 13 7.1 Financial and Business Information . . . . . . . . . . . . . . 13 7.2 Officer's Certificate. . . . . . . . . . . . . . . . . . . . . 17 7.3 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . 17 8. PREPAYMENT OF THE NOTES.. . . . . . . . . . . . . . . . . . . . . . 18 8.1 Required Prepayments, Payments at Maturity . . . . . . . . . . 18 8.2 Optional Prepayments with Make-Whole Amount. . . . . . . . . . 19 8.3 Limited Optional Prepayments of Series A Notes without Make-Whole Amount. . . . . . . . . . . . . . . . . . . . . . . 19 8.4 Allocation of Partial Prepayments. . . . . . . . . . . . . . . 20 8.5 Change in Control. . . . . . . . . . . . . . . . . . . . . . . 20 8.6 Maturity; Surrender, etc.. . . . . . . . . . . . . . . . . . . 22 8.7 Offers to Purchase Notes, etc. . . . . . . . . . . . . . . . . 22 8.8 Make-Whole Amount. . . . . . . . . . . . . . . . . . . . . . . 23 9. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 24 9.1 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . 24 9.2 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 24 9.3 Maintenance of Properties. . . . . . . . . . . . . . . . . . . 24 9.4 Payment of Taxes and Claims. . . . . . . . . . . . . . . . . . 25 9.5 Corporate Existence, etc.. . . . . . . . . . . . . . . . . . . 25 9.6 Additional Obligors. . . . . . . . . . . . . . . . . . . . . . 25 10. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 26 10.1 Tangible Net Worth.. . . . . . . . . . . . . . . . . . . . . . 26 10.2 Obligor Tangible Assets or Cash Flow.. . . . . . . . . . . . . 26 10.3 Fixed Charge Coverage. . . . . . . . . . . . . . . . . . . . . 27 10.4 Leverage Ratio.. . . . . . . . . . . . . . . . . . . . . . . . 27 10.5 Restricted Payments. . . . . . . . . . . . . . . . . . . . . . 27 10.6 Restricted Investments.. . . . . . . . . . . . . . . . . . . . 28 10.7 Restricted Subsidiary Debt.. . . . . . . . . . . . . . . . . . 28 10.8 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 10.9 Merger, Consolidation, etc.. . . . . . . . . . . . . . . . . . 30 10.10 Asset Dispositions. . . . . . . . . . . . . . . . . . . . . . 32 10.11 Disposal of Ownership of a Restricted Subsidiary. . . . . . . 33 10.12 Transactions with Affiliates. . . . . . . . . . . . . . . . . 33 10.13 Lines of Business.. . . . . . . . . . . . . . . . . . . . . . 33 11. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 34 12. REMEDIES ON DEFAULT, ETC. . . . . . . . . . . . . . . . . . . . . . 36 12.1 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . 36 12.2 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 37 12.3 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . 37 12.4 No Waivers or Election of Remedies, Expenses, etc. . . . . . . 37 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . . . . . . . . . . . 38 13.1 Registration of Notes. . . . . . . . . . . . . . . . . . . . . 38 13.2 Transfer and Exchange of Notes . . . . . . . . . . . . . . . . 38 13.3 Replacement of Notes . . . . . . . . . . . . . . . . . . . . . 38 14. PAYMENTS ON NOTES . . . . . . . . . . . . . . . . . . . . . . . . . 39 14.1 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . 39 14.2 Home Office Payment. . . . . . . . . . . . . . . . . . . . . . 39 15. EXPENSES, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 15.1 Transaction Expenses . . . . . . . . . . . . . . . . . . . . . 40 15.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. . . . 40 17. AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . . . . . . . . 40 17.1 Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 40 17.2 Solicitation of Holders of Notes . . . . . . . . . . . . . . . 41 17.3 Binding Effect, etc. . . . . . . . . . . . . . . . . . . . . . 41 17.4 Notes held by Obligors, etc. . . . . . . . . . . . . . . . . . 42 18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 19. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . 42 20. CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . 43 21. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . . . . . . 44 22. DESIGNATION OF FOREIGN SUBSIDIARIES . . . . . . . . . . . . . . . . 44 23. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 23.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 45 23.2 Payments Due on Non-Business Days; When Payments Deemed Received . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 23.3 Limitation on Liability of Certain Obligors. . . . . . . . . . 45 23.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 46 23.5 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 46 23.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 46 23.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 46 SCHEDULE A -- INFORMATION RELATING TO PURCHASERS SCHEDULE B -- DEFINED TERMS SCHEDULE 3 -- PAYMENT INSTRUCTIONS AT CLOSING SCHEDULE 4.9 -- CHANGES IN CORPORATE STRUCTURE SCHEDULE 5.3 -- DISCLOSURE MATERIALS SCHEDULE 5.4 -- SUBSIDIARIES, CERTAIN AGREEMENTS SCHEDULE 5.5 -- FINANCIAL STATEMENTS SCHEDULE 5.8 -- CERTAIN LITIGATION SCHEDULE 5.11 -- LICENSES, PERMITS, ETC. SCHEDULE 5.12 -- CERTAIN ERISA MATTERS SCHEDULE 5.14 -- USE OF PROCEEDS SCHEDULE 5.15 -- EXISTING DEBT AND LIENS SCHEDULE 8.1 -- SCHEDULED PRINCIPAL PAYMENTS ON THE NOTES SCHEDULE 10.6 -- CERTAIN EXISTING INVESTMENTS SCHEDULE 18 -- OBLIGOR ADDRESSES FOR NOTICES EXHIBIT 1A -- FORM OF SERIES A NOTE EXHIBIT 1B -- FORM OF SERIES B NOTE EXHIBIT 1C -- FORM OF SERIES C NOTE EXHIBIT 4.4(a) -- FORM OF OPINION OF COUNSEL FOR THE OBLIGORS EXHIBIT 4.4(b) -- FORM OF OPINION OF NEW JERSEY COUNSEL FOR THE OBLIGORS EXHIBIT 4.4(c) -- FORM OF OPINION OF SPECIAL COUNSEL FOR THE PURCHASERS EXHIBIT 9.6(a) -- FORM OF INSTRUMENT OF JOINDER EXHIBIT 9.6(b) -- FORM OF ALLONGE Guest Supply, Inc. and certain other Obligors $15,000,000 7.06% Series A Senior Notes due November 15, 2009 $5,000,000 6.95% Series B Senior Notes due November 15, 2007 $5,000,000 6.70% Series C Senior Notes due November 15, 2003 As of December 3, 1997 [To be separately addressed to each Purchaser listed in Schedule A] Ladies and Gentlemen: Each of GUEST SUPPLY, INC., a New Jersey corporation (together with its successors and assigns, the "Company"), BRECKENRIDGE-REMY CO., a Delaware corporation (together with its successors and assigns, "Breckenridge-Remy"), GUEST DISTRIBUTION SERVICES, INC., a Delaware corporation (together with its successors and assigns, "Guest Distribution"), and GUEST PACKAGING, INC., a New Jersey corporation (together with its successors and assigns, "Guest Packaging") (the Company, Breckenridge-Remy, Guest Distribution and Guest Packaging, together with any other Person that at any time becomes an Obligor pursuant to Section 9.6, are referred to herein, collectively, as the "Obligors") agrees with you as follows: 1. AUTHORIZATION OF NOTES. The Obligors will authorize the issue and sale of: (a) $15,000,000 aggregate principal amount of their joint and several 7.06% Series A Senior Notes due November 15, 2009 (as such notes may be amended, restated, supplemented or otherwise modified from time to time, the "Series A Notes," such term to include any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreements); (b) $5,000,000 aggregate principal amount of their joint and several 6.95% Series B Senior Notes due November 15, 2007 (as such notes may be amended, restated, supplemented or otherwise modified from time to time, the "Series B Notes," such term to include any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreements); and (c) $5,000,000 aggregate principal amount of their joint and several 6.70% Series C Senior Notes due November 15, 2003 (as such notes may be amended, restated, supplemented or otherwise modified from time to time, the "Series C Notes," such term to include any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreements). The Series A Notes, the Series B Notes and the Series C Notes, collectively, are referred to herein as the "Notes." The Notes shall be substantially in the respective forms set out in Exhibit 1A, Exhibit 1B and Exhibit 1C, with such changes therefrom, if any, as may be approved by the Purchasers and the Obligors. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement; references to a "Section" are, unless otherwise specified, to a Section of this Agreement. 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Obligors will issue and sell to you and you will purchase from the Obligors, at the Closing provided for in Section 3, Notes of the Series and in the principal amount specified below your name in Schedule A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Obligors are entering into separate Note Purchase Agreements (as may be amended, restated, supplemented or otherwise modified from time to time, the "Other Agreements") identical with this Agreement with each of the other purchasers named in Schedule A (the "Other Purchasers"), providing for the sale at such Closing to each of the Other Purchasers of Notes of the Series and in the principal amount specified below its name in Schedule A. Your obligation hereunder and the obligations of the Other Purchasers under the Other Agreements are several and not joint obligations and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or non-performance by any Other Purchaser thereunder. 3. CLOSING. The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Haythe & Curley, 237 Park Avenue, New York, New York 10017, at 10:00 a.m., local time, at a closing (the "Closing") on December 3, 1997. At the Closing, the Obligors will deliver to you one or more Notes (as set forth below your name in Schedule A), of the Series and in the denomination(s) indicated in Schedule A, in the aggregate principal amount of your purchase, dated the date of the Closing and registered in your name or in the name of your nominee, as indicated in Schedule A, against payment by federal funds wire transfer in immediately available funds in the amount of the purchase price therefor as directed by the Obligors in Schedule 3. If at the Closing the Obligors shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. 4. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at such Closing, of the following conditions: 4.1 Representations and Warranties. The representations and warranties of the Obligors in the Financing Documents shall be correct when made and at the time of the Closing. 4.2 Performance; No Default. The Obligors shall have performed and complied with all agreements and conditions contained in the Financing Documents required to be performed or complied with by them prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14) at the Closing no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Restricted Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Section 10.5, 10.10, 10.11 or 10.12 had such Sections applied since such date. 4.3 Compliance Certificates. (a) Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled. (b) Secretary's Certificate. Each Obligor shall have delivered to you a certificate, dated the date of the Closing, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of each Financing Document to which it is or is to be a party. 4.4 Opinions of Counsel. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing, (a) from Haythe & Curley, counsel for the Obligors, substantially in the form of Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Obligors hereby instruct such counsel to deliver such opinion to you), (b) from Jamieson, Moore, Peskin & Spicer, New Jersey counsel for the Obligors, substantially in the form of Exhibit 4.4(b) and covering such other matters incident to such transactions as you or your counsel may reasonably request (and the Obligors hereby instruct such counsel to deliver such opinion to you), and (c) from Hebb & Gitlin, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(c) and covering such other matters incident to such transactions as you may reasonably request. 4.5 Purchase Permitted By Applicable Law, etc. On the date of the Closing your purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation G, T or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date of your execution of this Agreement. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. 4.6 Sale of Other Notes. Contemporaneously with the Closing the Obligors shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at such Closing as specified in Schedule A. 4.7 Payment of Special Counsel Fees. Without limiting the provisions of Section 15.1, the Obligors shall have paid on or before the date of the Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4(c) to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the date of the Closing. 4.8 Private Placement Number. Prior to the Closing, a Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each Series of the Notes. 4.9 Changes in Corporate Structure. Except as specified in Schedule 4.9, no Obligor shall have changed its jurisdiction of incorporation or been a party to any merger or consolidation, nor shall any Obligor have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.10 New Credit Agreement; Lien Releases. On or before the date of the Closing, the Obligors, PNC Bank, National Association, and First Union National Bank shall have entered into the New Credit Agreement, in form and substance reasonably satisfactory to you, and the Company shall have delivered to you copies of the New Credit Agreement and each other document executed in connection therewith requested by you, certified as true and correct by a Responsible Officer. You shall have received written evidence, in form and substance reasonably satisfactory to you, that all Liens on property of the Company and the Subsidiaries in favor of such banks, or in favor of any other lender or lenders under any term loan or revolving credit facility, or in favor of any agent or trustee therefor, shall have been released. 4.11 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by the Financing Documents and all documents and instruments incident to such transactions shall be reasonably satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. 5. REPRESENTATIONS AND WARRANTIES OF OBLIGORS. Each Obligor represents and warrants to you that as of the date of the Closing: 5.1 Organization; Power and Authority. Each Obligor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Obligor has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts, to execute and deliver each Financing Document to which it is or is to be a party and to perform the provisions thereof. 5.2 Authorization, etc. The Financing Documents have been duly authorized by all necessary corporate action on the part of the Obligors, and each of the Note Purchase Agreements constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of each Obligor enforceable against such Obligor in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3 Disclosure. The Company, through its agent, PNC Capital Markets, Inc., has delivered to you and the Other Purchasers a copy of a Confidential Private Placement Memorandum, dated September 1997 (including, without limitation, all exhibits thereto, the "Memorandum"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and the Subsidiaries. Except as disclosed in Schedule 5.3, the Financing Documents, the Memorandum, the documents, certificates and other writings delivered to you by or on behalf of any one or more of the Obligors in connection with the transactions contemplated by the Financing Documents and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made (provided, that with respect to any projected financial information or forecasted information contained therein, the Obligors represent and warrant only that such projections and forecasts have been made in good faith and are based on reasonable assumptions). Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings delivered to you by or on behalf of any one or more of the Obligors, or in the financial statements listed in Schedule 5.5, since September 30, 1996, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect. There is no fact known to any Obligor that would reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of any one or more of the Obligors specifically for use in connection with the transactions contemplated hereby. 5.4 Organization and Ownership of Shares of Subsidiaries. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, the percentage of shares of each class of its Capital Stock or similar equity interests outstanding owned by the Company and each other Subsidiary, whether such Subsidiary is a Domestic Subsidiary or a Foreign Subsidiary and whether such Subsidiary is a Restricted Subsidiary or an Unrestricted Subsidiary. (b) All of the outstanding shares of Capital Stock or similar equity interests of each Subsidiary have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien. (c) Each Subsidiary is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than the Financing Documents, the agreements listed in Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of the Subsidiaries that owns outstanding shares of Capital Stock or similar equity interests of such Subsidiary. 5.5 Financial Statements. The Company has delivered to each Purchaser copies of the financial statements of the Company and the Subsidiaries listed in Schedule 5.5. All of such financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and the Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to the absence of footnotes and to normal year-end adjustments). 5.6 Compliance with Laws, Other Instruments, etc. The execution, delivery and performance by the Obligors of the Financing Documents will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary, or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. 5.7 Governmental Authorizations, etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Obligors of the Financing Documents. 5.8 Litigation; Observance of Agreements, Statutes and Orders. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of any Obligor, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. 5.9 Taxes. The Company and the Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that would reasonably be expected to have a Material Adverse Effect. There is no waiver or agreement in effect for the extension of time for the assessment of any tax obligation of the Company or any Subsidiary. With the exception of an ongoing Internal Revenue Service audit with respect to the Company's 1995 fiscal year, no federal income tax returns of the Company and the Subsidiaries have been audited by the Internal Revenue Service. 5.10 Title to Property; Leases. The Company and the Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after such date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by the Financing Documents. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. 5.11 Licenses, Permits, etc. Except as disclosed in Schedule 5.11, and except where the circumstances with respect to the failure of any one or more of the statements in the following clauses (a), (b) and (c) to be true individually and in the aggregate would not reasonably be expected to have a Material Adverse Effect: (a) the Company and the Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, without known conflict with the rights of others; (b) to the best knowledge of each Obligor, no product or practice of the Company or any Subsidiary infringes in any respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (c) to the best knowledge of each Obligor, there is no violation by any Person of any right of the Company or any of the Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of the Subsidiaries. 5.12 Compliance with ERISA. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and would not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that would reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meaning specified in section 3 of ERISA. (c) The Company and the ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and the Subsidiaries is not Material. (e) Schedule 5.12 sets forth all ERISA Affiliates and all "employee benefit plans" maintained by the Company (or any "affiliate" thereof) or in respect of which the Notes could constitute an "employer security" ("employee benefit plan" has the meaning specified in section 3 of ERISA, "affiliate" has the meaning specified in section 407(d) of ERISA and section V of PTCE 95-60 and "employer security" has the meaning specified in section 407(d) of ERISA). (f) The execution and delivery of the Financing Documents and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation in the first sentence of this Section 5.12(f) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you. 5.13 Private Offering by the Obligors. Neither any of the Obligors nor anyone acting on behalf of any of them has offered the Notes or any similar Securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than the Purchasers and not more than 45 other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither any of the Obligors nor anyone acting on behalf of any of them has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of section 5 of the Securities Act. 5.14 Use of Proceeds; Margin Regulations. The Obligors will apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation G of the Board of Governors of the Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve any Obligor in a violation of Regulation X of such Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of such Board (12 CFR 220). Margin stock does not constitute more than 2% of the value of the consolidated assets of the Company and the Subsidiaries and none of the Obligors has any present intention that margin stock will constitute more than 2% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in such Regulation G. 5.15 Existing Debt; Future Liens. (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Debt of the Company and the Subsidiaries as of September 30, 1997, since which date there has been no Material change in the amounts, interest rates, sinking funds, instalment payments or maturities of the Debt of the Company or the Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Debt of the Company or such Subsidiary and no event or condition exists with respect to any Debt of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.8. 5.16 Foreign Assets Control Regulations, etc. Neither the sale of the Notes by the Obligors hereunder nor their use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 5.17 Status under Certain Statutes. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Transportation Acts, as amended, or the Federal Power Act, as amended. 5.18 Environmental Matters. Neither the Company nor any Subsidiary has knowledge of any claim or has received any written notice of any claim, and neither the Company nor any Subsidiary has knowledge of any proceeding that has been instituted raising any claim against the Company or any of the Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as would not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing: (a) neither the Company nor any Subsidiary has knowledge of any facts that would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as would not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of the Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not transported or disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that would reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of the Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply would not reasonably be expected to result in a Material Adverse Effect. 5.19 Solvency. The fair saleable value of the business and assets of each Obligor, after giving effect to the transactions contemplated by the Financing Documents, will be in excess of the amount that will be required to pay the probable liabilities of such Obligor (including subordinated, contingent, unmatured and unliquidated liabilities), on existing debts as they may become absolute and matured. No Obligor, after giving effect to the transactions contemplated by the Financing Documents, will be engaged in any business or transaction, or be about to engage in any business or transaction, for which such Obligor has unreasonably small capital, and no Obligor has any intent to hinder, delay or defraud any entity to which such Obligor is, or will become indebted, or to incur debts that would be beyond such Obligor's ability to pay as they mature. 6. REPRESENTATIONS OF THE PURCHASERS. 6.1 Purchase for Investment. You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and you agree that the Obligors are not required to register the Notes. You represent that you are, or that you are a nominee for, a "qualified institutional buyer" (as defined in Rule 144A) or an "accredited investor" (as defined in Rule 501 under the Securities Act). 6.2 Source of Funds. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) you are an insurance company and the Source is an "insurance company general account," as such term is defined in Department of Labor Prohibited Transaction Class Exemption 95-60 (issued July 12, 1995) ("PTCE 95-60"), and there is no employee benefit plan, treating as a single plan all plans maintained by the same employer or same employee organization or affiliates thereof, with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan exceeds 10% of the total reserves and liabilities of such general account as determined under PTCE 95-60 (exclusive of separate account liabilities) plus surplus, as set forth in the National Association of Insurance Commissioners Annual Statement filed with your state of domicile; or (b) if you are an insurance company, the Source does not include assets allocated to any separate account maintained by you in which any employee benefit plan (or its related trust) has any interest, other than a separate account that is maintained solely in connection with your fixed contractual obligations under which the amounts payable, or credited, to such plan and to any participant or beneficiary of such plan (including any annuitant) are not affected in any manner by the investment performance of the separate account; or (c) the Source is either (i) an insurance company pooled separate account, within the meaning of Department of Labor Prohibited Transaction Class Exemption 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the Department of Labor Prohibited Transaction Class Exemption 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (d) the Source constitutes assets of an "investment fund" (within the meaning of part V of Department of Labor Prohibited Transaction Class Exemption 84-14 (the "QPAM Exemption")) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (d); or (e) the Source is a governmental plan; or (f) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (f); or (g) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2, the terms "employee benefit plan", "governmental plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 7. INFORMATION AS TO OBLIGORS, ETC. 7.1 Financial and Business Information. The Company shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- within 50 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of (i) consolidated balance sheets of the Company and its consolidated subsidiaries, as at the end of such quarter, (ii) a consolidating balance sheet of the Company and the Restricted Subsidiaries, as at the end of such quarter, (iii) consolidated statements of operations and cash flows of the Company and its consolidated subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, and (iv) consolidating statements of operations of the Company and the Restricted Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in the case of such consolidated statements in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments; (b) Annual Statements -- within 105 days after the end of each fiscal year of the Company, duplicate copies of (i) consolidated balance sheets of the Company and its consolidated subsidiaries, as at the end of such year, (ii) a consolidating balance sheet of the Company and the Restricted Subsidiaries, as at the end of such year, (iii) consolidated statements of operations, cash flows and shareholders' equity of the Company and its consolidated subsidiaries, for such year, and (iv) consolidating statements of operations of the Company and the Restricted Subsidiaries for such year, setting forth in the case of such consolidated statements in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by (A) in the case of such consolidated statements with respect to the Company and its consolidated subsidiaries, an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and (B) a certificate of such accountants stating that they have reviewed Sections 10.1 through 10.10, inclusive, of this Agreement and stating further whether, in making their audit, they have become aware of any condition or event under any of such Sections that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit); (c) Audit Reports -- promptly upon receipt thereof, a copy of each other report submitted to the Company or any Restricted Subsidiary by independent accountants in connection with any management report, interim or special audit report or comparable analysis prepared by them with respect to the books of the Company or any Restricted Subsidiary; (d) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public Securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission or any successor thereto and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; (e) Notice of Default or Event of Default -- promptly, and in any event within five Business Days, after a Senior Financial Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default under any Financing Document or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Obligors are taking or propose to take with respect thereto; (f) ERISA Matters -- promptly, and in any event within five Business Days, after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date of the Closing; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, would reasonably be expected to have a Material Adverse Effect; (g) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any written notice to the Company or any Subsidiary from any federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that would reasonably be expected to have a Material Adverse Effect; (h) Actions, Proceedings -- promptly after a Responsible Officer becomes aware of the commencement thereof, notice of any action or proceeding relating to the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, would reasonably be expected to have a Material Adverse Effect; (i) Rule 144A -- promptly upon request, to any holder of Notes and any "qualified institutional buyer" (as defined in Rule 144A) to whom any Note may be offered or sold by such holder, the information required under paragraph (d)(4) of Rule 144A (or any similar successor provision of Rule 144A) to permit compliance with Rule 144A in connection with a resale of such Note; and (j) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of the Subsidiaries or relating to the ability of the Obligors to perform their obligations under the Financing Documents as from time to time may be reasonably requested by any such holder of Notes. 7.2 Officer's Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including, where applicable, calculations in reasonable detail) required in order to establish whether the Obligors were in compliance with the requirements of Section 10.1 through Section 10.11, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default -- a statement that such officer, in his or her capacity as such, has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and the Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review has not disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Obligors shall have taken or propose to take with respect thereto. 7.3 Inspection. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior written notice to the Company, during normal business hours and without undue interruption, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and the Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Company and the other Obligors, to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Obligors authorize such accountants to discuss the affairs, finances and accounts of the Company and the Subsidiaries), all at such times and as often as may be requested. 8. PREPAYMENT OF THE NOTES. 8.1 Required Prepayments, Payments at Maturity. (a) Series A Notes. On November 15, 2001 and on each May 15 and November 15 thereafter to and including May 15, 2009, the Obligors will prepay the principal amount of Series A Notes specified in Schedule 8.1 under the column heading "Principal Amount of Series A Notes Scheduled to be Paid" with respect to such date (or such lesser principal amount as shall then be outstanding) at par and without payment of any Make-Whole Amount or any premium, and the Obligors will pay all of the principal amount of the Series A Notes remaining outstanding, if any, on November 15, 2009. Each partial prepayment of the Series A Notes pursuant to Section 8.2 or Section 8.3 will be applied, first, to the amount due on the maturity date of the Series A Notes and, second, to the mandatory prepayments applicable to the Series A Notes, as set forth in this Section 8.1(a) and Schedule 8.1, in the inverse order of the maturity thereof. In the event that less than all of the Series A Notes are prepaid, purchased, redeemed or otherwise acquired by any Obligor or any Affiliate pursuant to an offer made pursuant to Section 8.5, Section 8.7 or the definition of Debt Prepayment Application, then each such partial prepayment, purchase, redemption or other acquisition of the Series A Notes will reduce the principal amount of each mandatory prepayment applicable to the Series A Notes, as set forth in this Section 8.1(a) and Schedule 8.1, and the payment at maturity of the Series A Notes in the same proportion as the aggregate unpaid principal amount of the Series A Notes is reduced as a result of such prepayment, purchase, redemption or other acquisition. (b) Series B Notes. On November 15, 2000 and on each May 15 and November 15 thereafter to and including May 15, 2007, the Obligors will prepay the principal amount of Series B Notes specified in Schedule 8.1 under the column heading "Principal Amount of Series B Notes Scheduled to be Paid" with respect to such date (or such lesser principal amount as shall then be outstanding) at par and without payment of any Make-Whole Amount or any premium, and the Obligors will pay all of the principal amount of the Series B Notes remaining outstanding, if any, on November 15, 2007. Each partial prepayment of the Series B Notes pursuant to Section 8.2 will be applied, first, to the amount due on the maturity date of the Series B Notes and, second, to the mandatory prepayments applicable to the Series B Notes, as set forth in this Section 8.1(b) and Schedule 8.1, in the inverse order of the maturity thereof. In the event that less than all of the Series B Notes are prepaid, purchased, redeemed or otherwise acquired by any Obligor or any Affiliate pursuant to an offer made pursuant to Section 8.5, Section 8.7 or the definition of Debt Prepayment Application, then each such partial prepayment, purchase, redemption or other acquisition of the Series B Notes will reduce the principal amount of each mandatory prepayment applicable to the Series B Notes, as set forth in this Section 8.1(b) and Schedule 8.1, and the payment at maturity of the Series B Notes in the same proportion as the aggregate unpaid principal amount of the Series B Notes is reduced as a result of such prepayment, purchase, redemption or other acquisition. (c) Series C Notes. On November 15, 1999 and on each May 15 and November 15 thereafter to and including May 15, 2003, the Obligors will prepay the principal amount of Series C Notes specified in Schedule 8.1 under the column heading "Principal Amount of Series C Notes Scheduled to be Paid" with respect to such date (or such lesser principal amount as shall then be outstanding) at par and without payment of any Make-Whole Amount or any premium, and the Obligors will pay all of the principal amount of the Series C Notes remaining outstanding, if any, on November 15, 2003. Each partial prepayment of the Series C Notes pursuant to Section 8.2 will be applied, first, to the amount due on the maturity date of the Series C Notes and, second, to the mandatory prepayments applicable to the Series C Notes, as set forth in this Section 8.1(c) and Schedule 8.1, in the inverse order of the maturity thereof. In the event that less than all of the Series C Notes are prepaid, purchased, redeemed or otherwise acquired by any Obligor or any Affiliate pursuant to an offer made pursuant to Section 8.5, Section 8.7 or the definition of Debt Prepayment Application, then each such partial prepayment, purchase, redemption or other acquisition of the Series C Notes will reduce the principal amount of each mandatory prepayment applicable to the Series C Notes, as set forth in this Section 8.1(c) and Schedule 8.1, and the payment at maturity of the Series C Notes in the same proportion as the aggregate unpaid principal amount of the Series C Notes is reduced as a result of such prepayment, purchase, redemption or other acquisition. 8.2 Optional Prepayments with Make-Whole Amount. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time part of, the Notes (but if in part, in an amount not less than $2,500,000 or such lesser amount as shall then be outstanding), at 100% of the principal amount so prepaid, plus, with respect to the principal amount of each Note so prepaid, the applicable Make-Whole Amount determined for the prepayment date with respect to such principal amount, together with interest as provided in Section 8.6. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such prepayment date, the aggregate principal amount of the Notes of each Series to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.4), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. 8.3 Limited Optional Prepayments of Series A Notes without Make-Whole Amount. The Company may, at its option, upon notice as provided below, prepay pursuant to this Section 8.3, on any date on or after November 15, 2001 on which a principal amount of Series A Notes is required to be prepaid pursuant to Section 8.1(a) and Schedule 8.1, an additional principal amount of the Series A Notes equal to the principal amount of Series A Notes so required to be prepaid on such date, at 100% of the principal amount so prepaid, at par and without any Make-Whole Amount or premium, provided that the aggregate principal amount of Series A Notes prepaid pursuant to this Section 8.3 on all such dates together shall in no event exceed $3,750,000. The Company will give each holder of Series A Notes written notice of each optional prepayment under this Section 8.3 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such prepayment date, the aggregate principal amount of the Series A Notes to be prepaid on such date pursuant to this Section 8.3, the principal amount of each Series A Note held by such holder to be prepaid pursuant to this Section 8.3 (determined in accordance with Section 8.4) and a schedule (similar in format to Schedule 8.1) setting forth the Company's determination of the remaining required scheduled principal payments on the Series A Notes after giving effect to the proposed prepayment under this Section 8.3 (which determination shall be for informational purposes only and shall not be binding upon any holder of Notes). 8.4 Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes pursuant to Section 8.2, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes of each Series (without distinguishing among the different Series) at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore prepaid. In the case of each partial prepayment of the Notes of any Series pursuant to Section 8.1 or 8.3, the principal amount of the Notes of such Series shall be allocated among all of the Notes of such Series at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore prepaid. 8.5 Change in Control. (a) Notice of Change in Control or Control Event. The Company will, within three Business Days after any Responsible Officer has knowledge of the occurrence of any Change in Control or Control Event, give written notice of such Change in Control or Control Event to each holder of Notes (by telecopy transmission and, simultaneously with the sending of such telecopied notice, by sending a copy of such notice to each such holder via an overnight courier of national reputation) unless notice in respect of such Change in Control (or the Change in Control contemplated by such Control Event) shall have been given previously pursuant to clause (b) of this Section 8.5. If a Change in Control has occurred, such notices shall contain and constitute an offer to prepay Notes as described in clause (c) of this Section 8.5 and shall be accompanied by the certificate described in clause (g) of this Section 8.5. In the case of any such notice containing and constituting such an offer to prepay Notes, if the Company shall not have received a written response to such first notice from each holder of Notes within ten days after the transmission of such telecopy thereof, then the Company will immediately send a second such written notice via an overnight courier of national reputation to each holder of Notes who shall have not previously responded to the Company. (b) Condition to Action. Neither the Company nor any other Obligor will take any action that consummates or finalizes a Change in Control unless (i) at least 30 days prior to such action it shall have given to each holder of Notes written notice containing and constituting an offer to prepay Notes as described in clause (c) of this Section 8.5, accompanied by the certificate described in clause (g) of this Section 8.5, and (ii) contemporaneously with such action, the Obligors prepay all Notes required to be prepaid in accordance with this Section 8.5. (c) Offer to Prepay Notes. The offer to prepay Notes contemplated by clauses (a) and (b) of this Section 8.5 shall be a written offer to prepay, in accordance with and subject to this Section 8.5, all, but not less than all, the Notes held by each holder (in this case only, "holder" in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) on a date specified in such offer (the "Proposed Prepayment Date"). If such Proposed Prepayment Date is in connection with an offer contemplated by clause (a) of this Section 8.5, such date shall be not less than 30 days and not more than 60 days after the date of the first notice referred to in clause (a) of this Section 8.5 (if the Proposed Prepayment Date shall not be specified in such first notice, the Proposed Prepayment Date shall be the 30th day after the date of such notice). (d) Acceptance, Rejection. A holder of Notes may accept the offer to prepay made pursuant to this Section 8.5 by causing a notice of such acceptance to be delivered to the Company at least ten days prior to the Proposed Prepayment Date. A failure by a holder of Notes to respond (by such time) to an offer to prepay made pursuant to this Section 8.5 shall be deemed to constitute an acceptance of such offer by such holder. (e) Prepayment. Prepayment of the Notes to be prepaid pursuant to this Section 8.5 shall be at 100% of the principal amount of such Notes, at par and without payment of any Make-Whole Amount or any premium, together with interest on such Notes accrued to the date of prepayment. The prepayment shall be made on the Proposed Prepayment Date except as provided in clause (f) of this Section 8.5. (f) Deferral Pending Change in Control. The obligation of the Obligors to prepay Notes pursuant to the offers required by clause (b) and accepted in accordance with clause (d) of this Section 8.5 is subject to the occurrence of the Change in Control in respect of which such offers and acceptances shall have been made. In the event that such Change in Control does not occur on the Proposed Prepayment Date in respect thereof, the prepayment shall be deferred until and shall be made on the date on which such Change in Control occurs. The Company shall keep each holder of Notes reasonably and timely informed of (i) any such deferral of the date of prepayment, (ii) the date on which such Change in Control and the prepayment are expected to occur, and (iii) any determination by the Company that efforts to effect such Change in Control have ceased or been abandoned (in which case the offers and acceptances made pursuant to this Section 8.5 in respect of such Change in Control shall be deemed rescinded). In the event that such Change in Control is deferred for 60 or more days after the Proposed Prepayment Date, the offers and acceptances made pursuant to this Section 8.5 in respect of such Change in Control shall be deemed rescinded. If any such offers and acceptances are deemed rescinded pursuant to this clause (f), then all requirements of this Section 8.5 (including, without limitation, the requirement to give notice and make offers pursuant to clauses (a) and (b)) with respect to any Change in Control (including, without limitation, with respect to such deferred Change in Control) occurring after such rescission shall be reinstated. (g) Officer's Certificate. Each offer to prepay the Notes pursuant to this Section 8.5 shall be accompanied by a certificate, executed by a Senior Financial Officer and dated the date of such offer, specifying: (i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this Section 8.5; (iii) the principal amount of each Note offered to be prepaid; (iv) the interest that would be due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date; (v) that the conditions of this Section 8.5 have been fulfilled; and (vi) in reasonable detail, the nature and date or proposed date of the Change in Control. 8.6 Maturity; Surrender, etc. In the case of each prepayment of Notes pursuant to this Section 8 or pursuant to the definition of Debt Prepayment Application, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any provided, that no Make-Whole Amount shall be payable in connection with a prepayment pursuant to Section 8.1, Section 8.3 or Section 8.5). From and after such date, unless the Obligors shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.7 Offers to Purchase Notes, etc. The Obligors will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except (a) upon the payment or prepayment of the Notes in accordance with the terms of the Note Purchase Agreements and the Notes or (b) pursuant to an offer to purchase made by an Obligor or an Affiliate pro rata to the holders of all Notes of all Series at the time outstanding upon the same terms and conditions. Any such offer shall provide each holder with sufficient information to enable it to make an informed decision with respect to such offer, and shall remain open for at least 30 Business Days. If the holders of more than 10% of the principal amount of the Notes then outstanding accept any such offer, the Company shall promptly notify the remaining holders of such fact and the expiration date for the acceptance by holders of Notes of such offer shall be extended by the number of days necessary to give each such remaining holder at least 10 Business Days from its receipt of such notice to accept such offer. The Obligors will immediately cancel all Notes acquired by any of them or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of the Note Purchase Agreements and no Notes may be issued in substitution or exchange for any such Notes. 8.8 Make-Whole Amount. The term "Make-Whole Amount" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make- Whole Amount may in no event be less than zero. For the purposes of determining the Make- Whole Amount, the following terms have the following meanings: "Called Principal" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or the definition of Debt Prepayment Application or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Discounted Value" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "Reinvestment Yield" means, with respect to the Called Principal of any Note, the sum of (x) 0.50% plus (y) the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Telerate Access Service (or such other display as may replace Page 678 on Telerate Access Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the duration closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the duration closest to and less than the Remaining Average Life. "Remaining Average Life" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "Remaining Scheduled Payments" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1 or the definition of Debt Prepayment Application. "Settlement Date" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or the definition of Debt Prepayment Application or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. 9. AFFIRMATIVE COVENANTS. Each Obligor covenants that so long as any of the Notes are outstanding: 9.1 Compliance with Law. The Company will and will cause each of the Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.2 Insurance. The Company will and will cause each of the Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. 9.3 Maintenance of Properties. The Company will and will cause each of the Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation or the maintenance of any of its properties (i) if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or (ii) where such properties are the subject of a Transfer permitted by Section 10.10. 9.4 Payment of Taxes and Claims. The Company will and will cause each of the Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes, assessments, charges or levies have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of all such taxes, assessments and claims in the aggregate would not reasonably be expected to have a Material Adverse Effect. 9.5 Corporate Existence, etc. The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.9, 10.10 and 10.11, the Company will at all times preserve and keep in full force and effect the corporate existence of each of the Restricted Subsidiaries (unless merged into the Company or a Restricted Subsidiary) and all rights and franchises of the Company and the Restricted Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise would not, individually or in the aggregate, have a Material Adverse Effect. 9.6 Additional Obligors. The Company will cause each Domestic Subsidiary to, on and at all times after the Relevant Date with respect to such Domestic Subsidiary, be an Obligor under the Financing Documents. The Company will cause each Subsidiary that becomes a Domestic Subsidiary after the date of the Closing to, not later than the Relevant Date with respect to such Subsidiary: (a) become an Obligor under the Financing Documents by executing and delivering, to each holder of the Notes, an instrument of joinder, in the form of Exhibit 9.6(a) (each, an "Instrument of Joinder"), pursuant to which such Domestic Subsidiary shall become jointly and severally liable as an Obligor for the due and punctual performance and observance of all of the covenants and other obligations in the Notes and the Note Purchase Agreements to be performed or observed by the Obligors; immediately upon the execution and delivery of an Instrument of Joinder to one or more of the holders of Notes (and whether or not such Domestic Subsidiary shall, as required by Section 9.6(b), execute and deliver any Allonges with respect to the Notes), such Domestic Subsidiary shall be deemed to have become an Obligor for purposes of all of the Financing Documents, including, without limitation, for purposes of the definition of "Obligors" set forth in each Note Purchase Agreement and each Note; (b) execute and deliver, to each holder of Notes, an allonge with respect to each of the Notes, in the form of Exhibit 9.6(b) (each, an "Allonge"), pursuant to which such Domestic Subsidiary shall confirm its joint and several liability as an Obligor for the due and punctual payment of the principal of and Make-Whole Amount, if any, and interest on each of the Notes; (c) deliver, to each holder of Notes, copies of the constitutive documents of such Domestic Subsidiary and corporate resolutions (or equivalent) authorizing such transactions, in each case certified as true and correct by a Responsible Officer of the Company and an officer of such Subsidiary; and (d) cause to be delivered, to each holder of Notes, an opinion of Haythe & Curley or a nationally recognized independent counsel for such Domestic Subsidiary, addressed to each holder of Notes and dated the date of delivery of Instruments of Joinder by such Domestic Subsidiary, covering substantially the same matters with respect to such Domestic Subsidiary (recognizing and giving effect to the execution and delivery of such Instruments of Joinder and Allonges by such Domestic Subsidiary) as were covered with respect to the Initial Subsidiary Obligors in the opinions of counsel for the Obligors delivered on the date of the Closing pursuant to Sections 4.4(a) and 4.4(b), and covering such other matters as the Required Holders may reasonably request. The term "Relevant Date" means (i) with respect to each Subsidiary that is a Domestic Subsidiary as of the date of the Closing, the date of the Closing, and (ii) with respect to any Subsidiary that becomes a Domestic Subsidiary after the date of the Closing, the date that is the earlier of (A) 20 Business Days after such Subsidiary first becomes a Domestic Subsidiary or (B) the date that such Subsidiary first becomes obligated in any manner (whether as principal obligor, as guarantor or surety, or otherwise) in respect of any of the Debt under the New Credit Agreement or any promissory note, letter of credit, Guaranty or other agreement or instrument related to the New Credit Agreement. 10. NEGATIVE COVENANTS. Each Obligor covenants that so long as any of the Notes are outstanding: 10.1 Tangible Net Worth. The Company will not, at any time, permit Consolidated Tangible Net Worth to be less than the sum of (a) $31,000,000, plus (b) an aggregate amount equal to 50% of Consolidated Net Income (but, in the case of each fiscal year, only if a positive number) for each completed fiscal year of the Company ended after September 30, 1996. 10.2 Obligor Tangible Assets or Cash Flow. The Company will not, at any time, permit the ratio of (a) Consolidated Obligor Tangible Assets to (b) Consolidated Tangible Assets to be less than 0.9 to 1.0, unless at such time the Obligor Cash Flow Ratio is 0.9 to 1.0 or greater. 10.3 Fixed Charge Coverage. The Company will not, at any time, permit the ratio of (a) Consolidated Income Available for Fixed Charges for the period of four consecutive fiscal quarters of the Company ended at, or most recently prior to, such time to (b) Consolidated Fixed Charges for such period, to be less than 1.25 to 1.0. 10.4 Leverage Ratio. The Company will not, at any time, permit the ratio of (a) Consolidated Debt to (b) Consolidated Capitalization to be greater than 0.6 to 1.0. 10.5 Restricted Payments. (a) Limitation. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, through a Subsidiary or otherwise, at any time, declare or make, or incur any liability to declare or make, any Restricted Payment whether in cash or other property) unless: (i) immediately after giving effect to such action the aggregate amount of Restricted Payments of the Company and the Restricted Subsidiaries declared or made during the period commencing on October 1, 1997 and ending on the date such Restricted Payment is declared or made, inclusive, would not exceed the sum of (A) $4,000,000, plus (B) 50% of Consolidated Net Income for such period (or minus 100% of Consolidated Net Income for such period if Consolidated Net Income for such period is a loss), plus (C) the aggregate amount of cash proceeds (net of all costs and out-of-pocket expenses in connection therewith, including, without limitation, placement, underwriting and brokerage fees and expenses) received by the Company during such period from the sale of Capital Stock (other than Redeemable Capital Stock) of the Company; and (ii) immediately before, and immediately after giving effect to, such action, no Default or Event of Default exists or would exist. (b) Time of Payment. The Company will not, and will not permit any Restricted Subsidiary to, authorize a Restricted Payment that is not payable within 60 days of authorization. 10.6 Restricted Investments. (a) Limitation. The Company will not, and will not permit any Restricted Subsidiary to, at any time, make or authorize any Restricted Investment unless immediately after giving effect to such action: (i) the aggregate value of all Restricted Investments of the Company and the Restricted Subsidiaries (valued immediately after such action) would not exceed 10% of Consolidated Tangible Assets (valued immediately after such action); and (ii) no Default or Event of Default exists or would exist. (b) Investments of Restricted Subsidiaries. Each Person that becomes a Restricted Subsidiary after the date of the Closing will be deemed to have made, on the date such Person becomes a Restricted Subsidiary, all Restricted Investments of such Person in existence on such date. Investments in any Person that ceases to be a Restricted Subsidiary after the date of the Closing (but in which the Company or another Restricted Subsidiary continues to maintain an Investment) will be deemed to have been made on the date on which such Person ceases to be a Restricted Subsidiary. 10.7 Restricted Subsidiary Debt. The Company will not permit any Restricted Subsidiary to, at any time, directly or indirectly create, assume, incur, guaranty or in any other manner become liable in respect of (collectively, for purposes of this Section 10.7, "incurrences") any Debt other than: (a) Debt evidenced by the Notes; (b) Debt of Restricted Subsidiaries that are Obligors, which Debt is evidenced by the New Credit Agreement or any promissory note, letter of credit or Guaranty issued thereunder; (c) Debt owed to the Company or to a Restricted Subsidiary; and (d) Debt, other than Debt permitted pursuant to the foregoing clauses (a), (b) and (c), provided that at the time of incurrence of such Debt and after giving effect thereto the sum, without duplication, of (A) the aggregate amount of all Indebtedness of the Company and the Restricted Subsidiaries secured by Liens other than those permitted pursuant to clauses (a) through (h), inclusive, of Section 10.8, plus (B) the aggregate amount of Debt of Restricted Subsidiaries, other than Debt permitted pursuant to the foregoing clauses (a), (b) and (c), shall not exceed 15% of Consolidated Tangible Assets. 10.8 Liens. The Company will not, and will not permit any Restricted Subsidiary to, at any time, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property or asset (including, without limitation, any document or instrument in respect of goods or accounts receivable) of the Company or any such Restricted Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or otherwise convey any right to receive income or profits (unless it makes, or causes to be made, effective provision whereby the Notes will be equally and ratably secured with any and all other obligations thereby secured, such security to be pursuant to one or more agreements reasonably satisfactory to the Required Holders and, in any such case, the Notes shall have the benefit, to the fullest extent that, and with such priority as, the holders of the Notes may be entitled under applicable law, of an equitable Lien on such property), except: (a) Liens for property taxes and assessments or other governmental levies or charges, provided, in each case, that the amounts secured by such Liens are not yet required by Section 9.4 to be paid; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens, in each case, incurred in the ordinary course of business for sums not yet required by Section 9.4 to be paid; (c) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or a Restricted Subsidiary shall at any time in good faith be prosecuting an appropriate appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured and remains in effect; (d) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business (i) in connection with workers' compensation, unemployment insurance and other types of social security or retirement benefits, or (ii) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than Capital Leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit, the payment of the deferred purchase price of property or any other incurrence of Indebtedness and that do not materially impair the use of any property of the Company or a Restricted Subsidiary in the operation of the business of the Company and the Restricted Subsidiaries taken as a whole; (e) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way that are necessary for the conduct of activities or that customarily exist on properties of Persons engaged in similar activities and that do not materially impair use of any property in the operation of the business of the Company or any Restricted Subsidiary; (f) Liens on property or assets of any Restricted Subsidiary securing Indebtedness owing to the Company or to any Restricted Subsidiary; (g) Liens incurred after the date of the Closing given to secure the payment, or to secure Indebtedness incurred to provide funds for the payment, of the purchase price of fixed assets intended to be used in carrying on the business of the Company or a Restricted Subsidiary, including Liens existing on such fixed assets at the time of acquisition thereof by the Company or such Restricted Subsidiary, or at the time of acquisition by the Company or a Restricted Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens were given to secure the payment of the purchase price of the fixed assets to which they attach, so long as such Liens were not incurred, extended or renewed in contemplation of such acquisition, provided that (i) each such Lien shall attach solely to the fixed assets so acquired, (ii) at the time of acquisition of such fixed assets by the Company or a Restricted Subsidiary, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such fixed assets, whether or not assumed by the Company or a Restricted Subsidiary, shall not exceed an amount equal to 100% of the lesser of the total purchase price or the Fair Market Value at the time of acquisition of such fixed assets, (iii) each such Lien is created or assumed with respect to the fixed assets to which it attaches at the time of, or within 180 days immediately after, such acquisition and (iv) immediately before, and immediately after giving effect to, the incurrence of such Lien and such Indebtedness, no Default or Event of Default exists or would exist; (h) any Lien extending, renewing or replacing any Lien permitted by clause (g) of this Section 10.8, provided that (i) the principal amount of Indebtedness secured by such Lien immediately prior to such extension, renewal or replacement is not increased, (ii) such Lien is not extended to any property other than the property subject to such Lien immediately prior to such extension, renewal or replacement, and (iii) immediately before, and immediately after giving effect to, such extension, renewal or replacement, no Default or Event of Default exists or would exist; and (i) Liens, in addition to those described in clauses (a) through (h), inclusive, of this Section 10.8, provided that the sum, without duplication, of (A) the aggregate amount of all Indebtedness of the Company and the Restricted Subsidiaries secured by Liens other than those permitted pursuant to such clauses (a) through (h), inclusive, of this Section 10.8, plus (B) the aggregate amount of Debt of Restricted Subsidiaries, other than Debt permitted pursuant to the clauses (a), (b) and (c) of Section 10.7, shall not exceed 15% of Consolidated Tangible Assets. 10.9 Merger, Consolidation, etc. (a) Company. The Company will not consolidate, merge or amalgamate with or into any other Person, or convey, transfer or lease all or substantially all of its property in a single transaction or series of transactions to any Person, provided that the foregoing restriction does not apply to the consolidation, merger or amalgamation of the Company with or into, or the conveyance, transfer or lease of all or substantially all of the property of the Company in a single transaction or series of transactions to, another corporation if: (i) the successor formed by such consolidation or amalgamation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease all or substantially all of the property of the Company as an entirety, as the case may be (the "Successor Corporation") shall be a solvent corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia; (ii) if the Company is not the Successor Corporation, such corporation shall have executed and delivered to each holder of Notes its assumption of the due and punctual performance and observance of each covenant and condition of the Financing Documents (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Required Holders) and the Company shall have caused to be delivered to each holder of Notes an opinion of Haythe & Curley or a nationally recognized independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms of the Financing Documents; and (iii) immediately before, and immediately after giving effect to, such transaction, no Default or Event of Default exists or would exist. (b) Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary to consolidate, merge or amalgamate with or into any other Person, or convey, transfer or lease all or substantially all of its property in a single transaction or series of transactions to any Person, provided that the foregoing restriction does not apply to the following so long as, in each case, immediately before, and immediately after giving effect to, such transaction, no Default or Event of Default exists or would exist: (i) the consolidation, merger or amalgamation of a Restricted Subsidiary with or into, or the conveyance, transfer or lease of all or substantially all of the property of a Restricted Subsidiary in a single transaction or series of transactions to, the Company so long as the applicable requirements of Section 10.9(a) are satisfied; (ii) the consolidation, merger or amalgamation of a Restricted Subsidiary with or into, or the conveyance, transfer or lease of all or substantially all of the property of a Restricted Subsidiary in a single transaction or series of transactions to, a Wholly-Owned Restricted Subsidiary (provided that if such first-mentioned Restricted Subsidiary is an Obligor then the requirements of clause (iii) below shall be satisfied); and (iii) the consolidation, merger or amalgamation of a Restricted Subsidiary with or into, or the conveyance, transfer or lease of all or substantially all of the property of a Restricted Subsidiary in a single transaction or series of transactions to, another corporation if: (A) the successor formed by such consolidation or amalgamation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease all or substantially all of the property of such Restricted Subsidiary as an entirety, as the case may be (the "Successor Restricted Subsidiary") shall be a Restricted Subsidiary and shall be a solvent corporation organized and existing under the laws of (1) if such first-mentioned Restricted Subsidiary was a Domestic Subsidiary, the United States of America, any state thereof or the District of Columbia or (2) otherwise, the same jurisdiction as the jurisdiction of organization of such first-mentioned Restricted Subsidiary or the United States of America, any state thereof or the District of Columbia; and (B) if such first-mentioned Restricted Subsidiary is an Obligor and is not the Successor Restricted Subsidiary, such successor corporation shall have executed and delivered to each holder of Notes its assumption of the due and punctual performance and observance of each covenant and condition of the Financing Documents (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Required Holders) and the Company shall have caused to be delivered to each holder of Notes an opinion of Haythe & Curley or a nationally recognized independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms of the Financing Documents. 10.10 Asset Dispositions. Except as permitted under Section 10.9, the Company will not, and will not permit any Restricted Subsidiary to, make any Asset Disposition unless: (a) in the good faith opinion of the Company, such Asset Disposition is in exchange for consideration having a Fair Market Value at least equal to that of the property exchanged and is in the best interest of the Company or such Restricted Subsidiary; (b) immediately before, and immediately after giving effect to, the Asset Disposition, no Default or Event of Default exists or would exist; and (c) immediately after giving effect to such Asset Disposition, the Disposition Value of all property that was the subject of any Asset Disposition occurring during the period of 365 consecutive days then ending would not exceed 10% of Consolidated Tangible Assets determined as of the end of the most recently ended fiscal year of the Company. If the Net Proceeds Amount for any Transfer is applied within 365 days after such Transfer to a Property Reinvestment Application or within 365 days after such Transfer to a Debt Prepayment Application, then such Transfer, only for the purpose of determining compliance with clause (c) of this Section 10.10 as of any date on or after the Net Proceeds Amount is so applied, shall be deemed not to be an Asset Disposition. 10.11 Disposal of Ownership of a Restricted Subsidiary. The Company will not, and will not permit any Restricted Subsidiary to, Transfer any shares of Restricted Subsidiary Stock, nor will the Company permit any Restricted Subsidiary to issue, sell or otherwise dispose of any shares of its own Restricted Subsidiary Stock, provided that the foregoing restrictions do not apply to: (a) the issuance of directors' qualifying shares by any Restricted Subsidiary; (b) any such Transfer of Restricted Subsidiary Stock constituting a Transfer described in clause (a) of the definition of Asset Disposition; and (c) the Transfer of all of the Restricted Subsidiary Stock of a Restricted Subsidiary owned by the Company and the other Restricted Subsidiaries if: (i) such Transfer satisfies the requirements of Section 10.10, (ii) in connection with such Transfer the entire Investment (whether represented by Capital Stock, Indebtedness, claims or otherwise) of the Company and the other Restricted Subsidiaries in such Restricted Subsidiary is sold, transferred or otherwise disposed of to a Person other than (A) the Company, (B) another Restricted Subsidiary not being simultaneously disposed of, or (C) an Affiliate, and (iii) the Restricted Subsidiary being disposed of has no continuing Investment in any other Restricted Subsidiary not being simultaneously disposed of or in the Company. 10.12 Transactions with Affiliates. The Company will not, and will not permit any Restricted Subsidiary to, enter into directly or indirectly any transaction or group of related transactions (including, without limitation, the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Restricted Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. 10.13 Lines of Business. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business if, as a result, the general nature of the business in which the Company and the Restricted Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the general nature of the business in which the Company and the Restricted Subsidiaries, taken as a whole, are engaged on the date of the Closing as described in the Memorandum. 11. EVENTS OF DEFAULT. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Obligors default in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Obligors default in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (c) any Obligor defaults in the performance of or compliance with any term contained in Section 7.1(e) or Section 10.1 through 10.13, inclusive; or (d) any Obligor defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11), and such default is not remedied within 30 days after the earlier of (i) a Senior Financial Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note; or (e) any representation, warranty or other statement made in writing by or on behalf of any Obligor or by any officer of any Obligor in any Financing Document or in any certificate or other writing furnished in connection with the transactions contemplated by, or pursuant to, any Financing Document proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) the Company or any Restricted Subsidiary is in default (as principal or as guarantor or other surety) in the payment when due (whether by lapse of time, by declaration, by call for redemption or otherwise) of any principal of or premium or make-whole amount or interest on any Indebtedness (other than Indebtedness under the Financing Documents) or Securities beyond any period of grace provided with respect thereto, or (ii) the Company or any Restricted Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness (other than Indebtedness under the Financing Documents) or Securities and as a consequence of such default or condition such Indebtedness has become, or has been declared, due and payable before its stated maturity or before its regularly scheduled date or dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the right of the holder of Indebtedness or Securities to convert such Indebtedness or Securities into equity interests), the Company or any Restricted Subsidiary has become obligated to purchase or repay Indebtedness or Securities before its or their regular maturity or before its or their regularly scheduled dates of payment; provided that (A) any one or more of the conditions or events specified in the foregoing clauses (i), (ii) and (iii) of this paragraph (f) shall constitute an Event of Default at any time only if the aggregate principal amount of Indebtedness and Securities as to which any one or more of such conditions or events has occurred and is continuing at such time is, individually or collectively, at least $1,000,000 (or equivalent) and (B) in determining such amount of Indebtedness there shall be excluded the amount of any Indebtedness in respect of accounts payable for goods and services arising in the ordinary course of business as to which a good faith dispute exists; or (g) the Company or any Restricted Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv)consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate or other action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any Restricted Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any Restricted Subsidiary, or any such petition shall be filed against the Company or any Restricted Subsidiary and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of $5,000,000 (or equivalent) (excluding in the calculation of such amount any final judgment to the extent, but only to the extent, such judgment will be covered by payments from insurance maintained by the Company or a Restricted Subsidiary (y) in respect of which insurance the issuer thereof has agreed, in writing, to make such payments in respect of such judgment and (z) the issuer of which insurance is an independent commercial insurer that, in the good faith opinion of the Company, is capable of discharging its payment obligations in connection with such insurance) are rendered against one or more of the Company and the Restricted Subsidiaries or against any of their properties and any one or more of which judgments is not, within 30 days after entry thereof, bonded, vacated, discharged or stayed pending appeal or otherwise stayed, or are not discharged within 30 days after the expiration of any such stay; or (j) any Financing Document shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared by a court or Governmental Authority of competent jurisdiction to be void, voidable or unenforceable against any one or more Obligors party thereto, or any Obligor asserts any of the foregoing in writing or before any court or Governmental Authority; or (k) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $1,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Restricted Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Restricted Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, would reasonably be expected to have a Material Adverse Effect. As used in Section 11(k), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in section 3 of ERISA. 12. REMEDIES ON DEFAULT, ETC. 12.1 Acceleration. (a) If an Event of Default with respect to the Company described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, any holder or holders of 66-2/3% or more in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Obligors acknowledge, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Obligors (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Obligors in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 12.2 Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. 12.3 Rescission. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 66-2/3% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Obligors have paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, due and payable on any Notes other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the applicable Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 12.4 No Waivers or Election of Remedies, Expenses, etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by any Financing Document upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Obligors under Section 15, the Company or any other Obligor will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all reasonable out-of-pocket costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 13.1 Registration of Notes. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Obligors shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. 13.2 Transfer and Exchange of Notes. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing and accompanied by the name and address, and telecopy number, if any, for notices of each transferee of such Note or part thereof), each of the Obligors shall execute and deliver, at the Obligors' expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1A in the case of a Series A Note, Exhibit 1B in the case of a Series B Note or Exhibit 1C in the case of a Series C Note. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Obligors may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $100,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes of a Series, a Note of such Series may be in a denomination of less than $100,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in the last sentence of Section 6.1 and the representation set forth in Section 6.2. 13.3 Replacement of Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another Person with a net worth of at least $50,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Obligors at their own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 14. PAYMENTS ON NOTES. 14.1 Place of Payment. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Monmouth Junction, New Jersey, at the principal office of the Company in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in the United States of America or the principal office of a bank or trust company in the United States of America. 14.2 Home Office Payment. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Obligors will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Obligors will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. 15. EXPENSES, ETC. 15.1 Transaction Expenses. Whether or not the transactions contemplated hereby are consummated, the Obligors will pay all reasonable out-of-pocket costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or any other holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of any of the Financing Documents (whether or not such any amendment, waiver or consent becomes effective), including, without limitation: (a) the reasonable out-of-pocket costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under the Financing Documents or in responding to any subpoena or other legal process or informal investigative demand issued in connection with any of the Financing Documents, or by reason of being a holder of any Note, and (b) reasonable out-of-pocket the costs and expenses, including, without limitation, financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated by any of the Financing Documents. The Obligors will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). 15.2 Survival. The obligations of the Obligors under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of the Financing Documents, and the termination of the Financing Documents. 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of the Financing Documents, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of any Obligor pursuant to any of the Financing Documents shall be deemed representations and warranties of such Obligor under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding among you and the Obligors and supersede all prior agreements and understandings relating to the subject matter hereof. 17. AMENDMENT AND WAIVER. 17.1 Requirements. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Obligors and the Required Holders, except that (a) no amendment or waiver of any of the provisions of any of Sections 1, 2, 3, 4, 5, 6 and 21, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the definition of Required Holders or the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 and 20. 17.2 Solicitation of Holders of Notes. (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. The Obligors will not, and will not permit any Subsidiary or Affiliate to, directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions of any of the Financing Documents unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. (c) Consent in Contemplation of Transfer. Any consent made pursuant to this Section 17 by a holder of Notes that has transferred or has agreed to transfer its Notes to any Obligor, any Subsidiary or any Affiliate and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force or effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under the same or similar conditions) shall be void and of no force or effect except solely as to such holder. 17.3 Binding Effect, etc. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Obligors without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between any Obligor and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended, restated, supplemented or otherwise modified. 17.4 Notes held by Obligors, etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under any Financing Document, or have directed the taking of any action provided in any Financing Document to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by any Obligor or any Subsidiary or Affiliate shall be deemed not to be outstanding. 18. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (iii) if to any Obligor, to such Obligor at its address set forth in Schedule 18, or at such other address as such Obligor shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. 19. REPRODUCTION OF DOCUMENTS. The Financing Documents and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. Each Obligor agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit any Obligor or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 20. CONFIDENTIAL INFORMATION. For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of any Obligor or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that (unless such information was obtained by means of the exercise of rights under Section 7.3) was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of such Obligor or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by any Obligor, any Subsidiary or any director, officer, trustee, employee, agent, attorney or affiliate of any Obligor or any Subsidiary or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to: (i) your directors, officers, trustees, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any Security of any Obligor (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (A) to effect compliance with any law, rule, regulation or order applicable to you, (B) in response to any subpoena or other legal process, (C) in connection with any litigation to which you are a party or (D) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. 21. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 22. DESIGNATION OF FOREIGN SUBSIDIARIES. (a) Right of Designation. Subject to the satisfaction of the requirements of Section 22(c), the Company shall have the right to designate each Foreign Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary by delivering to each holder of Notes a writing, signed by a Senior Financial Officer, so designating such Foreign Subsidiary within 30 days of such Person becoming a Foreign Subsidiary. Any such Foreign Subsidiary not so designated within such 30-day period shall be deemed, on and after such date and without any further action by the Company or any holder of Notes, to have been designated by the Company as a Restricted Subsidiary. Each Foreign Subsidiary designated as a Restricted Subsidiary in Schedule 5.4 shall, so long as it shall continue to satisfy the requirements of the definition of Restricted Subsidiary, be a Restricted Subsidiary on and after the date of the Closing and all other Foreign Subsidiaries, if any, listed in such Schedule shall, subject to Section 22(b), be Unrestricted Subsidiaries on and after the date of the Closing. (b) Right of Redesignation. Subject to the satisfaction of the requirements of Section 22(c), the Company may at any time designate any Foreign Subsidiary that is an Unrestricted Subsidiary as a Restricted Subsidiary by delivering a written notice to such effect, signed by a Senior Financial Officer, to each holder of Notes. The Company may not designate a Restricted Subsidiary as an Unrestricted Subsidiary. (c) Designation Criteria. No Foreign Subsidiary shall at any time after the date of the Closing be designated as a Restricted Subsidiary unless: (i) such Foreign Subsidiary at such time meets all of the requirements of a Restricted Subsidiary as set forth in the definition thereof; (ii) such Foreign Subsidiary shall not previously have been designated as (or have been deemed to have been designated as) a Restricted Subsidiary; and (iii) immediately before, and after giving effect to, such designation, and assuming that all obligations and liabilities of, and all Liens on the property of, such Subsidiary being so designated were incurred contemporaneously with such designation, no Default or Event of Default exists or would exist. (d) Effectiveness. Other than as set forth in the last two sentences of Section 22(a), any designation under this Section 22 that satisfies all of the conditions set forth in this Section 22 shall become effective on the day that notice thereof shall have been sent in one of the manners specified in Section 18 by the Company to each holder of Notes. (e) Domestic Subsidiaries Not Subject to Designation. Only Foreign Subsidiaries may be designated (or deemed designated) pursuant to this Section 22. All Domestic Subsidiaries shall, in accordance with the definition of Restricted Subsidiary, constitute Restricted Subsidiaries. 23. MISCELLANEOUS. 23.1 Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 23.2 Payments Due on Non-Business Days; When Payments Deemed Received. (a) Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. (b) Any payment to be made to the holders of Notes hereunder or under the Notes shall be deemed to have been made on the Business Day such payment actually becomes available to such holder at such holder's bank prior to 12:00 noon (local time of such bank). 23.3 Limitation on Liability of Certain Obligors. Notwithstanding anything in any Financing Document to the contrary, the payment obligations of each Obligor (other than the Company) under the Financing Documents shall at each point in time be limited to an aggregate amount equal to the greatest amount that would not result in such obligations being subject to avoidance, or otherwise result in such obligations being unenforceable, at such time under applicable law (including, without limitation, to the extent, and only to the extent, applicable to such Obligor, section 548 of the Bankruptcy Code of the United States of America and any comparable provisions of the law of any other jurisdiction, any capital preservation law of any jurisdiction and any other law of any jurisdiction that at such time limits the enforceability of the obligations of such Obligor under the Financing Documents). This Section 23.3 is intended solely to preserve the rights of each holder of Notes under the Financing Documents to the maximum extent permitted by applicable law, and neither any Obligor nor any other Person shall have any rights under this Section 23.3 that it would not otherwise have under applicable law. 23.4 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 23.5 Construction. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 23.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 23.7 Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. [Remainder of page intentionally left blank; next page is signature page.] If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement among you and the Obligors. Very truly yours, GUEST SUPPLY, INC. By /s/Paul Xenis ---------------------------------------- Paul Xenis Secretary and Vice President - Finance BRECKENRIDGE-REMY CO. By /s/Paul Xenis ---------------------------------------- Paul Xenis Secretary and Vice President - Finance GUEST DISTRIBUTION SERVICES, INC. By /s/Paul Xenis ---------------------------------------- Paul Xenis Authorized Signatory GUEST PACKAGING, INC. By /s/Paul Xenis ---------------------------------------- Paul Xenis Secretary and Vice President - Finance [Signature page for Note Purchase Agreement of GUEST SUPPLY, INC. and certain other Obligors with respect to their joint and several 7.06% Series A Senior Notes due 2009, 6.95% Series B Senior Notes due 2007 and 6.70% Series C Senior Notes due 2003] The foregoing is hereby agreed to as of the date of the Closing. THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK By /s/Emilia F. Wiener ------------------- Name: Emilia F. Wiener Title: Managing Director [Signature page for Note Purchase Agreement of GUEST SUPPLY, INC. and certain other Obligors with respect to their joint and several 7.06% Series A Senior Notes due 2009, 6.95% Series B Senior Notes due 2007 and 6.70% Series C Senior Notes due 2003] The foregoing is hereby agreed to as of the date of the Closing. AUSA LIFE INSURANCE COMPANY, INC. By /s/Gregory W. Theobald ---------------------- Name: Gregory W. Theobald Title: VP & Asst. Secretary [Signature page for Note Purchase Agreement of GUEST SUPPLY, INC. and certain other Obligors with respect to their joint and several 7.06% Series A Senior Notes due 2009, 6.95% Series B Senior Notes due 2007 and 6.70% Series C Senior Notes due 2003] The foregoing is hereby agreed to as of the date of the Closing. GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY By /s/James G. Lowery ------------------- Name: James G. Lowery Title: Assistant Vice President Investments By /s/Wayne T. Hoffmann ------------------- Name: Wayne T. Hoffmann Title: Vice President Investments [Signature page for Note Purchase Agreement of GUEST SUPPLY, INC. and certain other Obligors with respect to their joint and several 7.06% Series A Senior Notes due 2009, 6.95% Series B Senior Notes due 2007 and 6.70% Series C Senior Notes due 2003] The foregoing is hereby agreed to as of the date of the Closing. NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY By /s/Edwin P. McCausland, Jr. --------------------------- Name: Edwin P. McCausland, Jr. Title: Vice President Fixed Income Securities [Signature page for Note Purchase Agreement of GUEST SUPPLY, INC. and certain other Obligors with respect to their joint and several 7.06% Series A Senior Notes due 2009, 6.95% Series B Senior Notes due 2007 and 6.70% Series C Senior Notes due 2003] SCHEDULE A INFORMATION RELATING TO PURCHASERS Purchaser Name THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK Name in which to register Note(s) J. ROMEO & Co. Series of Notes; Note registration number(s); Principal amount(s) Series A; AR-1; $10,000,000 Payment on account of Note(s) Method Federal Funds Wire Transfer Account information Chase Manhattan Bank ABA #021000021 for credit to Private Income Processing Account No. 544755102 Accompanying information Issuers: Guest Supply, Inc. and certain other Obligors Description of Security: 7.06% Series A Senior Notes due November 15, 2009 PPN: 401630 A* 9 Due date and application (as among principal, Make-Whole Amount and interest) of the payment being made: Schedule A-1 Purchaser Name THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK Address for notices related to payments If by Registered Mail, Certified Mail or Federal Express: The Chase Manhattan Bank 4 New York Plaza, 13th Floor New York, NY 10004 Attn: Income Processing - J. Piperato, 13th Floor If by Regular Mail: The Chase Manhattan Bank Dept. 3492 P.O. Box 50000 Newark, NJ 07101-8006 With a Second Copy to: Telecopy Confirms and Notices: 201-907-6979 Attention: Securities Custody Mailing Confirms and Notices: Glenpointe Marketing & Operations Center - MONY Glenpointe Center West 500 Frank W. Burr Blvd. Teaneck, NJ 07666-6888 Attention: Securities Custody Address for all other notices The Mutual Life Insurance Company of New York 1740 Broadway New York, NY 10019 Attention: MONY Capital Management Unit Telecopy No.: 212-708-2491 Tax identification number 13-1632487 Schedule A-2 Purchaser Name AUSA LIFE INSURANCE COMPANY, INC. Name in which to register Note(s) AUER & Co. Series of Notes; Note registration number(s); Principal amount(s) Series A; AR-2; $5,000,000 Payment on account of Note(s) Method Federal Funds Wire Transfer Account information Bankers Trust Company ABA #021001033 for credit to Account No. 99911145 for further credit to AUSA Life Insurance Company, Inc.'s Account No. 98606 Accompanying information Issuers: Guest Supply, Inc. and certain other Obligors Description of Security: 7.06% Series A Senior Notes due November 15, 2009 PPN: 401630 A* 9 Due date and application (as among principal, Make-Whole Amount and interest) of the payment being made: Address for notices related to payments If to AUSA Life Insurance Company, Inc. Telecopy Confirms and Notices 319-398-8695 Attention: Mary Reams Mailing Confirms and Notices: AEGON USA Investment Management, Inc. 4333 Edgewood Road, N.E. Cedar Rapids, IA 52499 Attention: Mary Reams Schedule A-3 Purchaser Name AUSA LIFE INSURANCE COMPANY, INC. Address for all other notices If to AUSA Life Insurance Company, Inc. AUSA Life Insurance Company, Inc. c/o The Mutual Life Insurance Company of New York 1740 Broadway New York, NY 10019 Attention: MONY Capital Management Unit Telecopy No.: 212-708-2491 with a second copy to: Bankers Trust Company Attn: Private Placement Unit P.O. Box 998 Bowling Green Station New York, NY 10274 Tax identification number 36-6071399 Schedule A-4 Purchaser Name GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY Name in which to register Note(s) Great-West Life & Annuity Insurance Company Series of Notes; Note registration number(s); Principal amount(s) Series B; BR-1; $5,000,000 Payment on account of Note(s) Method Federal Funds Wire Transfer Account information Norwest Bank Minnesota, N.A. ABA# 091-000-019 NW MPLS/Trust Clearing Account No. 08-40-245 Attn: Account No. 12468800 Accompanying information Issuers: Guest Supply, Inc. and certain other Obligors Description of Security: 6.95% Series B Senior Notes due November 15, 2007 PPN: 401630 A@ 7 Due date and application (as among principal, Make-Whole Amount and interest) of the payment being made: Address for notices related to payments Norwest Bank Minnesota, N.A. 733 Marquette Avenue Investors Bldg., 5th Floor Minneapolis, MN 55479-0047 Attention: Income Collections Fax: 612-667-4187 Address for all other notices Great-West Life & Annuity Insurance Company 8515 East Orchard Road 3rd Floor, Tower 2 Englewood, CO 80111 Attention: Corporate Finance Investments Fax: 303-689-6193 Schedule A-5 Purchaser Name GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY Tax identification number 84-0467907 Schedule A-6 Purchaser Name NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY Name in which to register Note(s) Nationwide Life and Annuity Insurance Company Series of Notes; Note registration number(s); Principal amount(s) Series C; CR-1; $5,000,000 Payment on account of Note(s) Method Federal Funds Wire Transfer Account information The Bank of New York ABA# 021-000-018 BNF: IOC566 F/A/O Nationwide Life and Annuity Insurance Company Attn: P & I Department Accompanying information Issuers: Guest Supply, Inc. and certain other Obligors Description of Security: 6.70% Series C Senior Notes due November 15, 2003 PPN: 401630 A# 5 Due date and application (as among principal, Make-Whole Amount and interest) of the payment being made: Address for notices related to payments Nationwide Life and Annuity Insurance Company c/o The Bank of New York P.O. Box 19266 Attn: P & I Department Newark, NJ 07195 with a copy to: Nationwide Life and Annuity Insurance Company Attn: Investment Accounting One Nationwide Plaza (1-32-05) Columbus, OH 43215-2220 Fax: 614-249-2152 Schedule A-7 Purchaser Name NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY Address for all other notices Nationwide Life and Annuity Insurance Company One Nationwide Plaza (1-33-07) Columbus, OH 43215-2220 Attention: Corporate Fixed-Income Securities Fax: 614-249-3825 Tax identification number 31-1000740 Schedule A-8 SCHEDULE B DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof indicated following such term: "Acceptable Control Persons" means: (a) any one or more of Clifford Stanley, Paul Xenis, R. Eugene Biber, or Teri E. Unsworth (each of whom is identified in further detail on page 42 of the Memorandum); and (b) any Person more than 50% of the equity interests and voting interests of which are owned by one or more of the Persons identified in the foregoing clause (a). "Affiliate" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation or other Person of which the Company and the Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "Agreement, this" is defined in Section 17.3. "Allonge" is defined in Section 9.6(b). "Asset Disposition" means any Transfer except: (a) any (i) Transfer from a Restricted Subsidiary to the Company or a Wholly-Owned Restricted Subsidiary; (ii) Transfer from the Company to a Wholly-Owned Restricted Subsidiary; and (iii) Transfer from the Company to a Restricted Subsidiary (other than a Wholly-Owned Restricted Subsidiary) or from a Restricted Subsidiary to another Restricted Subsidiary (other than a Wholly-Owned Restricted Subsidiary), that in either case is for Fair Market Value, so long as immediately before, and immediately after giving effect to, the consummation of any such Transfer, no Event of Default exists or would exist; or (b) any Transfer made in the ordinary course of business and involving only property that is either (i) inventory held for sale, or components of such inventory, or (ii) equipment, fixtures, supplies or materials no longer required in the operation of the business of the Company or any of the Restricted Subsidiaries or that is obsolete. "Breckenridge-Remy" is defined in the introductory sentence of this Agreement. "Business Day" means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "Capital Lease" means a lease with respect to which the lessee is required to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "Capital Lease Obligation" means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease that would, in accordance with GAAP, appear as a liability on a balance sheet of such Person. "Capital Stock" means any class of capital stock, share capital or similar equity interest of a Person. "Change in Control" means the following event or circumstance: any Person or Persons acting in concert (other than Acceptable Control Persons), together with Affiliates thereof, shall in the aggregate, directly or indirectly, control or own (beneficially or otherwise) more than 50% (by number of shares) of the issued and outstanding Voting Stock of the Company. "Closing" is defined in Section 3. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "Company" is defined in the introductory sentence of this Agreement. "Confidential Information" is defined in Section 20. "Consolidated Capitalization" means, at any time, the sum of (a) Consolidated Debt at such time, plus (b) Consolidated Tangible Net Worth at such time. "Consolidated Cash Flow" means, for any period, the sum of Consolidated Net Income for such period plus the amount of all depreciation and amortization allowances and other non-cash expenses of the Company and the Restricted Subsidiaries but only to the extent deducted in the determination of Consolidated Net Income for such period. "Consolidated Debt" means, at any time, the total of all Debt of the Company and the Restricted Subsidiaries outstanding at such time, after eliminating all offsetting debits and credits between the Company and the Restricted Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and the Restricted Subsidiaries in accordance with GAAP. "Consolidated Fixed Charges" means, for any period, the sum of (a) Consolidated Interest Expense for such period plus (b) Consolidated Long-Term Rentals for such period. "Consolidated Interest Expense" means, with respect to any period, the sum (without duplication) of the following (in each case, eliminating all offsetting debits and credits between the Company and the Restricted Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and the Restricted Subsidiaries in accordance with GAAP): (a) all interest in respect of Debt of the Company and the Restricted Subsidiaries (including, without limitation, imputed interest on Capital Lease Obligations) deducted in determining Consolidated Net Income for such period, together with all interest capitalized or deferred during such period and not deducted in determining Consolidated Net Income for such period, and (b) all debt discount and expense amortized or required to be amortized in the determination of Consolidated Net Income for such period. "Consolidated Long-Term Rentals" means, with respect to any period, the sum of the rental and other obligations required to be paid during such period by the Company or any Restricted Subsidiary as lessee under all leases of real or personal property (other than Capital Leases) having a term (including, without limitation, terms of renewal or extension at the option of the lessor or the lessee, whether or not such option has been exercised) expiring one year or more after the commencement of the initial term, excluding any amount required to be paid by the lessee (whether or not therein designated as rental or additional rental) on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. "Consolidated Income Available for Fixed Charges" means, for any period, Consolidated Net Income for such period plus all amounts deducted in the computation thereof on account of (a) Consolidated Fixed Charges and (b) taxes imposed on or measured by income or profits. "Consolidated Net Income" means, with reference to any period, the net income (or loss) of the Company and the Restricted Subsidiaries for such period (taken as a cumulative whole), as determined in accordance with GAAP, after eliminating all offsetting debits and credits between the Company and the Restricted Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and the Restricted Subsidiaries in accordance with GAAP and after eliminating income and losses attributable to Investments in Unrestricted Subsidiaries, provided that there shall be excluded: (a) the income of any Person (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent that any such income has been actually received by the Company or such Restricted Subsidiary in the form of cash dividends or similar cash distributions, and (b) the undistributed earnings of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is not at the time permitted by the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary. "Consolidated Obligor Cash Flow" means, for any period, and for purposes of determining the Obligor Cash Flow Ratio at any time, Consolidated Cash Flow for such period, but calculated (including, without limitation, for the purpose of determining Consolidated Net Income) as though the only Restricted Subsidiaries during such period were those Restricted Subsidiaries that are Obligors at the time of such determination of the Obligor Cash Flow Ratio. "Consolidated Obligor Tangible Assets" means, at any time, Consolidated Tangible Assets at such time, excluding, however, in the determination thereof any assets of any Restricted Subsidiary that is not an Obligor at such time. "Consolidated Tangible Assets" means, at any time, (a) the total assets of the Company and the Restricted Subsidiaries as would be shown on a consolidated balance sheet of the Company and the Restricted Subsidiaries as of such time prepared in accordance with GAAP, minus (b) to the extent included in clause (a), (i) the net book value of all Intangible Assets of the Company and the Restricted Subsidiaries (after deducting any reserves applicable thereto), and (ii) all Restricted Investments of the Company and the Restricted Subsidiaries. "Consolidated Tangible Net Worth" means, at any time, (a) the sum of (i) the par value (or value stated on the books of the corporation) of the Capital Stock (but excluding treasury stock and Capital Stock subscribed and unissued) of the Company and the Restricted Subsidiaries plus (ii) the amount of the paid-in capital and retained earnings of the Company and the Restricted Subsidiaries, in each case as such amounts would be shown on a consolidated balance sheet of the Company and the Restricted Subsidiaries as of such time prepared in accordance with GAAP, minus (b) to the extent included in clause (a), (i) the net book value of all Intangible Assets of the Company and the Restricted Subsidiaries (after deducting any reserves applicable thereto), and (ii) all Restricted Investments of the Company and the Restricted Subsidiaries. "Control" 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 the ownership of voting Securities, by contract or otherwise. "Control Event" means: (a) the execution by the Company or any Subsidiary or Affiliate of any agreement or letter of intent with respect to any proposed transaction or event or series of transactions or events that, individually or in the aggregate, may reasonably be expected to result in a Change in Control; (b) the execution of any written agreement that, when fully performed by the parties thereto, would result in a Change in Control; or (c) the making of any written offer by any "person" (as such term is used in section 13(d) and section 14(d)(2) of the Exchange Act as in effect on the date of the Closing) or related persons constituting a "group" (as such term is used in Rule 13d-5 under the Exchange Act as in effect on the date of the Closing) to the holders of the Voting Stock of the Company, which offer, if accepted by the requisite number of holders, would result in a Change in Control. "Debt" means, with respect to any Person, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capital Lease Obligations; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and (e) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (d) of this definition. Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (e) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Debt Prepayment Application" means, with respect to any Transfer of property that constitutes an Asset Disposition, the application by the Company of cash in an amount equal to the Net Proceeds Amount with respect to such Transfer to pay Designated Senior Debt, provided that in the course of making such application the Company shall offer to prepay each outstanding Note in accordance with the following paragraph of this definition in a principal amount that equals the Ratable Portion for such Note. "Ratable Portion" for any Note means an amount equal to the product of (x) the Net Proceeds Amount being so applied to the payment of Designated Senior Debt multiplied by (y) a fraction the numerator of which is the outstanding principal amount of such Note and the denominator of which is the aggregate principal amount of Designated Senior Debt. The following procedure will apply with respect to any such application of proceeds to a prepayment of the Notes: (a) The Company shall have irrevocably offered in writing (as provided in clause (c) below) to apply funds equal to a portion of the Net Proceeds Amount with respect to such Transfer to the prepayment of the principal of each outstanding Note in an amount for such Note equal to the Ratable Portion for such Note, and, simultaneously with the prepayment of such principal, to pay any accrued interest in respect thereof as of the date of such prepayment of principal and the applicable Make-Whole Amount determined for the prepayment date with respect to such principal amount. (b) To accept or reject such offer, a holder of Notes shall cause a written notice of such acceptance or rejection to be delivered to the Company within ten Business Days of such Person's receipt of such offer. A failure by a holder of Notes to respond (by such time) to an offer to prepay made pursuant to this definition shall be deemed to constitute an acceptance of such offer by such holder. Upon any rejection of such offer by any such Person, the Ratable Portion that would otherwise be payable to any such rejecting holder shall, within ten Business Days of rejection, be offered pro rata to all holders accepting such offer; to accept or reject such additional offer, a holder of Notes shall cause a written notice of such acceptance or rejection to be delivered to the Company within five Business Days of such Person's receipt of such additional offer. Subject to the provisions of this clause (b), the Company may retain for its own purposes the Ratable Portion that would otherwise be payable to any rejecting holder, provided that in no event shall any portion of any Ratable Portion (however applied) be deemed to have been applied to a Debt Prepayment Application unless either (i) such portion shall have been applied to prepay Notes of a holder accepting an offer in the manner specified under this clause (b) or (ii) the Company shall have received written rejections from each holder to which such portion was offered (whether initially or pursuant to an additional offer under this clause (b)) and shall have applied such portion to other Designated Senior Debt. (c) The written offer of the Company referred to in clause (a) above will be given to each holder of Notes not less than 30 days and not more than 60 days prior to the date of offered prepayment. Such notice will set forth: (i) such date, the aggregate principal amount of the Notes offered to be prepaid on such date, the principal amount of each Note held by such holder offered to be prepaid (determined in the same manner as in Section 8.4), and the interest that would be paid on the prepayment date with respect to such principal amount offered to be prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation (two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date), and (ii) a statement (A) describing the Transfer with respect to such Debt Prepayment Application, (B) setting forth a calculation of the Net Proceeds Amount in respect of such Transfer and (C) specifying the portion thereof that is to be applied to a Debt Prepayment Application. "Default" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Default Rate" means, with respect to any Note, a rate per annum from time to time equal to the greater of (a) 9.06% in the case of a Series A Note, 8.95% in the case of a Series B Note or 8.70% in the case of a Series C Note or (b) 2.0% over the rate of interest publicly announced by Chase Manhattan Bank, N.A. (or its successor) from time to time in New York, New York as its "base" or "prime" rate. "Designated Senior Debt" means any Debt of the Company constituting a portion of Consolidated Debt, other than: (a) any Debt that is in any manner subordinated in right of payment or security in any respect to the Debt evidenced by the Notes; (b) any Debt owing to any of the Subsidiaries or any Affiliate; and (c) any Debt in respect of any revolving credit or similar credit facility providing the Company or any of the Subsidiaries with the right to obtain loans or other extensions of credit from time to time, except to the extent that in connection with such payment of such Debt in a Debt Prepayment Application the availability of credit under such credit facility is permanently reduced by an amount not less than the amount of such proceeds applied to the payment of such Debt. "Disposition Value" means, at any time, with respect to any property, (a) in the case of property that does not constitute Restricted Subsidiary Stock, the book value thereof, valued at the time of such disposition in good faith by the Company, and (b) in the case of property that constitutes Restricted Subsidiary Stock, an amount equal to that percentage of book value of the assets of the Restricted Subsidiary that issued such Restricted Subsidiary Stock as is equal to the percentage that the book value of such Restricted Subsidiary Stock represents of the book value of all of the outstanding Capital Stock of such Restricted Subsidiary (assuming, in making such calculations, that all Securities convertible into such Capital Stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion) determined at the time of the disposition thereof, in good faith by the Company. "Distribution" means, in respect of any corporation, association or other business entity: (a) dividends or other distributions or payments on Capital Stock or other equity interest of such corporation, association or other business entity (except distributions in such Capital Stock or other equity interest); and (b) the redemption, repurchase, retirement or other acquisition of such Capital Stock or other equity interests or of warrants, rights or other options to purchase such Capital Stock or other equity interests (except when solely in exchange for such Capital Stock or other equity interests, or when solely given to such corporation, association or other business entity in payment of all or a portion of the exercise price of any such warrants, rights or other options) unless made, contemporaneously, from the net proceeds of a sale of such Capital Stock or other equity interests; provided that the redemption by the Company of all but not less than all of the rights under the Rights Agreement, dated as of July 15, 1988, between the Company and ChaseMellon Shareholder Services, L.L.C., as amended from time to time, shall be deemed not to constitute a Distribution so long as the aggregate redemption price paid by the Company in respect of all such rights does not exceed $100,000. "dollars" and the symbol "$" each mean United States of America dollars. The phrase "(or equivalent)" used in connection with any reference to a specified amount of dollars means such specified amount of dollars or an equivalent amount in one or more currencies (one of which may, but need not, be dollars), with the amount of each such currency other than dollars being converted to dollars for such purposes in accordance with the requirements of GAAP and in a manner consistent with the accounting policies implemented in the most recent annual report of the Company. "Domestic Subsidiary" means, at any time, any Subsidiary that is organized under the laws of the United States of America or any state thereof or the District of Columbia. "Environmental Laws" means any and all federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA Affiliate" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "Event of Default" is defined in Section 11. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "Fair Market Value" means, at any time and with respect to any property, the sale value of such property that would be realized in an arm's-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell). "Financing Documents" means the Notes and the Note Purchase Agreements. "Foreign Subsidiary" means a Subsidiary that is not a Domestic Subsidiary. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America. "Governmental Authority" means (a) the government of (i) the United States of America or any state or other political subdivision thereof, or (ii) any jurisdiction in which the Company, any Subsidiary or any other relevant Person conducts all or any part of its business, or that asserts jurisdiction over any properties of the Company, any Subsidiary or any such other Person, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guaranty" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guarantying or in effect guarantying (whether by reason of being a general partner of a partnership or otherwise) any Indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including, without limitation, obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of any other Person to make payment of the Indebtedness or obligation; or (d) otherwise to assure the owner of such Indebtedness or obligation or any other creditor of such Person against loss in respect thereof, including, without limitation, by means of any comfort letter, operating agreement or take-or-pay contract. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which has been guarantied, and a Guaranty in respect of any other Indebtedness or obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. "Guest Distribution" is defined in the introductory sentence of this Agreement. "Guest Packaging" is defined in the introductory sentence of this Agreement. "Hazardous Material" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). "holder" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1. "Indebtedness" means, with respect to any Person, without duplication, (a) all Debt of such Person, (b) all other obligations and liabilities of such Person classified, or required to be classified, as liabilities of such Person in accordance with GAAP, and (c) any Guaranty of such Person with respect to liabilities of a type described in either of clauses (a) and (b) of this definition. "Initial Subsidiary Obligors" means Breckenridge-Remy, Guest Distribution and Guest Packaging. "Institutional Investor" means (a) any Purchaser, (b) any holder of a Note holding more than 5% of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "Instrument of Joinder" is defined in Section 9.6(a). "Intangible Assets" means, with respect to any Person, all assets that would be shown as intangible assets (and in any event including, without limitation, all goodwill, franchises, licenses, patents, trademarks, trade names, copyrights, service marks, brand names, organization expense and unamortized debt discount and expense) on a balance sheet of such Person prepared in accordance with GAAP. "Investment" means any investment, made in cash or by delivery of property, by the Company or any Restricted Subsidiary (a) in any Person, whether by acquisition of Capital Stock, Debt or other obligation or Security, or by loan, Guaranty, advance, capital contribution or otherwise, or (b) in any property. "Lien" means, with respect to any Person, any mortgage, lien, pledge, adverse claim, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of Capital Stock, stockholder agreements, voting trust agreements and all similar arrangements). The precautionary filing of a financing statement covering property leased by the Company or a Restricted Subsidiary as lessee under an operating lease (but not a Capital Lease) in the ordinary course of business to secure performance by the Company or any Restricted Subsidiary of such operating lease shall not be deemed to constitute a Lien. "Make-Whole Amount" is defined in Section 8.8. "Material" means material in relation to the business, operations, financial condition, assets, properties or prospects of the Company and the Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, financial condition, assets, properties or prospects of the Company and the Subsidiaries taken as a whole, or (b) the ability of any Obligor to perform its obligations under any Financing Document, (c) any of the rights and remedies of the holders of Notes under any Financing Document, or (d) the validity or enforceability of any Financing Document. "Memorandum" is defined in Section 5.3. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "Net Proceeds Amount" means, with respect to any Transfer of any property by any Person, an amount equal to the difference of (a) the aggregate amount of the consideration (valued at the Fair Market Value of such consideration at the time of the consummation of such Transfer) received by such Person in respect of such Transfer, minus (b) the sum of (i) all ordinary and reasonable out-of-pocket costs and expenses actually incurred by such Person in connection with such Transfer, plus (ii) the amount of any sales tax or capital gains tax (but not income tax other than capital gains tax) liability actually incurred by such Person in connection with such Transfer. "New Credit Agreement" means the Revolving Credit Agreement, dated December 3, 1997, among the Obligors, PNC Bank, National Association, First Union National Bank, and PNC Bank, National Association, as agent, as modified, amended, or supplemented from time to time. "Note Purchase Agreements" means this Agreement and the Other Agreements. Each reference to the Note Purchase Agreements shall be deemed to include any Instruments of Joinder with respect thereto. "Notes" is defined in Section 1. Each reference to Notes shall be deemed to include any Allonges with respect thereto. "Obligor Cash Flow Ratio" means, at any time, the ratio of (a) Consolidated Obligor Cash Flow for the period of four consecutive fiscal quarters of the Company most recently ended at such time to (b) Consolidated Cash Flow for such period. "Obligors" is defined in the introductory sentence of this Agreement. "Officer's Certificate" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "Other Agreements" is defined in Section 2. "Other Purchasers" is defined in Section 2. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA, or any successor thereto. "Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "Plan" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "property" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "Property Reinvestment Application" means, with respect to any Transfer of property, the application of an amount equal to the Net Proceeds Amount with respect to such Transfer to (i) the acquisition by the Company or any Restricted Subsidiary of assets useful and intended to be used in the business of the Company or any Restricted Subsidiary or (ii) the acquisition by the Company or any Restricted Subsidiary of Capital Stock of a Person that concurrently with such acquisition becomes a Restricted Subsidiary. "Proposed Prepayment Date" is defined in Section 8.5(c). "PTCE 95-60" is defined in Section 6.2(a). "Purchasers" means you and the Other Purchasers. "QPAM Exemption" is defined in Section 6.2(d). "Redeemable" means, with respect to the Capital Stock of any Person, each share of such Person's Capital Stock that is (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into Debt of such Person (i) at a fixed or determinable date, whether by operation of sinking fund or otherwise, (ii) at the option of any Person other than such Person, or (iii) upon the occurrence of a condition not solely within the control of such Person, or (b) convertible into other Redeemable Capital Stock of such Person. "Relevant Date" is defined in Section 9.6. "Required Holders" means, at any time, the holders of at least 66-2/3% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company, any Subsidiary or any other Affiliate). "Responsible Officer" means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of any Financing Document. "Restricted Investments" means all Investments of the Company and the Restricted Subsidiaries other than the following: (a) Investments existing on the date of the Closing and disclosed in Schedule 10.6; (b) Investments in one or more Wholly-Owned Restricted Subsidiaries, or Investments in any Person that concurrently with such Investment becomes a Wholly-Owned Restricted Subsidiary, or Investments that concurrently with such Investment result in any Person becoming a Wholly-Owned Restricted Subsidiary; (c) Investments in commercial paper maturing within 270 days or less from the date of issuance thereof that, at the time of acquisition by the Company or any Restricted Subsidiary, is rated "A-1" or better by S&P, "P-1" or better by Moody's or an equivalent rating by another nationally recognized credit rating agency of similar standing; (d) Investments in (i) direct obligations of the United States of America, (ii) obligations that are guaranteed by the full faith and credit of the United States of America or (iii) obligations of state or local governments rated "AAA" or better by S&P or "Aaa" or better by Moody's, in all cases maturing within twelve months or less from the date of acquisition thereof by the Company or any Restricted Subsidiary; (e) Investments in time deposits or certificates of deposit, maturing within one year from the date of issuance thereof, issued by (and bankers acceptances endorsed by) a bank or trust company, organized under the laws of the United States of America or any state thereof, having capital, surplus and undivided profits aggregating at least $100,000,000 and whose long-term certificates of deposit are, at the time of acquisition thereof by the Company or a Restricted Subsidiary, rated "A-" or better by S&P or "A3" or better by Moody's (provided that if such bank is PNC Bank, National Association, or First Union National Bank and such bank is a lender to the Company under the New Credit Agreement, such bank may be rated "BBB" or better by S&P or "Baa" or better by Moody's); (f) Investments in repurchase agreements entered into with a bank or trust company of the type described in clause (e) above, provided that each such repurchase agreement has a term not exceeding 30 days, is collateralized by United States Treasury securities, and requires physical delivery of the securities securing such repurchase agreement (except those delivered through the Federal Reserve book entry system); (g) loans or advances in the usual and ordinary course of business of the Company or a Restricted Subsidiary to officers, directors and employees thereof for expenses (including moving expenses related to a transfer) incidental to carrying on the business of the Company or any Restricted Subsidiary, in the aggregate at any one time outstanding not to exceed 1.0% of Consolidated Tangible Assets; (h) receivables (and chattel paper, notes and other instruments evidencing such receivables) arising from the sale of goods and services in the ordinary course of business of the Company and the Restricted Subsidiaries and in each case maturing within twelve months or less from the date of creation of such receivable, and property to be used in the ordinary course of business of the Company and the Restricted Subsidiaries; and (i) Investments in money market funds having assets in excess of $500,000,000 and that are restricted by their respective charters to investing solely in Investments of the type permitted by clauses (c) through (f), inclusive, above. "Restricted Payment" means any Distribution in respect of the Company or any Restricted Subsidiary (other than on account of Restricted Subsidiary Stock or other equity interests of a Restricted Subsidiary owned legally and beneficially by the Company or another Restricted Subsidiary), including, without limitation, any Distribution resulting in the acquisition by the Company of Securities that would constitute treasury stock. For purposes of this Agreement, the amount of any Restricted Payment made in property shall be the greater of (x) the Fair Market Value of such property (as determined in good faith by the board of directors (or equivalent governing body) of the Person making such Restricted Payment) and (y) the net book value thereof on the books of such Person, in each case determined as of the date on which such Restricted Payment is made. "Restricted Subsidiary" means, at any time, a Subsidiary that at such time is: (a) one of the Initial Subsidiary Obligors or a successor thereto; (b) a Domestic Subsidiary; or (c) a Foreign Subsidiary as to which a designation (or deemed designation) as a Restricted Subsidiary pursuant to Section 22 is then effective. "Restricted Subsidiary Stock" means the Capital Stock (or any options or warrants to purchase Capital Stock or other Securities exchangeable for or convertible into any Capital Stock) of any Restricted Subsidiary. "Rule 144A" means Rule 144A promulgated under the Securities Act, as such rule may be amended from time to time. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Security" means any "security" as defined in section 2(1) of the Securities Act. "Senior Financial Officer" means the president, the chief executive officer, the vice president, finance, the principal accounting officer, the treasurer or the comptroller of the Company. "Series" means any one or more series of the Notes. "Series A Notes" is defined in Section 1(a). "Series B Notes" is defined in Section 1(b). "Series C Notes" is defined in Section 1(c). "Source" is defined in Section 6.2. "Subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries, or such Person and one or more of its Subsidiaries, owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a Subsidiary is a reference to a Subsidiary of the Company. "Successor Corporation" is defined in Section 10.9(a)(i). "Successor Restricted Subsidiary" is defined in Section 10.9(b)(iii)(A). "Transfer" means, with respect to any Person, any transaction in which such Person sells, conveys, transfers, leases (as lessor) or otherwise disposes of any of its property, including, without limitation, Restricted Subsidiary Stock (but not including an issuance of Capital Stock of the Company by the Company), and including, without limitation, any merger, consolidation, amalgamation or other transaction the direct or indirect result of which is a disposition of all or a portion of any equity or other interest in any Person. For purposes of determining the application of the Net Proceeds Amount in respect of any Transfer, the Company may designate any Transfer as one or more separate Transfers each yielding a separate Net Proceeds Amount. In any such case, the Disposition Value of any property subject to each such separate Transfer attributable to any property subject to each such separate Transfer shall be determined by ratably allocating the aggregate Disposition Value of all property subject to all such separate Transfers to each such separate Transfer on a proportionate basis. "Unrestricted Subsidiary" means a Subsidiary that is not a Restricted Subsidiary. "Voting Stock" means, with respect to any Person, any shares of Capital Stock of such Person whose holders are entitled under ordinary circumstances to vote for the election of directors of such Person, or for the election of Persons performing a similar function (irrespective of whether at the time shares of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "Wholly-Owned Restricted Subsidiary" means, at any time, any Restricted Subsidiary 100% of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the other Wholly-Owned Restricted Subsidiaries at such time. SCHEDULE 3 PAYMENT INSTRUCTIONS AT CLOSING Re: Guest Supply, Inc. and certain other Obligors -- $15,000,000 7.06% Series A Senior Notes due 2009 $5,000,000 6.95% Series B Senior Notes due 2007 $5,000,000 6.70% Series C Senior Notes due 2003 In accordance with Section 3 of the Note Purchase Agreement, the Obligors direct you to make payment for the Note or Notes being purchased by you by payment by federal funds wire transfer in immediately available funds of the purchase price thereof to: PNC Bank, New Jersey NA (Make sure you include "New Jersey" when you give the bank name) ABA no.: 031-207-607 Account no.: 80-0275-1648 Account name: Guest Supply, Inc., Guest Packaging, Inc. & Breckenridge-Remy Co. Contact person at bank: Name: Gary Wessels Title: Vice President Phone no.: (908) 220-4553 SCHEDULE 4.9 CHANGES IN CORPORATE STRUCTURE None SCHEDULE 5.3 DISCLOSURE MATERIALS None SCHEDULE 5.4 SUBSIDIARIES, CERTAIN AGREEMENTS Subsidiaries Breckenridge-Remy Co., a Delaware Corporation (1) (3) Guest Packaging, Inc., a New Jersey Corporation (1) (3) Guest International, Ltd., an English Corporation (1) (3) Guest International (Canada) Ltd., a Canadian Corporation (1) (3) Guest International New Zealand Ltd., a New Zealand Corporation (1) (3) Guest Distribution Services, Inc., a Delaware Corporation (2) (3) (1) A 100% wholly owned subsidiary of Guest Supply, Inc. (2) A 100% wholly owned subsidiary of Breckenridge-Remy, Co. (3) Restricted subsidiary Agreements None SCHEDULE 5.5 FINANCIAL STATEMENTS Consolidated Balance Sheets September 30, 1996, 1995, 1994, 1993 and 1992 Consolidated Statements of Operations Years Ended September 30, 1996, 1995, 1994, 1993, 1992 and 1991 Consolidated Statements of Cash Flows Years Ended September 30, 1996, 1995, 1994, 1993, 1992 and 1991 Consolidated Statements of Shareholders' Equity Years Ended September 30, 1996, 1995, 1994, 1993, 1992 and 1991 Consolidated Balance Sheets June 30, 1997 and 1996 Consolidated Statements of Operations Nine Months and Three Months Ended June 30, 1997 and 1996 Consolidated Statements of Cash Flows Nine Months Ended June 30, 1997, 1996 and 1995 SCHEDULE 5.8 CERTAIN LITIGATION None SCHEDULE 5.11 LICENSES, PERMITS, ETC. None SCHEDULE 5.12 CERTAIN ERISA MATTERS Guest Supply, Inc. and Subsidiaries Hospitalization and Major Medical Plan Guest Supply, Inc. and Subsidiaries Dental Plan Guest Supply, Inc. and Subsidiaries Long Term Disability Plan Guest Supply, Inc. and Subsidiaries Life Insurance and Accident Death and Dismemberment Plan Guest Supply, Inc. and Subsidiaries 401 (k) Salary Reduction Plan and Trust The Company and its domestic subsidiaries are ERISA Affiliates. SCHEDULE 5.14 USE OF PROCEEDS Repayment of Term Loans with PNC Bank, NA and First Union National Bank as follows: Principal Interest Total -------------- --------- -------------- $5,000,000 Five-year term note payable due February, 1999 $ 1,166,682.00 $ 418.06 $ 1,167,100.06 $5,000,000 Four-year term note payable due February, 1999 1,458,322.00 668.40 1,458,990.40 $10,500,000 Seven-year term note payable due November, 2002 7,375,017.50 2,868.03 7,377,885.53 -------------- --------- -------------- $10,000,021.50 $3,954.49 $10,003,975.99 Revolving credit facility 21,150,004.00 12,614.63 21,162,618.63 -------------- ---------- -------------- $31,150,025.50 $16,569.12 $31,166,594.62 ============== ========== ============== SCHEDULE 5.15 EXISTING DEBT AND LIENS Debt - ---- As of September 30, 1997 $5,000,000 Five-year term note payable $ 1,416,681.00 due February, 1999 $5,000,000 Four-year term note payable 1,770,823.00 due February, 1999 $10,500,000 Seven-year term note payable 7,750,014.92 due November, 2002 -------------- 10,937,518.92 Revolving credit facility $17,616,526.00 -------------- $28,554,044.92 ============== Liens - ----- None SCHEDULE 8.1 SCHEDULED PRINCIPAL PAYMENTS ON THE NOTES Principal Principal Principal Amount of Amount of Amount of Series A Series B Series C Notes Notes Notes Scheduled to Scheduled to Scheduled to Payment Date be Paid be Paid be Paid Totals - ----------------- ------------ ------------ ------------ --------------- November 15, 1999 $ 0.00 $ 0.00 $555,555.56 $ 555,555.56 May 15, 2000 $ 0.00 $ 0.00 $555,555.56 $ 555,555.56 November 15, 2000 $ 0.00 $187,500.00 $555,555.56 $ 743,055.56 May 15, 2001 $ 0.00 $187,500.00 $555,555.56 $ 743,055.56 November 15, 2001 $882,352.94 $250,000.00 $555,555.56 $1,687,908.50 May 15, 2002 $882,352.94 $250,000.00 $555,555.56 $1,687,908.50 November 15, 2002 $882,352.94 $375,000.00 $555,555.56 $1,812,908.50 May 15, 2003 $882,352.94 $375,000.00 $555,555.56 $1,812,908.50 November 15, 2003 $882,352.94 $375,000.00 $555,555.52 $1,812,908.46 May 15, 2004 $882,352.94 $375,000.00 $ 0.00 $1,257,352.94 November 15, 2004 $882,352.94 $375,000.00 $ 0.00 $1,257,352.94 May 15, 2005 $882,352.94 $375,000.00 $ 0.00 $1,257,352.94 November 15, 2005 $882,352.94 $375,000.00 $ 0.00 $1,257,352.94 May 15, 2006 $882,352.94 $375,000.00 $ 0.00 $1,257,352.94 November 15, 2006 $882,352.94 $375,000.00 $ 0.00 $1,257,352.94 May 15, 2007 $882,352.94 $375,000.00 $ 0.00 $1,257,352.94 November 15, 2007 $882,352.94 $375,000.00 $ 0.00 $1,257,352.94 May 15, 2008 $882,352.94 $ 0.00 $ 0.00 $ 882,352.94 November 15, 2008 $882,352.94 $ 0.00 $ 0.00 $ 882,352.94 May 15, 2009 $882,352.94 $ 0.00 $ 0.00 $ 882,352.94 November 15, 2009 $882,352.96 $ 0.00 $ 0.00 $ 882,352.96 Totals $15,000,000 $ 5,000,000 $ 5,000,000 $ 25,000,000 SCHEDULE 10.6 CERTAIN EXISTING INVESTMENTS Guest Supply, Inc. - ------------------ Shares FMV* ------ ------ Prime Hospitality Corp. PDQ 34 $22.56 Servico, Inc. SER 21 17.13 Breckenridge-Remy Co. - --------------------- Prime Hospitality Corp. PDQ 260 $22.56 Servico, Inc. SER 4,979 17.13 * As of September 30, 1997 SCHEDULE 18 OBLIGOR ADDRESSES FOR NOTICES Guest Supply, Inc. 4301 US Highway One P.O. Box 902 Monmouth Junction, NJ 08852 Attention: Paul Xenis Guest Packaging, Inc. 4301 US Highway One P.O. Box 902 Monmouth Junction, NJ 08852 Attention: Paul Xenis Breckenridge-Remy Co. 4301 US Highway One P.O. Box 902 Monmouth Junction, NJ 08852 Attention: Paul Xenis Guest Distribution Services, Inc. 190 West Crowther Avenue, Unit B Placentia, CA 92670 Attention: Teri Unsworth EXHIBIT 9.6(a) [FORM OF INSTRUMENT OF JOINDER] INSTRUMENT OF JOINDER To each holder of one or more of the Notes referred to below Date: ____________ Reference is made to the separate Note Purchase Agreements, each dated as of December 3, 1997 (the "Note Purchase Agreements"), among Guest Supply, Inc., a New Jersey corporation (the "Company"), Breckenridge-Remy Co., a Delaware corporation ("Breckenridge-Remy"), Guest Distribution Services, Inc., a Delaware corporation ("Guest Distribution"), Guest Packaging, Inc., a New Jersey corporation ("Guest Packaging") (the Company, Breckenridge- Remy, Guest Distribution and Guest Packaging are referred to herein, collectively, as the "Original Obligors") and each of the Purchasers listed in Schedule A thereto, which provide, among other things, for the issuance and sale by the Original Obligors of their joint and several (a) 7.06% Series A Senior Notes due November 15, 2009 in the aggregate principal amount of $15,000,000, (b) 6.95% Series B Senior Notes due November 15, 2007 in the aggregate principal amount of $5,000,000 and (c) 6.70% Series C Senior Notes due November 15, 2003 in the aggregate principal amount of $5,000,000. Reference is also made to the Instruments of Joinders (if any) identified in Annex 1 hereto, pursuant to which the Persons (if any) identified on such Annex 1, prior to the execution and delivery of this Instrument of Joinder, joined and were made joint and several Obligors with the Original Obligors under the Note Purchase Agreements and the Notes (such Persons (if any) and the Original Obligors are herein referred to, collectively, as the "Existing Obligors"). Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Note Purchase Agreements. 1. JOINDER OF ADDITIONAL OBLIGOR. In accordance with the terms of Section 9.6 of the Note Purchase Agreements, ________________________, a[n] ____________ corporation (the "Additional Obligor"), by the execution and delivery of this Instrument of Joinder, does hereby become jointly and severally liable as an Obligor, under each of the Notes and each of the Note Purchase Agreements, for the due and punctual performance and observance of all of the covenants and other obligations in the Notes and the Note Purchase Agreements to be performed or observed by the Obligors, including, without limitation, the due and punctual payment of the principal and Make-Whole Amount, if any, of, and interest on and all other amounts in respect of, each Note (whether such principal, Make-Whole Amount, interest or other amounts are currently outstanding or to be incurred in the future) and (b) for the due and punctual performance and observance of all the covenants in the Notes and the Note Purchase Agreements to be performed or observed by the Obligors; immediately upon the execution and delivery of this Instrument of Joinder to one or more of the holders of Notes (and whether or not the Additional Obligor shall, as required by such Section 9.6, execute and deliver any Allonges with respect to the Notes), the Additional Obligor shall be deemed to have become an Obligor for purposes of all of the Financing Documents, including, without limitation, for purposes of the definition of "Obligors" set forth in each Note Purchase Agreement and each Note. 2. REPRESENTATIONS AND WARRANTIES OF THE ADDITIONAL OBLIGOR. The Additional Obligor hereby makes and restates, as to itself and as of the date hereof, each of the representations and warranties set forth in Section 5 to the Note Purchase Agreements, subject to only the exceptions in respect thereof set forth in Annex 2 hereto. 3. MISCELLANEOUS. 3.1 Part of Note Purchase Agreements, Future References, etc. This Instrument of Joinder shall be construed in connection with and as a part of each of the Note Purchase Agreements and, except as expressly amended by this Instrument of Joinder, all terms, conditions and covenants contained in the Note Purchase Agreements and the Notes are hereby ratified and shall be and remain in full force and effect. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Instrument of Joinder may refer to the Note Purchase Agreements and the Notes without making specific reference to this Instrument of Joinder, but nevertheless all such references shall include this Instrument of Joinder unless the context otherwise requires. 3.2 Successors and Assigns. This Instrument of Joinder shall inure to the benefit of and be binding upon the successors and assigns of the Additional Obligor and shall inure to the benefit of each holder from time to time of any Notes. 3.3 Governing Law. THIS INSTRUMENT OF JOINDER, THE NOTE PURCHASE AGREEMENTS AND THE NOTES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. [Remainder of page intentionally left blank; next page is signature page.] IN WITNESS WHEREOF, each of the Additional Obligor and the Company has caused this Instrument of Joinder to be executed on its behalf by a duly authorized officer thereof as of the date first above written. Very truly yours, [ADDITIONAL OBLIGOR] By___________________________________________ Name: Title: GUEST SUPPLY, INC. By___________________________________________ Name: Title: [Signature page of Instrument of Joinder with respect to ____________] Annex 1 List of Prior Instruments of Joinder [Identify any prior Instruments of Joinder and related Obligors] Annex 2 Exceptions as to Representations and Warranties EXHIBIT 9.6(b) [FORM OF ALLONGE] ALLONGE FOR VALUE RECEIVED, the undersigned, ________________________ [ADDITIONAL OBLIGOR], a[n] ____________ corporation, hereby promises to pay to _______________________ or registered assigns the outstanding principal balance of the [7.06% Series A Senior Note due November 15, 2009] / [6.95% Series B Senior Note due November 15, 2007] / [6.70% Series C Senior Note due November 15, 2003] (the "Note") originally issued jointly and severally by Guest Supply, Inc. and certain other Obligors, to which this Allonge is attached, in accordance with the terms of such Note, and as required by Section 9.6 and other provisions of each of the separate Note Purchase Agreements, dated as of December 3, 1997 among Guest Supply, Inc. and certain other Obligors and each of the Purchasers named on Schedule A thereto. The undersigned agrees that it is and shall be jointly and severally liable for the payment of the principal, Make-Whole Amount, if any, and accrued interest on such Note as one of the "Obligors" as such term is defined in the Note and as if the undersigned had been an original co-maker of such Note. [ADDITIONAL OBLIGOR] By Name: Title: EX-10.(R) 12 GUEST SUPPLY, INC. and certain other Obligors 7.06% Series A Senior Note due November 15, 2009 No. AR-1 December 3, 1997 $10,000,000 PPN: 401630 A* 9 For value received, the undersigned, GUEST SUPPLY, INC., a New Jersey corporation (herein called the "Company"), BRECKENRIDGE-REMY CO., a Delaware corporation, GUEST DISTRIBUTION SERVICES, INC., a Delaware corporation, and GUEST PACKAGING, INC., a New Jersey corporation (collectively, the "Obligors") hereby jointly and severally promise to pay to J. ROMEO & Co., or registered assigns, the principal sum of TEN MILLION DOLLARS ($10,000,000) on November 15, 2009, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 7.06% per annum from the dale hereof, payable semiannually, on the 15th day of May and November in each year, commencing with the May 15 or November 15 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 9.06% or (ii) 2.0% over the rate of interest publicly announced by Chase Manhattan Bank, N.A. (or its successor) from time to time in New York, New York as its "base" or "prime" rate. Subject to Section 14.2 of the Note Purchase Agreements, payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of the Company in Monmouth Junction, New Jersey, or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of joint and several senior notes (together with the other two series of joint and several senior notes issued pursuant thereto, as from time to time amended, restated, supplemented or otherwise modified, herein called the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of December 3, 1997 (as from time to time amended, restated, supplemented or otherwise modified, herein called the "Note Purchase Agreements"), among the Obligors and the respective Purchasers named therein, and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in the last sentence of Section 6.1 and the representation set forth in Section 6.2 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Obligors may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Obligors will not be affected by any notice to the contrary. The Obligors will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreements. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. THIS NOTE AND THE NOTE PURCHASE AGREEMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. GUEST SUPPLY, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance BRECKENRIDGE-REMY CO. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance GUEST DISTRIBUTION SERVICES, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Authorized Signatory GUEST PACKAGING, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance EX-10.(S) 13 GUEST SUPPLY, INC. and certain other Obligors 7.06% Series A Senior Note due November 15, 2009 No. AR-2 December 3, 1997 $5,000,000 PPN: 401630 A* 9 For value received, the undersigned, GUEST SUPPLY, INC., a New Jersey corporation (herein called the "Company"), BRECKENRIDGE-REMY CO., a Delaware corporation, GUEST DISTRIBUTION SERVICES, INC., a Delaware corporation, and GUEST PACKAGING, INC., a New Jersey corporation (collectively, the "Obligors") hereby jointly and severally promise to pay to AUER & Co., or registered assigns, the principal sum of FIVE MILLION DOLLARS ($5,000,000) on November 15, 2009, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 7.06% per annum from the dale hereof, payable semiannually, on the 15th day of May and November in each year, commencing with the May 15 or November 15 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 9.06% or (ii) 2.0% over the rate of interest publicly announced by Chase Manhattan Bank, N.A. (or its successor) from time to time in New York, New York as its "base" or "prime" rate. Subject to Section 14.2 of the Note Purchase Agreements, payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of the Company in Monmouth Junction, New Jersey, or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of joint and several senior notes (together with the other two series of joint and several senior notes issued pursuant thereto, as from time to time amended, restated, supplemented or otherwise modified, herein called the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of December 3, 1997 (as from time to time amended, restated, supplemented or otherwise modified, herein called the "Note Purchase Agreements"), among the Obligors and the respective Purchasers named therein, and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in the last sentence of Section 6.1 and the representation set forth in Section 6.2 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Obligors may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Obligors will not be affected by any notice to the contrary. The Obligors will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreements. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. THIS NOTE AND THE NOTE PURCHASE AGREEMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. GUEST SUPPLY, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance BRECKENRIDGE-REMY CO. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance GUEST DISTRIBUTION SERVICES, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Authorized Signatory GUEST PACKAGING, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance EX-10.(T) 14 GUEST SUPPLY, INC. and certain other Obligors 6.95% Series B Senior Note due November 15, 2007 No. BR-1 December 3, 1997 $5,000,000 PPN: 401630 A@7 For value received, the undersigned, GUEST SUPPLY, INC., a New Jersey corporation (herein called the "Company"), BRECKENRIDGE-REMY CO., a Delaware corporation, GUEST DISTRIBUTION SERVICES, INC., a Delaware corporation, and GUEST PACKAGING, INC., a New Jersey corporation (collectively, the "Obligors") hereby jointly and severally promise to pay to GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY, or registered assigns, the principal sum of FIVE MILLION DOLLARS ($5,000,000) on November 15, 2007, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.95% per annum from the dale hereof, payable semiannually, on the 15th day of May and November in each year, commencing with the May 15 or November 15 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.95% or (ii) 2.0% over the rate of interest publicly announced by Chase Manhattan Bank, N.A. (or its successor) from time to time in New York, New York as its "base" or "prime" rate. Subject to Section 14.2 of the Note Purchase Agreements, payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of the Company in Monmouth Junction, New Jersey, or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of joint and several senior notes (together with the other two series of joint and several senior notes issued pursuant thereto, as from time to time amended, restated, supplemented or otherwise modified, herein called the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of December 3, 1997 (as from time to time amended, restated, supplemented or otherwise modified, herein called the "Note Purchase Agreements"), among the Obligors and the respective Purchasers named therein, and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in the last sentence of Section 6.1 and the representation set forth in Section 6.2 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Obligors may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Obligors will not be affected by any notice to the contrary. The Obligors will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreements. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. THIS NOTE AND THE NOTE PURCHASE AGREEMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. GUEST SUPPLY, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance BRECKENRIDGE-REMY CO. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance GUEST DISTRIBUTION SERVICES, INC. By s/ Paul Xenis ------------- Paul Xenis Title: Authorized Signatory GUEST PACKAGING, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance EX-10.(U) 15 GUEST SUPPLY, INC. and certain other Obligors 6.70% Series C Senior Notes due November 15, 2003 No. CR-1 December 3, 1997 $5,000,000 PPN: 401630 A*9 For value received, the undersigned, GUEST SUPPLY, INC., a New Jersey corporation (herein called the "Company"), BRECKENRIDGE-REMY CO., a Delaware corporation, GUEST DISTRIBUTION SERVICES, INC., a Delaware corporation, and GUEST PACKAGING, INC., a New Jersey corporation (collectively, the "Obligors") hereby jointly and severally promise to pay to NATIONWIDE LIFE & ANNUITY INSURANCE COMPANY, or registered assigns, the principal sum of FIVE MILLION DOLLARS ($5,000,000) on November 15, 2003, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.70% per annum from the dale hereof, payable semiannually, on the 15th day of May and November in each year, commencing with the May 15 or November 15 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.70% or (ii) 2.0% over the rate of interest publicly announced by Chase Manhattan Bank, N.A. (or its successor) from time to time in New York, New York as its "base" or "prime" rate. Subject to Section 14.2 of the Note Purchase Agreements, payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of the Company in Monmouth Junction, New Jersey, or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of joint and several senior notes (together with the other two series of joint and several senior notes issued pursuant thereto, as from time to time amended, restated, supplemented or otherwise modified, herein called the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of December 3, 1997 (as from time to time amended, restated, supplemented or otherwise modified, herein called the "Note Purchase Agreements"), among the Obligors and the respective Purchasers named therein, and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in the last sentence of Section 6.1 and the representation set forth in Section 6.2 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Obligors may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Obligors will not be affected by any notice to the contrary. The Obligors will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreements. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. THIS NOTE AND THE NOTE PURCHASE AGREEMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. GUEST SUPPLY, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance BRECKENRIDGE-REMY CO. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance GUEST DISTRIBUTION SERVICES, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Authorized Signatory GUEST PACKAGING, INC. By s/ Paul Xenis ------------- Name: Paul Xenis Title: Secretary and Vice President-Finance EX-21 16 EXHIBIT 21 Subsidiaries of Guest Supply, Inc. Guest Supply, Inc. has the following subsidiaries: 1. Guest International, Ltd., an English corporation. 2. Guest Packaging, Inc., a New Jersey corporation. 3. Breckenridge-Remy Co., a Delaware corporation. 4. Guest International (Canada) Ltd., a Canadian corporation. 5. Guest International New Zealand Limited, a New Zealand corporation. 6. Guest Distribution Services, Inc., a Delaware corporation. EX-23 17 EXHIBIT 23 Independent Auditors' Consent The Board of Directors Guest Supply, Inc.: We consent to incorporation by reference in the Registration Statements (File Nos. 2-89233, 2-89234, 33-22872, 33-63352 and 333-26709) on Form S-8 of Guest Supply, Inc. of our report dated November 18, 1997, except as to the note on Long Term Debt which is as of December 3, 1997, relating to the consolidated balance sheets of Guest Supply, Inc. and subsidiaries as of September 30, 1997 and 1996, and the related consolidated statements of operations, cash flows, and shareholders' equity and related schedule for each of the years in the three-year period ended September 30, 1997, which report appears in the September 30, 1997 annual report on Form 10-K of Guest Supply, Inc. KPMG Peat Marwick LLP Short Hills, New Jersey December 9, 1997 EX-27 18
5 12-MOS SEP-30-1997 SEP-30-1997 4,152,000 0 31,461,000 1,032,000 34,676,000 73,056,000 33,141,000 0 112,669,000 33,430,000 0 0 0 546,000 46,051,000 112,669,000 0 200,917,000 0 158,092,000 34,043,000 0 2,065,000 6,717,000 2,901,000 0 0 0 0 3,816,000 .55 .54
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